The Build to Rent Fund.

by Mark Johnston

The Build to Rent Fund.

Recent research has revealed that private rented housing is a growing part of the housing market. It comprises almost 16.5 per cent of all households which equates to nearly 3.8 million homes in England.

Therefore there is now growing realisation that Generation Rent needs more affordable housing especially as lenders are pulling the ladder up on mortgage availability.

The Build to Rent Fund is designed to help developers invest in homes built specifically for private rent by reducing the up-front risk in a relatively untested market.

Back in September 2012 the government launched the Build to Rent Fund which was initially set at £200 million.

The fund was launched to stimulate new private rented housing supply and to provide opportunities for new institutional investment in the sector.

The Fund is a fully recoverable, commercial investment where Government will share risk or bridge finance to allow schemes to be built, managed and let. The investment could be used to cover development costs such as land, construction or management costs.

Once the scheme is fully let the developer will sell on its interest or re-finance and repay the loan/equity.

Some experts feel that building new well designed homes to rent will also lead to a more balanced rental market as well as providing construction jobs and therefore in turn helping to stimulate growth within the economy.

Housing Minister Mark Prisk said: “This government is determined to get Britain building, and the Build to Rent Fund is set to help us deliver, with up to 10,000 new homes to be built from these projects”.

George Osborne, the Chancellor of the exchequer then increased the funding available to £1 billion in the March 2013 Budget , in the hope that the extra finance will help meet demand and deliver thousands of new extra private rented homes and large scale investment opportunities.

Richard Hill, chief executive of the Homes and Communities Agency, suggests “the £1 billion fund presents a fantastic opportunity to bring about a step change in the way we meet the growing demand for rental homes in this country”.

In April this year the first 45 projects were announced and are expected to support the construction of between 8,000 and 10,000 new private rented homes by 2015.

According to the Department for Communities and Local Government  (DCLG), successful projects were chosen according to their deliverability, their value for money, local housing demand and whether promoters had a clear exit strategy.

Current reports show that Kier, Persimmon, Lend Lease, Keepmoat, Taylor Wimpey, Bovis and Carillion are among the firms to have won places on the scheme.

Some industry insiders believe that these new projects will bring in ‘new blood’ which will improve rental quality and choice.

In conclusion the UK still needs more affordable housing and greater output from house builders, but if  the build to rent fund even chips in just 20,000 homes a year we could see 200,000 extra families housed.

Story link - The Build to Rent Fund.

Related stories to : The Build to Rent Fund.