Councils "should waive affordable housing requirements" to aid build-to-let

Local authorities should consider waiving affordable housing requirements on new developments of homes being built specifically for private rent, a Government-commissioned independent report has claimed.

The report by Sir Adrian Montague also recommended that councils should review stalled sites to see whether some of the new homes planned could be made available to rent rather than sell.

Sir Adrian was commissioned by ministers in November 2011 to look at the barriers to institutional investment in private rented homes.

His report also recommends 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;
• The Government should provide a number of targeted incentives to encourage the development of Build-to-Let business models. These could include sharing development risk in the short-term;
• The Government should allocate some of the redundant, formerly used public sector land and buildings being released for housebuilding to build-to-let development, and publish data on how this is done; and
• The Government should work with councils and the Greater London Authority to identify a number of sites where there is good demand for rental housing and make them available to developers on the grounds that a proportion of the homes built be let out to tenants.

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.”

A copy of the report can be found here. The Government will issue a formal response to the report later in the year.

Housing Minister Grant Shapps said the Montague report offered "a blueprint" for encouraging more institutional investment into the sector and for setting the standards of accommodation people should expect.

He added: "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. In the past 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.

"A major part of this is to attract and encourage new players to the market, while at the same time avoiding the excessive regulation that would force up rents and reduce choice for tenants.”

The Chartered Institute of Housing said it supported the Montague report’s recommendation that local authorities should use the flexibilities in the planning system to support the development of private rented homes where that helps to meet local housing need.

However it added that it was “essential that, as the report suggests, where planning permission for new private rented homes involve developers negotiating a reduced provision of affordable housing there must be clear arrangements to guarantee that homes built remain available for private renting into the longer term”.

It also argued that the revised approach to planning should be trialled for a time limited period. “Government can then review the results of the approach before any move to adopt it on a permanent basis,” the CIH said. “Planning gain has been a very important mechanism for providing new affordable homes and should not be easily discarded.”

The Institute also said it backed the proposal to pilot the release of public sector land for private rented schemes, “a measure which could stimulate of much-needed new development”.

The Royal Town Planning Institute meanwhile said the critical issue was whether there was enough housing overall and was it in the right place, with the right supporting infrastructure.

Commenting on the Montague report’s suggestion that for private rented schemes there should be a relaxation of affordable housing requirements, Richard Blyth, the RTPI’s Head of Policy & Practice, said this would raise two issues:

• “Would this reduce the overall numbers of affordable homes to be provided?
• “Are the Montague proposals for ensuring that homes are privately rented for a minimum period actually workable? There is no planning definition of private rented homes. Planning conditions do not effectively endure for longer than 10 years. Would covenants as suggested be practicable?”

Earlier this month, the Government launched a consultation on proposals to give developers the option to ask councils to renegotiate s.106 obligations agreed prior to April 2010.

Where agreement cannot be reached on a voluntary basis, the proposals would enable signatories to section 106 agreements to formally request reconsideration of s106 planning obligations agreed prior to 6 April 2010. At present, s106 obligations cannot be renegotiated for five years once a council refuses a request for voluntary renegotiation by a developer.

Philip Hoult