HCA seeks investors to boost private rented market

It is asking for expressions of interest for a new Private Rented Sector Initiative, which it hopes will allow institutional investors to enter the private rented market on a large scale for the first time.

Institutional investors pool large sums of money, and invest these on behalf of their clients. They include bodies such as banks, pension funds, and insurance companies.

Generally they are looking for a steady income stream, so the private rented market has not been attractive. But the HCA believes the market is now at a point where investors could make money on rents, rather than relying on the property to increase in value.

It hopes that getting institutional investors involved would increase the capacity of the private rented sector, by giving developers the confidence to build new homes for rent.

The HCA has also said it would be prepared to consider using recently built homes as ‘seed assets’ to get the scheme started. Most of the homes built would be for private rent, but a smaller proportion could be for intermediate rent.

The HCA would mainly act as a facilitator for any scheme, although it said it could offer ‘limited financial support to stabilise the portfolio and create confidence for investors during the initial years’.

Chief executive Sir Bob Kerslake said: ‘To date, achieving scale has been one of the main barriers to attracting institutional investors into the housing sector. We believe there is an opportunity now for the HCA to work with developers and house builders to offer a pipeline of projects for the PRSI, which could result in a positive outcome for all stakeholders.

‘But it is only potential at this stage. We will engage with the private sector to develop a market driven proposition which is attractive to investors. Projected rental yields and the current market suggest that the time is right, and that is why we are engaging with the market to develop the proposition further.’

Organisations including the British Property Federation have been lobbying for a move to encourage institutional investors into the private rented market.

Its residential director Ian Fletcher said:  ‘It’s great that policy makers are alert to the need to continue to expand the private rented sector and support development through these difficult times.

‘But it’s vital we look at what we can do to make the numbers stack up. It’s now or the never for the professional rented sector and it’s essential that ministers do not lose sight of the opportunities here.’

The HCA proposals are expected to form a key part of the government’s forthcoming response to last year’s Rugg Review of the private rented sector.

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