Government to invest £200m in Build to Rent in the private rented sector
An announcement was made on 20/12/12 about a £200m fund for Build to Rent in the private rented sector.
Homes and Community Agency Chief Executive Pat Ritchie said: “The private rented sector is already home for a significant number of people, including young professionals and families, and demand for this type of housing is rising. We want to see people having the opportunity to choose their housing options, of which private rented is a growing and vital part. This programme will increase and accelerate the building of quality and well-managed private rented homes, as well as encouraging long-term institutional investors to the sector which will in turn unlock greater capacity in the housing market.”
The quote above states that “We want to see people having the opportunity to choose their housing options.” Many renters do not have a choice of tenure and their only choice is the private rented sector where they can be subject to inflated rents and poor quality accommodation.
Reading through the fund prospectus core parameters under the heading management, reference is made to ‘Robust and realistic letting and management plan’ and ‘Clear proposals for a high quality management regime’. It will be very interesting to see exactly what is required and if this means a fairer balance between the rights of landlords and tenants. I could not find any reference to tenant representation and participation which is a must if there is going to be institutional investors.
The core proposals also state that ‘Accommodation should be appropriate for long term, high quality residential letting. Lets hope this means long fixed term Assured Shortholds and Assured tenancies being offered or new types of tenancies which provide the security many tenants require! The fund misses out on addressing the issue of rocketing market rents. In periods of high demand private tenants suffer from inflated rents which bear no relationship to a reasonable return on an investment. Market rents have no relationship to affordability.
Information on the fund also states that “The Fund could be used to cover development costs such as land, construction or management costs. Once the development is complete and fully let, the developer will refinance or sell on its interest and repay the finance back to government.” What would happen to robust management standards once a new owner takes on the development?
The above are just some initial thoughts on the fund.