There has been a mixed reaction to the Montague Report which yesterday called for a radical new model of British homes whereby institutional investors such as pension funds will be encouraged to fund the mass-scale building of private homes for rent.
The homes would have to be available for rent, and could not be sold off for at least ten and even up to 21 years in order to ensure investors’ returns, and ‘build-to-let’ developers would be incentivised by the waiving of Section 106 agreements, including the obligation to build 40% affordable homes on schemes.
Whilst some have been enthusiastic that the costs of development will be lowered, housing associations – chief beneficiaries of affordable housing targets – announced their opposition.
Mike Jones, of the Local Government Association, said: “Any strategy to boost the number of new rental homes should not come at the expense of new affordable housing.”
But Alan Ward, of the Residential Landlords Association, said he welcomed the recommendations that S106 agreements could be waived. He said new-build rental property should be exempt from such obligations as long as they were rented for at least ten years.
Think tank the Resolution Foundation also said that providing affordable housing was not a panacea, or even practical.
Director of research Vidhya Alakesoni said: "The housing associations that have come out against the Review largely because of its proposals on affordable housing are right that we desperately need more affordable homes. The stock is declining and policies such as right to buy will lead to further declines, regardless of what the Government says.
“However, more affordable housing will not meet the needs of working families who are shut out of ownership. They will never qualify for an affordable home. Waiting lists stretch into the millions and the sector rightly prioritises the most vulnerable.
“Build-to-let creates the opportunity to provide these low to middle income individuals and families with a purpose-built professionally managed, secure rented home.
“The economic rationale for build-to-let is strong too. House building could help kick start the recovery, much as it did after the 1930s recession.
“Build-to-let has the potential to draw a new source of private finance into the sector to get building going while the mortgage market continues to struggle.”
Venture capitalist Sir Adrian Montague had been asked by ministers to come up with ways to tackle the UK's housing crisis, and specifically the shortfall in the private rental sector amid concerns that the private, mostly small-scale, buy-to-let landlords who have traditionally supplied the sector will be unable to keep up with demand.
His report makes a series of sweeping recommendations, including getting councils to review stalled building sites to see whether some of the homes originally planned should now be made available for rent rather than purchase.
There could also be measures to get redundant public sector land and buildings made available for build-to-rent schemes.
In areas with a high demand for private rented housing, land would be made available to developers on the basis that a proportion of the homes were let out and not sold.
The report also calls for a code of standards so that tenants know what standards to expect of new rental developments.
Housing minister Grant Shapps said: "We're determined to encourage greater investment in the build-to-let market and boost the country's private rented sector, which plays an integral role in meeting the nation's housing needs and aspirations.
"A major part of this is to attract and encourage new players to the market, while at the same time avoiding the excessive regulation that would force up rents and reduce choice for tenants."
The British Property Federation welcomed the report, saying the proposals ‘could unleash unprecedented investment in house building from pension funds, insurance companies and REITs [real estate investment trusts]’.
Chief executive Liz Peace said: "Encouraging institutions into building homes for rent has for some time been seen as the holy grail in enabling a long-term, private rented sector which is designed and built to let and offers renters something a bit different in the marketplace.”