In the run up to Christmas the coalition government announced an important new fund for the private rented sector. Missed by many of the broadsheets the new “Build to Rent” fund is aimed at reducing the risk for developers who normally build homes only for sale and investors who are wary of the risks in the private rented sector. With house building at an all-time the coalition government is desperate to find ways of kick starting house building. Don’t get your hopes up it’s a loan not a grant !
The new fund will finance the construction of rental homes until they are built, let out and managed, the fund will ‘bank roll’ developers to build homes specifically for that market.
So the £200m Fund is a fully recoverable, commercial investment where the public sector will share risk or bridge finance to allow schemes to be built out, 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.
What’s particularly interesting is that the fund is also open to management companies who will have the chance to invest in these new rental developments. When completed and let the management companies and developers will then repay the investment from government.
Allen Creedy senior partner at Ethical partnership said “I’m sure some of our housing clients will be looking to use the fund – but we need to get moving as the expressions of interest close on the 4th of February – looks like a busy January!”
Resuscitating the rental market
The Build to Rent fund follows on from the investigation into the barriers to institutions investing in the private rental sector (Montague report). With the majority of private rental landlords being small-scale and individual investors the fund is aimed at redressing the balance, it hopes to stimulating the market for private rented homes for institutional investors and large-scale housing organisations.
Will it deliver? Well certainly in the short term there will be demonstration’ projects to test out how it can work, to finesse the regulations and to provide guidance for participating companies and developers. An expert taskforce will also work to boost investor awareness of the fund and offer practical support to those interested in this new market.
The bidding process
The Fund prospectus was launched on 20 December, and follows a two stage selection process. Run as a national competition, developers are invited to submit expressions of interest, including core information about their propositions, by noon 4 February 2013.
Shortlisting decisions will be made by DCLG, the Homes and Communities Agency and the Greater London Authority. The Homes and Communities Agency will undertake due diligence, contracting and monitoring