UK - Plans to encourage pension funds to invest in private rented housing have been announced by the UK government's Housing and Communities Agency (HCA).

The Private Rented Sector Initiative (PRSI) is designed to persuade institutional investors to enter the private rented residential sector for the first time by facilitating the building of new homes for rent, while also considering recently-built properties as seed assets.

There have been a number of barriers to institutional investment in the UK residential sector, including a lack of significant lot sizes and a focus on capital value growth rather than rental income.

But HCA claims sufficiently high-netting yields are now potentially achievable from rental streams, without having to rely on capital appreciation.

"To date, achieving scale has been one of the main barriers to attracting institutional investors into the housing sector," said Bob Kerslake, chief executive at HCA.

"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."

HCA is aiming to create an investment vehicle dedicated to buying private rental homes from developers and housebuilders, which would appeal to institutional and private investors.

"We will engage with the private sector to develop a market-driven proposition which is attractive to investors," added Kerslake.

"Projected rental yields and the current market suggests that the time is right, and that is why we are engaging with the market to develop the proposition further."

The HCA announcement has been hailed as a major lobbying victory by the British Property Federation (BPF), which has been leading a two-year campaign to shift government housing policy towards rental.

"It's great that policymakers are alert to the need to continue to expand the private rented sector and support development through these difficult times," said Ian Fletcher, residential director at the BPF, who has led the BPF campaign.

"It's vital we look at what we can do to make the numbers stack up. It's now or never for the professional rented sector and it's essential that ministers do not lose sight of the opportunities here."

The HCA is brokering an expressions of interest exercise through property agent DTZ.

Chris Balch, director at DTZ, said: "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."

Topics