September started so well for those with high hopes for a new institutionally-backed private rented housing sector, with the Homes and Communities Agency announcing its first private rental initiative agreement with the Berkeley Group.
The landmark deal commits Berkeley to establish a Private Rental Fund to purchase around 550 of its own new homes over the next two years, with the HCA providing equity funding from its Kickstart programme to retain a 20% stake in the portfolio that would have to be available for long-term private rental. The public-private venture is a first for both sides and was immediately hailed by the British Property Federation as the deal it has been waiting for to demonstrate the viability of large-scale development for private rental.
The HCA's investment is part of a £45.6m package of funding that is allowing Berkeley to bring forward development on ten of its existing sites in London, the South East and South West. The deal is expected to generate an additional 922 homes for sale and 299 new affordable homes.
However, by the end of last week the BPF's celebrations were cut short by a statement from the Treasury that appeared to rule out future financial support for initiatives designed to increase the delivery of homes to rent, claiming that any institutional investment would always be no more than a 'niche' in the sector. The Treasury's comments were issued as its response to the consultation on promoting the private rented sector launched by the last government.
Through the Property Industry Alliance, mortgage lenders had joined the RICS, BPF and others to draw up a list of suggestions for encouraging investment, including suitably tax-efficient investment vehicles and the removal of barriers to investment such as current stamp duty land tax bulk purchase rules.
For its part the HCA had claimed that its Private Rental Sector Initiative could generate £1 billion of development funding in its first year and so help to establish a new housing investment sector in its own right. Names linked to the initiative included Legal & General and Aviva and scores more pension funds and insurers had expressed interest.
With the government's spending review just weeks away and future HCA funding expected to be under pressure, the odds appear to be lengthening for any significant public sector pump priming of pioneering housing investment initiatives.