DCLG commissioned Social Finance to explore ways of using institutional investment to increase the supply of long term, well managed, Private Rented Sector Accommodation for homeless households at Local Housing Allowance level rents. This includes both the purchase of existing property and new build. A seminar was held on November 4 2013 with representatives from around 25 local authorities and provided an important opportunity to canvas a wider range of opinion and perspectives.
The project has also benefited from the advice and guidance provided by an expert advisory group including representations from a range of organisations, which met regularly throughout this project to review progress. Meetings were conducted with a number of additional private sector organisations during this project including potential investors, tenant and asset managers, and registered providers, who have also provided constructive challenge and feedback. In addition to this report, a technical guide for local authorities as well as a financial model to assess viability have been developed which are available for use. The structures and financial model have been developed with consideration of the acquisition of a portfolio of street property. This reflects the desire by local authorities to consider activities which can be completed immediately to help address homelessness numbers, and the time lags of introducing new build developments. However it is not viewed that the inclusion of new build developments would have a material impact on the analysis presented, and both the financial model and structures can be easily adapted.
The technical guide can be downloaded here and for a copy of the financial model please email email@example.com.
Nick Salisbury, Director at Social Finance contributed a chapter to this report; “Is Social Investment Relevant”.
Britain’s housing crisis is well documented. Supply has failed to keep up with demand for many years, keeping prices historically high despite a prolonged downturn. This has become particularly pronounced in the private rented sector which in many parts of the country is now more expensive than owning a home with a mortgage given that interest rates remain low. However, difficulties accessing mortgage finance and raising a deposit coupled with a decline in the stock of social housing have left many low and middle income households with few options except the private rented sector.
Kick starting the development of purpose built rental accommodation in the UK to increase the supply of private rented homes for those who are shut out of home ownership must now be a priority. As well as growing supply, build to rent could bring to market a new rental offer for tenants: purpose built accommodation, greater security of tenure, more transparent rental increases and more consistent management quality, with a new breed of lettings agents and asset managers.
This briefing note looks at the challenges that build to rent poses for housing providers. It is based on a six month project conducted by the Resolution Foundation and Social Finance to develop a financing model for institutional investment in a build to rent portfolio of 778 rental units nationwide aimed at middle income households.