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Investing in private rented housing Matthew Warburton - 27/07/2012

money keys 300This week brought some unexpected bad news on the economy, but failed to bring expected news of the conclusions of Sir Adrian Montague's review of barriers to investment in the private rented sector.

Sir Adrian's review was originally expected to report before Parliament went into recess earlier this month. Publication has been delayed, but the report is widely expected to recommend a bundle of measures to kick-start large-scale institutional investment, including government-backed loans to support large-scale new build schemes for rent, a task-force to scour public sector land banks to release suitable sites for private rented development, and relaxation of section 106 arrangements to allow developers to include housing for market rent in new developments in place of affordable housing.

While home-ownership remains out of reach for so many, it is difficult to deny the case for a bigger and better managed private rented sector. And it is clear that the barriers to large-scale institutional investment in private rented housing are real; if they were not the opportunities offered by the sharp growth of the sector over the past decade would surely have been seized.

Governments - both central and local - must be willing to take action if they are to be broken down. But if the government acts on the recommendations that Montague looks likely to make, the danger is that councils will be forced further down the road of marginalising social rented housing.

Already the lion's share of new sub-market rented developments are for letting at affordable rather than social rents; squeezing additional rented housing out of existing and planned developments puts further pressure on the scope for social rented development.

The solution is not to accept the constraints imposed by the current low level of construction activity and existing public land banks, and to refuse the choice between market and submarket, affordable and social rented housing - most areas need all of them in a mix that suits local housing market conditions.

Instead of worrying endlessly as to which should have the highest priority within a national housing strategy hamstrung by spending cuts, the government should accept the case for spending a little more on housing.

This week's news that economic activity had fallen by 0.7 per cent in the three months to June came as an unpleasant shock, and prompted a further round of calls for the government to change course.


It is said that the case for housing investment to boost the economy is well understood at the highest levels of government. That is good news so long as it includes an understanding of the case for investment in social housing.

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