Government launches new homes scheme

The Homes and Communities Agency's Private Rented Sector Initiative claims to offer investors low-risk long term deals in a bid to generate funds to build new rental accommodation, especially in London and the south east.

The hope is to attract money from institutions which have little or no tradition of investing in the residential lettings market, such as pension funds.

The agency's chief executive Sir Bob Kerslake said: "Our initiative is one of many innovations we have used to attract new investment to kick-start stalled housing schemes and mitigate against the effects of market downturn.

"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 housebuilders to offer a pipeline of projects for the initiative, which could result in a positive outcome for all stakeholders.

"But is is only potential at this stage. We will engage with the private sector to develop a proposition which is attractive to investors.

"Projected rental yields and the current market suggest that the time is right for this scheme."

The agency believes the scheme will help bring an end to the speculative nature of housebuilding, and will unlock funding for projects which have stalled.

Liz Peace, chief executive of the British Property Federation, said: "This initiative paves the way for a new kind of private renting that could support new development as the housing market recovers.

"We need to ensure we create attractive proposals that provide solid returns for investors, and more importantly tenants, at no cost to the taxpayer.

"The task now is to stimulate interest in the agency's proposals to encourage some innovative bids and ensure that we create some attractive proposals that provide solid returns for investors.

"To make this work, we do need to reflect on the different financial structures of private rented housing, ensuring that we do anything we can to draw in this vital new funding."