The Homes and Communities Agency (HCA) has launched an expression of interest process for a new initiative, which could potentially attract significant investment into the housing market by encouraging institutions to fund new homes specifically for private rent.

The objective of the HCA's Private Rented Sector Initiative (PRSI) is to create an opportunity for investors - like pension funds - to enter the private rented sector on a large scale for the first time. At a point in the economic cycle where there is strong investor appetite for low risk investment, focused on income distribution and a longer-term investment horizon, many believe that this is the perfect time to expand the private rented sector. The initiative will form a key part of the package of proposals at the heart of the Government's forthcoming response to the Rugg Review of the private rented sector.

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The HCA is seeking to work with financial institutions and other investors to develop a long-term funding model for new private rental housing in England. It is anticipated that the potential investment could come from sources such as pension funds or overseas investors which have not traditionally been involved in UK residential letting.

The PRSI could have the potential to help kickstart stalled schemes and lead to a significant increase in high quality new homes for rent, managed in a consumer focused way, which would in turn help to make private rental an option of choice for consumers and relieve pressure within the housing market.

Sir Bob Kerslake, Chief Executive of the HCA, said: "Our initiative is one of many innovations we have used to attract new investment, kickstart stalled housing schemes and mitigate against the effects of the 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 PRSI, which could result in a positive outcome for all stakeholders.

"But it is only potential at this stage. We will engage with the private sector to develop a market driven proposition which is attractive to investors. Projected rental yields and the current market suggest that the time is right, and that is why we are engaging with the market to develop the proposition further."

(CD/JM)