Notting Hill’s £500m private sector plan

As a result Mr Belton, in his role as chief operating officer at Notting Hill Housing Group, is spearheading one of the most ambitious and aggressive private rented sector expansions by any housing association in the UK.

Although, as Inside Housing revealed in April, many associations across the country are looking to expand their PRS portfolios, few are planning to do so on quite the same scale as 25,000-home NHHG.

The west London-based housing association plans to invest £500 million in assembling a private rented portfolio of 2,000 homes by 2018. The move aims to generate extra surpluses in a world of lower grant levels and to cater for different groups of people, such as those not eligible for affordable housing.

So what exactly is NHHG planning?

The association already manages 470 private rented homes which have been bought since 2008 using £100 million of NHHG resources without grant. The majority of the homes are managed through two profit-making companies, Notting Hill Market Rent and Presentation Market Rent.

It has committed £120 million to buy a further 483 homes between now and 2016. These will be a mix of new build and existing properties. It eventually hopes to grow its PRS portfolio to 2,000 homes, and plans to build a high proportion of the final 1,000 to be added to the portfolio itself.

The plan will increase the association’s gearing, which measures debt to assets, from around 45 per cent to 56 per cent. However, Mr Belton says this is far below the 76 per cent limit in its existing lending agreements, meaning lenders will be comfortable with it.

NHHG has also secured a £45 million loan from the Greater London Authority through the government’s Get Britain building scheme to buy 280 homes, including 140 PRS homes, from developer Berkeley Group. It is also expecting £18.3 million through the government’s build-to-rent fund to build PRS homes.

Currently NHHG’s total private rented sector activity has assets worth £101 million, a turnover of £5.4 million and an operating profit of £3.5 million. Mr Belton said he wants this rate of return to improve from the current 3 per cent to more like 5 per cent.

‘It [the current return] is not good enough, it is not hitting our benchmark. We have to be out there marketing more aggressively, charging higher rents and managing it more efficiently,’ he told conference delegates.

He said brand will become increasingly important in the PRS market, adding that Thames Valley Housing has to date ‘won the branding war’ with its Fizzy Living private rented product.

‘We think it is a wake-up call, we do need to go out there with a brand,’ he said.

If Mr Belton’s scheme goes to plan, NHHG’s PRS portfolio will deliver an annual turnover of around £30 million by 2018 and an operating profit of £22.5 million, to be re-invested in building affordable housing.

However, Mr Belton said the move is not solely about creating cross-subsidy, but also about addressing need.

‘We want to grow it [the PRS] further, we realise it is not social housing, we need to attract different people to the PRS,’ he said.

Mr Belton said the PRS provides housing for ‘people stuck in the middle’, who can’t afford to buy and are not eligible for affordable housing. However he also said it is there for people who ‘are just deciding to rent’.

He added that young people are less likely to want to buy outside London and commute into the capital than previous generations. ‘They would rather be in London and rent,’ he said.