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BPF lobby victory as HCA unveils rental plans

Plans to encourage pension funds to invest in private rented housing will be unveiled today by the Homes and Communities Agency (HCA) in what will be seen as a major lobbying victory for the British Property Federation (BPF).

The government’s recently formed ‘super agency’ is responding to a two-year campaign led by the trade body to shift housing policy towards rental. Today’s announcement will focus around gauging expressions of interest which will then be taken forward in late May and worked up into pilots. Around eight organisations have reportedly been in talks with the HCA over building rented accommodation, and therefore supporting builders during the housing market recovery.

They are rumoured to include two institutions, two housing associations and one or two big name pension funds. The project could see thousands of new homes built for long term rent.

The HCA is brokering the expressions of interest exercise with property agent DTZ. Berwin Leighton Paisner are the lawyers acting for the HCA.

The BPF and its leading members have all welcomed the move, but called again on Treasury ministers to make a major stamp duty fix to encourage investment.

Changes were set to be made in the Budget which would have allowed big investors to pay the same amount of tax on bulk purchases as they would on individual units. This would have provided much needed encouragement to pension funds to pump millions into building new homes as part ofthe an initiative which is seeking to build thousands of quality homes for rent..

Sir Bob Kerslake, chief executive of the Homes and Communities Agency, said: “Our initiative is one of many innovations we have used to attract new investment, kickstart stalled housing schemes and mitigate against the effects of the market downturn.

“To date, achieving scale has been one of the main barriers to attracting institutional investors into the housing sector. We believe there is an opportunity now for the HCA to work with developers and housebuilders to offer a pipeline of projects for the PRSI, which could result in a positive outcome for all stakeholders.

“But it is only potential at this stage. We will engage with the private sector to develop a market driven proposition which is attractive to investors. Projected rental yields and the current market suggest that the time is right, and that is why we are engaging with the market to develop the proposition further.”

Ian Fletcher, BPF residential director who has led the BPF’s lobbying work on housing, welcomed the announcement.

“It’s great that policy maker sare alert to the need to continue to expand the private rented sector and support development through these difficult times.. But it’s vital we look at what we can do to make the numbers stack up. It’s now or the never for the professional rented sector and it’s essential that ministers do not loose sight of the opportunities here,” he said.

Peter Cosmetatos, BPF director for finance, said:

“One positive to emerge from the current downturn is that the fall in property prices has made the yields offered by residential property, which are typically modest, much more attractive. There is a rare opportunity at this point in the cycle for institutional investors to invest in an asset class that provides an excellent hedge against inflation at a good price.”

Nick Jopling, head of residential at CB Richard Ellis, said:

“With the future of public funding looking rather bleak, and buy-to-let not likely to expand at the same pace, it’s essential we look at alternative sources of finance for housing. . A well managed, large scale rental sector would enhance our social mobility and provide greater security for many caught between social housing and ownership. The Treasury’s decision to, at the eleventh hour, remove stamp duty changes from the Budget which would encourage institutions into the sector was nonsensical, and we urge ministers to look again at this measure. Ensuring the large investors pay stamp duty at the marginal, ‘per unit’ cost, would not dent our tax take and it would go a long way to providing quality homes for rent and thousands of jobs along with way, through constructions and development.”

Rupert Dickinson, chief executive of Grainger plc, the UK’s largest listed residential landlord commented:

“This is a real opportunity to develop the professional rented sector, delivering a new and badly needed source of housing. Build to let is an idea whose time has come and we look forward to working with the HCA and investing institutions to turn it into reality. However there is a also an urgent need for the government to demonstrate that it is equally committed by taking action on bulk SDLT and Residential REITs. These are not trivial requests but key elements of delivering an investable proposition to institutional investors.”

Chris Balch, director, DTZ Consulting said:

“The BPF has worked hard behind the scenes for years to bring about this change, and DTZ is very much looking forward with the HCA and other colleagues to make the best of every new opportunity we have.

“The housing bubble we’ve been living in has burst and the need for new investment vehicles and new products is clear. The success of the professional rented sector will depend on investor support, but with the political support we now have there is every possibility that we can start to build a home rental market to match our European and American neighbours.

“DTZ’s experience working across both commercial and residential real estate leaves us well placed to ensure that Britain’s professional rented sector capitalises on the strengths of both sectors, ensuring that the public have a choice of well designed, professionally managed homes to live in.”

John Bowles, head of development and residential consulting at Atisreal, said:

"The progressive reliance that successive Governments have placed on private developers to deliver affordable as well as private market housing (through particularly the planning system) means that, in the present circumstances, there is a massive under-delivery of housing which is likely to persist for at least the next 3-4 years. The HCA has a crucial role in coming forward with innovative ways and alternative mechanisms to show how good quality (particularly affordable) housing can be delivered at sufficient levels in difficult market conditions.

"It is very encouraging to see the HCA leading this particular initiative - if the right framework can be created to attract institutional investors to enter the private rented sector on a large scale, the opportunity really begins to present itself for us to leave the late 20th Century housing model behind to a more diverse and sound housing sector better tuned to our modern needs and society".

For more info call the British Property Federation:

Andrew Teacher – ateacher@bpf.org.uk 07968 12 4545 (broadcast/nationals)
Andrew Panting – apanting@bpf.org.uk 020 7828 0111 (trade press)
James Anderson – janderson@bpf.org.uk 020 7828 0111 (policy)

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Sir Bob Kerslake interview