The news that RBS has allocated £1bn to the private rented sector is - on the face of it, at least - further evidence that the UK is at last embracing the continental model of high-quality, long-term rental accommodation.
The consensus seems to be that good-quality rental tenure can provide part of the mix required to bridge the housing gap.
That’s all well and good but there remain detailed commercial and legal issues that act as a brake on the provision of this new class of accommodation.
In running the same planning use class for the private rented sector (PRS) as for open-market and affordable housing (use class C3) in a bull market, there is an inevitable gravitation to the open-market housing model using traditional residual land valuation principles. Notwithstanding the similarities between PRS and conventional housing in residential use terms, there is certainly a case to be made for the creation of a subcategory of C3.
Doing so would differentiate and diffuse some of the underlying commercial tensions that may hold back the release of land for the PRS.
Increasingly, land contracts contain purchase price definitions based on the valuation of a planning permission and an obligation to maximise the value of a consent. This is usually enforced with provisions requiring the developer to get its planning application approved by the vendor. That brings problems of its own. The land-owning vendor will favour a traditional open-market scheme with the minimum of affordable housing.
The government’s clear direction of travel on affordable housing in the form of new housing products begs the question whether the PRS could be accepted in lieu of other conventional affordable housing tenures for Section 106 purposes. An update to the National Planning Practice Guidance would clear this up.
There has been much talk about the government putting forward its land for development through the Homes and Communities Agency or other government vehicles. While this is to be welcomed, you have to hope the immediate advantages of land value and overage gain will be weighed sensibly against the public benefit of offering good-quality rental development.
Robert Lee is head of the real estate group at DAC Beachcroft