Feature Story

Pushing the private

Chief Executive Liz Peace explains to the PPP Journal what the British Property Federation would like to see prioritised by the new Housing Minister, Grant Shapps.

The idea of 'residential for rent' – how residential properties can be managed to yield a rental income is a key issue for the British Property Federation. We have a small but committed cadre of people who deal in residential investment and there are more who would like to assemble funds to invest in this sector. If we could tap into this potential we would add substantial numbers to the availability of housing for people in this country.

This has been talked about for a long time and the first thing the government needs to do is to encourage institutional investment in the Private Rented Sector (PRS). There was a Treasury consultation right up to the election looking at ways of encouraging institutional investment into PRS throughvarious potential tax breaks, in particular the disaggregation of Stamp Duty Land Tax on bulk purchases and the encouragement of residential real estate investment trusts.

As well as tax changes, there are things that the Department for Communities and Local Government could do to encourage the PRS. For example, changes to the planning system could be used to encourage the construction of homes specifically for rent rather than sale. Generally though we would like to see government making really positive statements about the PRS and showing the industry that it is keen to encourage this potentially important sector. My message to Grant Shapps is simple: push the private rented sector.

The government needs to encourage institutional investment, which is what is needed to meet demand. We need the right sorts of houses, in the right place, funded by the institutional investors we see in the commercial rental market. It could make a very useful contribution and could benefit contractors because they would have someone to sell their housing stock to en bloc rather than selling piecemeal. Volume house builders never showed much interest in this previously, but the downturn has caused them to re-evaluate that. If they knew they had the PRS waiting to snap up their houses, they might be motivated to go out and build more. So the PRS can be used to expand housing provision.

I am also in favour of tapping into private funding because there is huge potential for using it in a variety of areas. Infrastructure REITs would be a very good way of raising capital to provide infrastructure, which would then be paid for from the proceeds of people using that infrastructure. It might mean more toll roads but perhaps people would prefer toll roads to higher taxes. Government has to be smart about trying to tap into new money because it does not have much of its own. There is a huge amount of money in the capital markets looking for a sound investment, and there is a whole raft of things to do with the built environment, which, if done properly, could attract investment. People like things they can see: buildings, bridges, roads and hospitals, for example. And there are other ways of tapping into the private capital markets – for instance, local authorities could put land into a vehicle which is being run by the private sector. The local authority would get a share of the profits as the vehicle completes projects and starts to make profits. That has potential because there is so much public sector land that could be used to provide a useful injection into the equation.

But the government really has to tackle the mechanics of PPP and PFI because those in industry who have responded in the past have become disillusioned with the high costs of bidding and the inefficiencies of the selection, management and monitoring process. This is an area ripe for coalition government reassessment, a de-bureaucratisation and a tightening up and improvement of process.

We strongly believe this is an opportunity for the government to embrace the private real estate sector generally, and the PRS in particular, to look at ways of tapping into our expertise and the potential investment that is out there waiting to be able to make a real contribution to residential and other much needed infrastructure. If they do not, it will be a massive opportunity missed.


Liz Peace
Chief Executive
British Property Federation

www.bpf.org.uk