Olympic inspiration for new family housing

The planned conversion of the Olympic Village to 1,400 high quality long-term private rental homes should serve as an inspirational model for how to tackle the UK’s housing crisis according to new research published today by independent think tank the Resolution Foundation. The report argues that with one low to middle income family in four shut out of home ownership, there is an urgent need for high quality purpose-built rental homes offering more secure tenancies than typically found in today’s buy to let sector.

The Department for Communities and Local Government is shortly expected to publish the findings of an independent review into institutional investment in build-to-let development conducted by Sir Adrian Montague.

The private rented sector is expected to account for 22 percent of the housing market by 2025, and 37 percent in London according to projections commissioned by the Resolution Foundation and Shelter. This compares to 16 percent of households today, and 8 percent in the early 1990s.

In a context of significant cuts to public investment in housing, the Resolution Foundation proposes that new build-to-let developments could be funded by institutional investors, such as pension and life funds, and has developed a financial model for debt and equity investment in the private rented sector in collaboration with the Royal Bank of Canada (RBC). Given that investors are often reluctant to invest in the development phase to get rental schemes up and running, the report foresees a role for registered social housing providers in kick starting build-to-let developments by building new units which could then be sold onto an investment fund enabling social housing providers to build further new homes.

The Resolution Foundation report, Making Institutional Investment in the Private Rented Sector Work, calls on Local Authorities to support private rented sector development through the planning system by strategically designating land for PRS development rather than for residential development in general. This will lower the price of land for new-build rental accommodation.

The report also recommends that central government supports the private rented sector as a strategic priority, calling on the Homes and Communities Agency (HCA), the national housing and regeneration agency for England, to designate a proportion of public land specifically for build-to-let development.

Vidhya Alakeson, Director of Research and Strategy at the Resolution Foundation, said “More and more families find themselves in the private rented sector, they urgently need access to better quality housing options. Institutional investment in build-to-let provides an opportunity to create new, professionally-managed homes better suited to long term tenants. It also increases the overall supply of housing whilst boosting the construction sector.” 

Giles Tucker, European Head of Infrastructure at RBC Capital Markets, said “RBC is  committed to remaining at the forefront of research and innovation in the social housing space – a sector that has the potential to play a central role in the revival of the UK economy.” 

Notes to editors

Charts & data showing projected growth in private rental sector are available from the Resolution Foundation press office.

The report, Making Institutional Investment in the Private Rented Sector Work, will be published on Thursday 19 July and will be available to download from www.resolutionfoundation.org

This report is based on a financial model for debt and equity investment in the PRS that the Resolution Foundation has been developing in collaboration with the Royal Bank of Canada (RBC) over the last 12 months. The model targets households on low to middle incomes, building on the conceptual approach set out in the Resolution Foundation’s 2011 report, Making A Rented House a Home: Housing solutions for ‘generation rent’

The Resolution Foundation and Royal Bank of Canada are currently working with a group of five Registered Providers (social housing) to model the returns that would be generated by this approach to build-to-let development. The details of this work will be published this autumn.