With one low to middle income family in four shut out of home ownership, there is an urgent need for high quality purpose-built rental homes offering more secure tenancies than typically found in today’s buy to let sector.
In a context of significant cuts to public investment in housing, the Resolution Foundation proposes that new build-to-let developments could be funded by institutional investors, such as pension and life funds, and has developed a financial model for debt and equity investment in the private rented sector in collaboration with the Royal Bank of Canada (RBC). Given that investors are often reluctant to invest in the development phase to get rental schemes up and running, the report foresees a role for registered social housing providers in kick starting build-to-let developments by building new units which could then be sold onto an investment fund enabling social housing providers to build further new homes.
- Political leaders at the national, regional and local levels need to give a clear signal that they see the private rented sector as a strategic priority and are committed to supporting build-to-let. While investors see political interference in the housing sector and sudden changes in policy as highly undesirable, investors and other stakeholders in the sector need to know that government is serious about supporting the private rented sector. While the government has understandably been strong on its support for first time buyers, it has been less vocal about its support for a high quality, private rented sector. Leadership in this area will be critical.
- Local Authorities need to include the private rented sector as part of their overall housing strategies and recognise those in work who cannot access either home ownership or affordable housing as a legitimate form of housing need. This marks a move away from a bifurcated approach to housing policy which previously recognised home ownership and social housing and left much of the rest to the market.
- It will be critical that Local Authorities support PRS development through the planning system. Central to this will be their ability to strategically designate land for PRS development rather than for residential development in general. This will lower the price of land and make returns more viable for institutional investors. To satisfy these planning requirements, Local Authorities should insist that properties are maintained in rent for the long term, meet the needs of groups who are shut out of ownership and offer tenants a quality product with greater security of tenure than the current buy-to-let sector. The current flexibilities in the planning system allow Local Authorities to promote PRS development in this way without needing to introduce a separate planning class for private rented property.
- The Homes and Communities Agency (HCA), the national housing and regeneration agency for England, should designate a proportion of public land specifically for build-to-let development which can be invested or purchased on a build now, pay later basis. As part of the strategic use of public land, the HCA needs to incorporate land held by other government departments, the NHS and transport agencies, as well as supporting Local Authorities to invest their land on a similar basis.