Councils have been urged to be ‘flexible’ about affordable home requirements in developments to encourage more private investment in rented properties.
The recommendation comes in a report by Adrian Montague for the Department for Communities and Local Government, whichexamines the barriers to institutional investment in private rented homes.As well as waiving affordable housing quotas, he says town halls should review any stalled developments to determine whether they could be built to rent rather than to sell.
Montague, the chair of private equity firm 3i and former chief executive of the Private Finance Initiative Taskforce at the Treasury, also called for redundant public sector land to be allocated to so-called ‘build-to-let’ developments.
He said reforms could increase private sector institutional investment in private rented homes, a market that is currently dominated by individual landlords.
There is ‘real potential’ for investment in large-scale development of homes built specifically for private rent, he added.
‘My review shows that the rental housing sector offers potential investment opportunities of interest to institutional investors. But real momentum has been inhibited by constraints affecting the supply of stock, the treatment of rented housing schemes under the planning system and the need to create confidence among investors.
‘The recommendations in today's report are designed to challenge this, and remove the barriers that prevent the kind of investment that our private rented sector needs.’
Housing minister Grant Shapps said today the recommendations could provide ‘a blueprint’ for increasing investment. The government will issue a formal response to the report, commissioned as part of the government's housing strategy in November, later this year.
Shapps said: ‘We're determined to encourage greater investment in the build-to-let market and boost the country's private rented sector, which plays an integral role in meeting the nation's housing needs and aspirations.
‘In the past it's often been seen as the Cinderella of the housing market, but when over 3 million people rely on this sector for their home, this is clearly no longer the case.
‘A major part of this is to attract and encourage new players to the market, while at the same time avoiding the excessive regulation that would force up rents and reduce choice for tenants.’
However, the Local Government Association said that moves to increase the number of new rental homes ‘should not come at the expense of new affordable housing’.
Environment and housing board chair Mike Jones said: ‘Councils across the country agree that there simply aren’t enough new homes being built. We desperately need more housing, and we need a mixture that includes private, social, affordable and rental properties.
‘Any strategy to boost the number of new rental homes should not come at the expense of new affordable housing, and councils, in consultation with their residents, always seek to ensure a suitable balance between the need for private rental property and new affordable homes.’
The National Housing Federation backed the call for more investment in private rented housing. However, chief executive David Orr also said the delivery of more homes for market rent shouldn’t hit the number of affordable homes.
