UK - The UK government will launch a consultation in 2010 on the private rented residential sector, which has been attracting interest from institutional fund managers and pension funds.

Chancellor of the Exchequer, Alistair Darling, confirmed in last week's pre-Budget report that a consultation document early in the new year will consider the contribution this sector could make to addressing demand and increasing housing supply in the UK, and assess any barriers to investment.

Aviva Investors is one fund manager planning to launch a vehicle aimed at pension funds who might be interested in investing in the sector and is working closely with the Homes and Communities Agency (HCA), the government's national housing body, to do this.

HCA claimed the pre-Budget report confirmed that the body was on track to deliver its programme of housing and regeneration investment. (See earlier IPE Real Estate story: Pension funds show interest in UK housing)

"The Chancellor has put forward a series of measures that allow us to maintain the momentum of our investment programme and, at the same time, build on the innovative approaches that we already have underway, such as the Private Rental Sector and Public Land Initiative," said Bob Kerslake, chief executive at HCA.

"Creating an environment that attracts more institutional investment into the private rental market; freeing up a greater supply of public land; and increasing the impact of local authorities on housing delivery are all significant shifts that will help stimulate the housing and regeneration sector," he added.

The British Property Foundation (BPF), which has been campaigning to facilitate institutional investment in private rented accommodation, voiced its disappointment that the government saw the need for a further consultation rather than just running with industry recommendations to promote growth in the sector.

The BPF added it would welcome the consultation if it considered seriously proposals such as relief on stamp duty land tax for bulk purchases and changes to the real estate investment trust (REIT) regime to allow investment through the vehicles.

The growing interest on the part of UK pension funds in the residential property sector was highlighted recently by the raising of at least £133m (€148m) of new equity by student housing developer and fund manager for its Unite UK Student Accommodation Fund (USAF).

"The support for USAF by both new and existing institutional investors, as demonstrated by the success of this fundraising to date, underlines the ongoing growth in appetite for access to the student accommodation asset class," said Mark Allan, chief executive at Unite.

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