Local Authorities Urged To Promote Institutional Investment In Private Rented Sector Over Home Ownership
According to the report “Making Renting Viable“ commissioned by the British Property Foundation (BPF) and conducted by a leading London law firm; more UK local authorities should focus on building new residential properties for the private rented sector to encourage institutional investment instead of promoting local homeownership.
The British Property Foundation and Addleshaw Goddard who conducted the survey, reckon that UK local authorities should earmark land within their council boundaries for private rented sector (PRS) properties and set housing development targets to encourage pension funds and other institutions to invest more in the private rented sector.
Partner at Addleshaw Goddard, Marnix Elsenaar, said: “It’s vital councils recognise both the need for an institutional private rented sector that’s not the same as buy-to-let, while ministers should update planning guidance to make building for rent economically viable. Residential property was seen as more difficult than renting out a commercial office block, but the landscape has changed. Institutions want reliable, long-term returns and they should see a good degree of income growth in the private rented sector.The “Making Renting Viable” report, recommends that Government ministers update local authority planning guidance to make building for rent more economically viable for institutional investments.
Institutional investment providers could become big players in the UK private rental sector by encouraging more UK local authorities and councils to build-to-rent. The UK’s private rented sector has more than doubled in size over the last ten years, however, according to data provider IPD, less than 1% of the UK’s private rented sector housing stock is owned by institutions at present, compared with 13% in the USA and 17% in Germany,.
In August 2013, London mayor Boris Johnson announced the first rental-led development scheme in South London funded by M3 Capital Partners, who are responsible for managing USA pension funds.
The report follows a recent study by estate agents Knight Frank who discovered that 17% of the UK’s population live in private rented sector accommodation and the number of tenanted households looks set to grow from 4 Million observed in 2010 to around 5.3 Million by the end of 2018.
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