to Sir Adrian Montague's report on private
renting, published last week, were mixed. Opinion divided on
his recommendation that councils should drop affordable housing
requirements in section 106 agreements in favour of homes for
market rent. Unusually, the Chartered Institute of Housing and
National Housing Federation took opposing views, with the CIH willing to give
the proposal a try, while the NHF and
were firm that homes for market rent should not be at the expense
of affordable housing.
At first sight it is hard to see the argument for dropping
affordable housing requirements in new build schemes. We need more
rented housing because demand for house purchase has stalled, don't
we? So surely development for rent should substitute for building
for sale, not affordable housing.
The problem is, however, that the market is not geared up to build
new homes for rent; while large scale investment in building for
private rent is commonplace abroad, it has not been a feature of
the British housing market for many years. Hence Montague's remit
to look at the barriers to institutional investment.
The argument for institutional investment is not just about
quantity; if a larger private rented sector is to become a
permanent feature it needs to change. For renting to become a
long-term choice for a range of households, the market needs to
offer more housing to higher standards, with longer-term tenancies
and a better service to tenants.
The biggest barriers to investment identified in Montague's report
are novelty, and concerns about the yield, particularly if
appreciation in capital value is not factored into the calculation
because there is no foreseeable prospect of sale.
Investors, particularly overseas investors, are apparently
reluctant to be the first to move into a untested market, or expect
to be paid for taking a risk; hence the case for intervention to
bump-start a market.
Montague also recommends earmarking public sites for rental
development, and allowing developers to defer payment.
How much of an incentive is needed in practice to get investment
going cannot be predicted in advance - what is needed to make a
scheme stack up will depend on local circumstances.
Councils face different local needs and opportunities; the
relative priority they give to new private rented and affordable
housing will vary. Some will want to waive affordable housing
requirements on particular development in order to get more
building and more rented homes. But the government should not apply
pressure on all councils to go down this road.