HCA signs landmark private sector deal
The Homes and Communities Agency has agreed to give funding to a developer to build homes for private rent in the first deal of its kind.
Under the deal with Berkeley Homes the developer will set up a private rental fund that it will use to buy 555 homes it is building over the next two years. The fund, which will be a wholly owned subsidiary of the Berkeley Group, will keep the properties to rent on the open market.
The HCA is putting in £45.6 million through its Kickstart scheme. Of this £28.5 million is equity, £455,000 is gap funding, and £16.6 million comes through the National Affordable Housing Programme. In return for the equity funding it will get a 20 per cent stake in Berkeley’s private rental fund.
Berkeley said the overall investment would allow it to bring forward further phases on 10 of its developments, amounting to 922 homes for private sale, and 299 affordable units, in addition to the 555 for private rent.
The homes for private rent will be in developments across London, the south east and south west, including Kingshill in Cirencester, Royal Clarence Yard in Gosport and Kidbrooke in south east London.
The HCA launched its private rented sector initiative in May 2009 with the aim of encouraging institutional investors into the private rented market. The deal with Berkeley, which was outlined in Inside Housing last month, could form a model for future agreements.
Rob Perrins, managing director of the Berkeley Group, said: ‘The creation of the private rental fund with the support of the HCA is a significant innovation for the private rented sector and will provide high quality homes for open market rent across a number of our sustainable communities.’
Sir Bob Kerslake, chief executive of the Homes and Communities Agency, said: ‘This is exactly the kind of landmark deal we were looking to have associated with our private rental sector initiative.
‘We know that more people are choosing to rent and as well as accelerating the supply of new open market and affordable homes, the creation of a bulk portfolio of homes for rent could be a blueprint for long-term investment in the private rental sector in the future.’
Readers' comments (8)
David Lawrenson | 3-Sep-2010 5:14 pm
Sounds interesting to us at LettingFocus Towers but we wonder if we could have more details, like for example, who will be managing the actual private rentals.
Doing things right in the private rented sector - finding the tenants, managing them etc is not as simple as it may seem as many amateur private landlords have found out to their cost (and a few building societies found out too when they got clobbered for a lot of mortgage fraud.)
Many of the amateur private landlords who lost out in buy to let in the last 10-15 years did so by buying into inner-city-me-too-flats which were hugely oversupplied, as dull as ditchwater and had poor ongoing management arrangements.
And these blocks always had a very high proportion of private tenants in them because the flats had often been promoted by property entrepenuers to private landlords.
Pretty soon they looked pretty shabby partly because the type of close managment of blocks and the environment that you can get in a lot of old social housing was simply not in place in the PRS.
We wonder what will happen here in practice. We hope these will not be badly ran "buy to let ghettos mark 2"
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Sidney Webb | 3-Sep-2010 5:15 pm
The recognition that people are choosing to rent is welcome. The recognition that people would wish to afford to rent is now required.
Do we have any indication of the prospective rental charges for the scheme, and will the investment of tax-payers money deliver onward affordability?
Previously, such schemes would have come under the TSA. Is there any indication on if Shapps would be intending to see regulation still in this area?
There have been numerous posters clammering against any subsidy for public housing - how do they feel about subsidised private housing? Indeed - how do they feel about the existing and extensive private housing subsidies?
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Bannside | 4-Sep-2010 9:35 am
Building houses for rent, that's a good idea - good long term profits. Why don't we do this for social hosing as well?
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Sharon Crossland | 6-Sep-2010 10:12 am
'Sounds interesting to us at LettingFocus Towers but we wonder if we could have more details, like for example, who will be managing the actual private rentals'.....
Sounds interesting to me too. Blocks of flats purchased as homes already experience horrendous problems with managing agents and freeholders and these have been compounded further by amateur PRS landlords and unregulated letting agents crossing over into the mix.
It's also been my experience that councils don't want to get involved much in private renting outside of HMOs's.
So, is there any reason to think that developments solely for rent are going to be managed any better? Are purchasers of these properties going to be legally compelled to belong to trade associations and provide proof of accreditation?
After all, it's a whole other world outside the cosy environment of the NLA, et al.
Kind Regards
Miss Sharon Crossland AIRPM
Leasehold Life
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john bull | 6-Sep-2010 1:42 pm
So HCA will give a private developer money to pay for their houses so they can rent them. A 20% stake in the equity, someone in HCA in line for a p/t directorship?
How do I feel PSR ? this makes me hopping mad. Now is the time to stop all these gifts to build houses.
It was bad enough when it was only a few social landlords got it and genuine Housing Co-operatives, who would look after the property better than any other Social housing provider, can get nothing.
When people have a real democratic say in the houses they collectivly own, the standards in all respects are much higher.
They get no money or encouragement from HCA because bureauracrats hate what they call 'bottom up management'
In other words they cannot exercise their 'nanny state power'
But now to give our tax money to companies whose sole objective is to maximise profits at all and any cost is insanity. If they want money they should raise it on the money markets, not scrounge off the tax payer.
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Anonymous | 6-Sep-2010 11:16 pm
What a turn up Sir bob does a deal for the private sector then leaves the HCA before the prevebial hit the fan.
The big question is why did the tax payers money go to the private sector they should have gone to the money market not the HCA and they should have known better that to do the deal in the first place. How come the private sector can get public money yet to help Forgemasters of Sheffield where it was only a lone they wanted again the SOUTH being looked after and the North is left high and dry. There is no justice in the way things are done these days.
Doing things like this will just cause more unrest. Mr Bob should have given it to the RSL sector to get the homes built then they would have been looked after as they have to keep on being rented out where the private sector get as much as they can as quick as they can then sell and leave others to maintain them. Who ever gets the management contract it should come under the same regulation as the Housing Associations with proper Tenancy Agreements and not just short term rental say min of 12 month with option to extend. Lets get some control of the private sector.
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Rich Kightley | 7-Sep-2010 9:50 am
The flats shown remind one of the slums of the East end of London built in the 1970's.
The grassland about will become a syringe-litered no-go area for tenants.
It will become a slum very shortly after construction.
After being a student in 1971 and going on to study Town Planning in 1977, I am amazed that any serious body, public or private would build instant slums.
If no one wants to live there, eventually only problem families, drug addicts and dealers, and criminal families will live there. I pity any desperate family that is re-housed there.
The use of public money to build slums is a criminal act.
Where is the "defensive space concept"? Where are the brick built houses on normal streets we all choose to live in?
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David Lawrenson | 7-Sep-2010 10:18 am
With my journalist hat on for a change, I'll be writing a piece on this next week (not for IH, for another mag) but I'll certainly ask those behind the schemes (and those in govt who think these are a good idea) all the questions you have posed, especially about the ongoing managment arrangements for these new proposed developments.
I'll post the answers here.
I share your concerns but let's give them a chance and hear what the developers have to say and HCA have to say.
HCA press release does not give the detail on the mgt of the tenants / other ongoing mgt issues etc. Here is the release:
http://www.homesandcommunities.co.uk/the-berkeley-group-and-hca.htm
Perhaps someone involved there would like to comment here?
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