The Montague Review

Sir Adrian Montague has published his proposals in the Montague Review to encourage greater investment in build-to-let, which include measures aimed at boosting professional investment in good quality, privately rented homes and to help meet the nation’s housing demand.

The vast majority of private-rented homes are managed by individual landlords, but Sir Adrian’s report highlights the “real potential” for investment in large scale development of homes built for private rent by professional organisations and says that a combination of recent tax changes and wider market conditions have cleared the way for this sector to grow.

The report offers recommendations to speed up the timescale to meet existing and growing demand. These include:

• That councils use flexibilities in the planning system to enable developments of privately rented homes where they can meet local need. This could include waiving affordable housing requirements on new development of homes for private rent, or reviewing stalled sites to see if some of the new homes planned could be made available to rent rather than sale;
• That a task force be set up to encourage and support build-to-let investment from the private sector, and to develop voluntary standards that future landlords would meet and tenants could expect;
• That the Government look to provide targeted incentives to encourage the development of Build-to-Let business models, which could include sharing development risk in the short-term;
• That the Government allocate redundant, formerly used public sector land and buildings being released for housebuilding to build-to-let development.

Sir Adrian’s report was commissioned as part of the Government’s Housing Strategy in November. The Government will issue a formal response later this year.

Grant Shapps (Minister at the time) said, “We’re determined to encourage greater investment in the build-to-let market and boost the country’s Private Rented Sector, which plays an integral role in meeting  the nation’s housing needs and aspirations. It’s often been seen as the Cinderella of the housing market, but when over three million people rely on this sector for their home, this is clearly no longer the case.”

Sir Adrian Montague said, “It’s clear we must encourage investment in the Private Rented Sector, which has gone through a period of rapid growth and is now relied upon by millions of people.

“My review shows that the rental housing sector offers potential investment opportunities of interest to institutional investors. But real momentum has been inhibited by constraints affecting the supply of stock, the treatment of rented housing schemes under the planning system and the need to create confidence among investors.

“The recommendations in today’s report are designed to challenge this, and remove the barriers that prevent the kind of investment that our Private Rented Sector needs.”

Industry comment

Liz Peace, Chief Executive of the British Property Federation, said, “The Montague Review’s reccomendations will help address the barriers cited by the institutions.

“Today is not the end of the journey, however, but the start of one. Local councils and the communities they represent are in the box seat on this issue. If they want more housing to support their sons and daughters and grandchildren then an institutional private rented sector is an option they should consider.”

Sue Foxley, head of research at Cluttons said, “London needs more rental accommodation; the capital is crying out for housing which is specifically developed for renters.

“Long-term investors genuinely add to the housing stock and through focused and efficient management look at income returns not capital growth. There is an opportunity here to radically transform the rental market to the benefit of tenants.”

Knight Frank’s Head of Affordable Housing, Sue Cocking said, “If we are serious about stimulating the private rental sector, one of the key ways of achieving this is for local authorities to factor in the lower land values supported by private rented property in their planning assessments, and accept that schemes will not always be able to deliver section 106 aspirations, including as much affordable housing.”

Ian Potter, MD, ARLA, said, “ARLA welcomes the recommendations, however we do have concerns over the speed with which public land will be made available as land prices aren’t attractive enough to the owners but we agree that part of the success of any housing policy in the present climate is to get stalled sites moving. We are in a general housing crisis and there is little capital for building new homes.”

Adam Challis, Head of Research at Hamptons International said, “There is significant demand from institutional investors to invest in the industry if it is enabled to deliver 100 per cent private rental buildings. This will do much to alleviate the housing supply logjam.”

Sir Adrian Montague’s report, Review of the barriers to institutional investment in private rented homes, can be found at: www.communities.gov.uk/publications/housing/privaterentedhomesreview.