Rules have been set out for two new schemes designed to encourage institutional investment in build-to-rent schemes.
The Government will give up to £10bn of lending guarantees, chief secretary to the Treasury Danny Alexander and housing minister Mark Prisk announced.
The private rented sector guarantee will back a variety of options, including building new homes and converting existing commercial spaces into rental properties.
The projects must have a minimum value of £10m, and the new homes will have to remain in the private rented sector until the money is paid back.
The fund will be available to reduce risk for lenders by guaranteeing to repay the money in the event of default from borrowers.
A separate guarantee will also be available for affordable housing projects, on top of existing house building programmes.
Prisk said: “We’re introducing ground-breaking measures to unlock the vast, untapped potential for growth in the private rented sector. Investors will now be able to draw upon low-cost lending so they can bring thousands of new homes into the market.
“The housing guarantee schemes will help to get spades in the ground, create jobs, and establish new business models that will ensure the private rented sector continues to grow and more affordable homes are delivered.”
Liz Peace, chief executive of the British Property Federation, gave a cautious welcome to the move.
She said: “We welcome the pace at which the Government has brought this scheme to market. Clearly the detail will be important, but the mere fact the Government is offering this kind of support to build-to-let, shows its confidence in the sector, and we hope that it proves infectious, building on the momentum of investment the sector has already seen in 2013.
“Significant strides have been made to put the various different elements of the Montague Review in place, with an equity fund, debt guarantees and task force in various stages of development.
“There is, however, one major area which is outstanding and critical to creating sustained investment in the sector, and that is planning.
“Without clarity on its planning treatment, local authorities and investors will be cautious about build-to-let. The Government will have the opportunity to clarify this over the summer as the Taylor Review requires new guidance to be drafted, and we look forward to dialogue on that.”
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