Investors seek revised affordable home definition
Liberalising the definition of affordable rent in section 106 agreements will encourage investment in the housing sector, according to a group of property industry bodies.
Responding to the government-backed Montague Review into how best to attract major institutional investors into the private rented sector, a joint response from the British Property Federation, the Association of Real Estate Funds and the Investment Property Forum, has made the case for a number of radical changes.
These include changes to section 106 agreements whereby homes offered at market rent can be treated as ‘affordable’ as long as they are rented for a minimum of ten years from first occupation.
The response also called on the government to encourage ‘build to rent’ schemes on large-scale projects to offer higher yields to investors and to advise councils on the benefits of market rents in fulfilling their requirement to identify housing supply under the national planning policy framework.
‘There is interest among institutional investors to invest in housing, but barriers such as scale and low net income yield remain,’ said Andrew Stanford, who is leading the BPF in its response to the Montague Review. ‘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.’
The Montague Review, led by Sir Adrian Montague, was launched in February and will seek evidence on how to encourage greater investment into privately rented property.
The review is part of the government’s housing strategy and is intended to help increase the supply of affordable housing by attracting new sources of funding.