UK private rental sector must grow, says Montague report

To Let sign There are a number of recommendations to speed up the timescale for building privately-rented homes.

Institutional investors could fund the large-scale building of private housing for rent, a report for the government by Sir Adrian Montague has said.

He says a combination of recent tax changes and wider market conditions could help the sector to grow.

Sir Adrian was asked for ways to tackle the UK's housing shortage, especially in the private rental sector.

But Labour has criticised suggestions that future developments might not cater to lower-income households.

Housing Minister Grant Shapps told the BBC he thought private funding for rental homes was "an interesting idea; I think it's odd that it doesn't exist".

He said the UK housing market was "unusual in that there is no institutional sector in building homes for rent to get a long term rental income".

'Targeted incentives'

Sir Adrian's report makes a series of recommendations for speeding up the timescale for building privately rented homes.

It is hoped that any major housebuilding programme could also boost the stalled construction sector and reduce unemployment.

Suggestions include calling on councils to review stalled development sites, to see whether some of the new homes originally planned could be made available to rent rather than sell.

There could also be some new measures to get redundant public sector land and buildings made available for housing development.

And the Montague report also says the government could look to provide a number of "targeted incentives" to encourage the development of build-to-let business models, which could include sharing development risk in the short-term.

In areas where there is a high current demand for rented housing, the report says land could be made available to developers on the grounds that a proportion of the homes built be let out to tenants.

And a code of standards could be adopted so that tenants knew what standards to expect of new rental developments.

'Missed a trick'

Start Quote

[The report] offers nothing for the millions of people already in the sector, paying sky-high rents and living under constant threat of eviction or further rent rises”

End Quote Shelter

The Montague proposals also include councils being asked to consider relaxing requirements for developers to build affordable social accommodation as well as private housing, something the Labour Party opposes.

Labour shadow housing minister Jack Dromey said "many of the measures recommended in this report are sensible, for instance on the use of public land, on attracting investment and on standards in the private rented sector".

But he said Labour was "not convinced that the answer to the crisis created by this government is to further water down affordable housing requirements that councils place on developers".

And homeless charity Shelter said that while it welcomed the report's recognition of "the need for more and better quality homes for people to rent", it had "missed a trick" in not addressing the current state of the sector.

Shelter said the report "offered nothing for the millions of people already in the sector, paying sky-high rents and living under constant threat of eviction or further rent rises".

Mr Shapps said the government was already spending "an awful lot of money on building affordable homes for rent and on social housing, even in these austere times".

He said the government would be spending almost £20bn in the current parliament.

"So the question is, what else can we do?" he said.

'Unleash investment'

The Local Government Association said the private rented sector had a key role to play in providing new homes, and that councils were keen to support the sector in providing good quality homes.

Chief Executive of the National Housing Federation, David Orr: "We're not building enough new homes"

But Mike Jones, from the LGA, said the government needed "to address the lack of liquidity in the finance market and limited availability of mortgages".

It said these were the obstacles standing in the way of a resurgence in new house building.

The vast majority of private-rented homes in this country are currently managed by individual landlords.

But the British Property Federation (BPF) believes the Montague recommendations "could unleash unprecedented investment in house building from pension funds, insurance companies and REITs [real estate investment trusts]".

"Encouraging institutions into building homes for rent has for some time been seen as the holy grail in enabling a long-term, private rented sector which is designed and built to let and offers renters something a bit different in the marketplace," said chief executive Liz Peace.


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  • rate this

    Comment number 197.

    So you wish for private investors to become the UKs landlords so says "SIR Adrian Montague" REALLY! And who is he when he's out I thought the UK landlords were the Royals and the likes of the Tory front bench. However this shouldn't affect the rich and powerfuls housing. As one says tickity boo old boy!

  • rate this

    Comment number 196.


    Then the goverment decreases the BoE rate to very low levels so person B has no mortgage costs and person A has to pay very high rents, experience very low savings rates and high inflation.

    It has to do with goverment subsidising the house market through the low rates and us taxpayers paying for this.

  • rate this

    Comment number 195.

    Private sector investment in anything has got to be a good thing, so long as it has a sufficient BCR.

    But as far as housing is concerned, we're not going to make much progress until the government, local authorities and developers finally get the message that the vast majority of people in the country prefer to own their own home rather than rent one.

  • rate this

    Comment number 194.

    166 - I agree with you but it's the kind of attitude most people associate with those who are a problem to "society". We're encouraged to own our own homes & stay put because then we're more easily controlled & spied upon by the state. I'd be happy (& capable of) living in a tent or a caravan but the taxman, my employer & countless others wouldn't like that one bit.

  • rate this

    Comment number 193.

    18 Minutes ago
    4 Minutes ago

    Person A can't afford the mortgage deposit (yet can afford monthly payments). Person B comes along, pays deposit and rents out to Person A at a significantly higher cost

    Fine. So it's nothing to do with affordability then. It's because people can't be ar%ed to save a deposit like they used to.

  • Comment number 192.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 191.

    We do not need more houses, however funded.
    We need fewer people.
    Stop importing people.
    Stop the stupid breeding.

  • rate this

    Comment number 190.

    Price controls are a disaster, they force prices up! Govt doesn't & can't know what a TV, shoe, stick of gum or a house should cost, only the freemarket can. Govt shouldn't be in housing at all! If Govt didn't allow speculative homes to develop by big market distortions like QE, insanely low interest rates to Bank lenders & Bank Bailouts, the rental market would be more affordable.

  • rate this

    Comment number 189.

    Response to 160 Miklatov
    A property Valued at £180K has a Repayment Mortgage of say £1,000 per Month. However, a buy to let will be for a lower value (say £120K with a large deposit) on an "Interest Only" Basis of say £450 per Month. Therefore they can rent it to you at £800/Month and make £350 month profit. Some of which will be needed to do do repairs, certificates, etc.. Simple!

  • rate this

    Comment number 188.

    Why not put a tax on all the EMPTY houses, with over half a million of them empty the tax would be huge and the money could be ploughed back in to redeveloping these homes and not building new ones on our dwindling green belt land.

  • rate this

    Comment number 187.

    Building more houses isnt the first answer. Making use of existing buildings should be tackled first. There are thousands of empty properties left to the elements all over the country. Even some of the old factory mills in the Northwest can be modernised into flats.

  • rate this

    Comment number 186.

    People do not want to spend their entire life's earnings on rent. They want to buy, so they have a place to live in their old age and pass on to their children.

    What happens when the occupants of these rental properties are too old to work? They are left to the mercy of the state, paid for by taxpayers.

    This is not the solution. We need to tax second properties and lower mortgage deposits.

  • rate this

    Comment number 185.

    More properties being rented means more tax for the government

  • rate this

    Comment number 184.

    What's wrong with the existing system of appeals anyway? If a scheme is unviable because of affordable housing, then a developer can show that.

    Give the council's/housing associations some cash (not the investors/Tchenguez's etc), divert money away from inflated housing benefits, let them build some new stock, and require them to rent out at affordable rents = net public saving.

  • rate this

    Comment number 183.

    It sounds obvious but the best way to improve housing affordability is for the govt / banks to stop its policy of propping up house prices - let the market decide.

    The banks' balance sheets are vulnerable to a writedown of asset values but this is at the expense of a mobile workforce who don't have to spend too much of their income on housing etc.

  • rate this

    Comment number 182.

    The commenter who talked about buying abroad for the money you'd need for a deposit here has got it about right.

    If the government/bankster defrauding the public continues, you're going to see more and more people just upsticks and leave, then all you'll have left are the chavs and the authoritarian freaks

  • rate this

    Comment number 181.

    The 'Right to Buy' scheme was an excellent idea. It's just that the government took the money and ran, when they should have reinvested building replacement council houses, thus allowing the continuation of a brilliant Tory idea (and as these don't come along very often, they should make the most of it!)

  • rate this

    Comment number 180.

    At the age of 56, I've owned 2 properties. I am thinking of a new property (bungalow) for our retirement. The more and more I look at what has happened to house prices, employment, the more I think renting is becoming a better option (like most of the world already do).

    I could not get a mortgage at my age, so I would have to downsize. Or rent a suitable property.

  • rate this

    Comment number 179.

    Private investment for social housing will only happen if the gov't make incentives ie make it low risk, profitable and speedy returns.

    At the end of the day this means benefits to LLs. This has already happened in N.Ireland and the gov't here is finding that while it worked short term, long term is a bit of a problem and costs need to be cut. Investors are now finding things rather tight.

  • rate this

    Comment number 178.

    The state is already overspending and does not have money to invest. It therefore makes sense to incentivise private money to do so. As long as proper checks and balances are put in place I'm happy with this.


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