The Homes and Communities Agency (HCA) has published an update on its Private Rental Sector Initiative, reporting that momentum is rapidly building towards establishing funds that would invest at scale in new build property for residential letting for the first time in England.

Several strong consortia have emerged from those organisations that expressed interest to the Agency in June.

The HCA is now focussing its engagement on discussions with a small number of those funds or consortia which have the potential for both investment and fund management, in addition to Legal and General, and a consortium led by Aviva/CBRE, which have made a public declaration of their interest or intentions. A number of investors are actively looking at the viability for private rental property at specific sites, particularly those coming through the HCA’s Kickstart Programme and the emerging portfolio of public land associated with the HCA’s new Public Land Initiative.

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This focus on housebuilder sites and public land as a basis for public engagement with the prospective investors is a move away from the early exclusive emphasis on the concept of rental income support from the HCA, although the HCA will maintain this potential instrument for use on selected sites where needed.

Potential investors have indicated that links with developers going through the Agency's Kickstart Programme and the contribution of HCA's own land as equity through the Public Land Initiative would be very attractive to them in building seed-corn assets for potential private rental funds, as they seek to make investment assets viable by minimising upfront costs. Any HCA support would be given on a scheme-specific basis and not across an entire fund portfolio.

Sir Bob Kerslake Chief Executive of the HCA, said: "If we can help get funds to link up with our existing housing supply initiatives, we could see more stalled housing schemes being unlocked and provide an affordable and flexible tenure of choice. We have listened to the institutional market, and the message we have received is that we need to develop a number of support mechanisms to assist funds with their seed-corn sites.

"The housing market has not yet recovered and we have to look at new options. There are a growing number of people who can’t afford to buy right now, but don't qualify for social housing, and we should be aiming to give them a decent and well-managed rental option which fits with their current life stage."

(CD/KMcA