7th September 2012

Sir Adrian Montagues Report: Review of the barriers to institutional

investment in private rented homes
Background to the report
The report set out to consider whether there was significant potential for institutional investment in
privately rented homes, whether the changes Government had already made were sufficient to kickstart that investment, and what else might need to be done.
The Department for Communities and Local Government (DCLG) quotes in relation to the
recommendations of the Montague report are taken from the written statement on housing and
growth by the Secretary of State Eric Pickles MP, released on 6 September 2012, which can be found
here.

RTPI response to the report

The RTPI considers that the critical issue is whether there is enough housing overall and is it in the
correct place, with the correct supporting infrastructure.
On the specific suggestion that for private rented schemes there should be a relaxation of affordable
housing requirements, the RTPI 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?
The full response of the RTPI to the Montague report can be found here.

Conclusions and recommendations of the report

Recommendation One Local authorities should use existing flexibilities in the planning system to
plan for and enable developments of privately rented homes, where they can meet local needs. The
NPPF has enabled this, but both housebuilders and local authorities lack experience in developing
proposals for rent. The government should show them the way by providing practical advice and
support to local authorities to enable them to, for example:
Specifically recognise the role of the private rented sector when assessing housing demand
and planning for housing. Building and designing specifically for the rental market in the
right locations should be recognised for the benefits it brings to the wider community.
Ensure that planning tools are used to ensure new homes remain in the rental sector for a
fixed period of years, which should mean that land values are based on rental tenure rather

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than theoretical values based on sale. This would also mean that local authorities can be
sure that the resulting housing would continue to meet their local communities needs.
Whilst desirability of affordable housing should not be ruled out, in many cases it will be
appropriate for authorities to waive affordable housing requirements in relation to schemes
for private rental. Local authorities should also review stalled sites to engage the potential of
private rented units to accelerate delivery.

Recommendation Two The government has committed to releasing public sector land with
capacity for 100,000 homes by 2015.The government should publish separate information regarding
the use of released public land for private rented projects.
The government should identify, in partnership with local authorities and the Greater
London Authority, a number of sites in locations where there is a good demand for rental
housing and makes them available to developers on the basis of a pre-determined volume of
build-to-let.

DCLG The government will accelerate the release of surplus public sector land by strengthening the
role of the Homes and Communities Agency outside London. We will also work to accelerate
disposals by preparing the land for market and providing a single shop window for all surplus
public sector land. We will work with the Mayor of London in order to develop a similar approach in
London.

Recommendation Three The government should provide carefully targeted incentives to stimulate
the rapid development of new business models, from a range of promoters public sector
landowners, registered providers of private sector housebuilders. The most effective interventions
are likely to be:
Equity or debt funding to support schemes that can be sold into the institutional market
once completed and would act as demonstrations of possible viability, particularly around
yields.
o This could build on the existing Get Britain Building model, but designed specifically
for rental schemes. This support might be made available first to the pilot schemes
supported by the government, then rolled out to other projects under a more
general programme of incentives.
The government should consider seeding institutional funds in order to leverage in other
private capital. This funding should be on the same terms as private investment, without any
element of subsidy a demonstration through the power of example of the governments
determination to trigger a significant expansion of institutional interest in the sector.

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DCLG To give institutional investors the assurance they need to invest in this area we will be issuing
a debt guarantee for up to 10bn for this scheme. The government will enable providers to raise debt
with a government guarantee, where they commit to investing in additional new-build rental homes.
From tomorrow, the government will be inviting expressions of interest from companies wishing to
benefit from the scheme. It is expected that housing associations, property management companies
and developers will be among those to benefit.
Today I can announce that we will be investing 200m in housing sites to ensure that the highquality rented homes that are needed are available to institutional investors quickly.

Recommendation Four In order to provide some of the expertise and support to overcome
barriers around the unfamiliarity of these schemes, A Task Force should be established by the
government, working closely with the Homes and Communities Agency, composed of a range of
officials and private sector specialists (including developers, lenders, investors, valuers and lawyers).
Its role could be:
To act as the focal point for private rented schemes across the public sector, and to coordinate parties in the private sector, including financial institutions, developers and
landowners.
To work with the Homes and Communities Agency to ensure that the private sector is fully
aware of all opportunities regarding surplus public land held for release.
To provide support for the public sector (in particular smaller authorities) that may not have
experience or resources to handle transactions with private sector developers, and to
encourage authorities to work together. Support provided would cover issues such as
viability studies, scoping and contract negotiation.

DCLG We will be establishing a taskforce to bring together developers, management bodies and
institutional investors to broker deals and deliver more rented homes.

Recommendation Five Whilst not recommending a kitemark be placed upon new-build rented
homes, in order to distinguish them from existing housing stock, it is recommended that the Housing
Task Force work with other industry bodies to develop voluntary standards that could be adopted
across the build to let sector, specifically by those schemes supported by the government. These
could include:
Quality of accommodation and the standards of construction
The level of energy efficiency and sustainability of the building
The professionalism of the management service
The building owners promises as regards the maintenance and refurbishment of the
premises.

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DCLG There is a concern that the array of local and national standards used in different parts of
the country is complex and counter-productive: confusing local residents, councillors and developers.
I am announcing today a fundamental and urgent review led by government working with interested
parties to rationalise these standards. This review will result in a clear plan of action by next spring,
including legislative approaches if a significant rationalisation cannot be agreed.

If you require more detailed information or want to work with the RTPI on reacting to the
Governments proposal, please contact the RTPI.
Tino Hernandez
Head of Marketing & Communications
Royal Town Planning Institute
41 Botolph Lane
London EC3R 8DL
e.
t.
m.

tino.hernandez@rtpi.org.uk
020 7929 9486
07830 879 274

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