Market rent homes should be treated as affordable housing, says BPF

Responding to the Government's Montague Review into barriers to institutional investment in the private rented sector, the BPF said that the Government must "explicitly encourage" the construction of build-to-rent schemes to ensure that large scale projects that would provide the financial return that investors seek are built.

Sir Adrian Montague conducted the review which examined what barriers exist to greater institutional investment in the private rented sector, and how the supply of these properties can be increased in line with rapidly growing demand.

Section 106 planning agreements should be used to treat market rent dwellings as affordable housing, the BPF said in its joint response to the review with the Association of Real Estate Funds (AREF) and the Investment Property Forum (IPF).

A section 106 agreement is a legally binding agreement under the Town and Country Planning Act 1990 which allows a local planning authority to agree planning obligations with a developer in order to mitigate the impact of development and make it acceptable in planning terms.

This could be achieved by including a covenant which specifies that all units on a development must be rented for a minimum period of 10 years from first occupation, the joint response said.

“There is interest among institutional investors to invest in housing, but barriers such as scale and low net income yield remain," said Andrew Stanford of BPF. "If we want to attract the sort of sums that will really make a difference to housing supply then we need some support via the planning system, to deliver a different rental product and support the yields that institutions seek."

Extra weight could be added to the initiative by educating local authorities on the benefits that ‘market rented’ housing can provide in fulfilling requirements in the NPPF that they identify a supply of housing sites, the joint review said.

The BPF said that this would be a ‘cost free’ way for Government to boost housing supply, and would actually be profitable for them if they invested public land

Consultation on the Montague Review closed on 31 March and recommendations are due to be made to Ministers in June.