Institutional investment in private sector

New homes are needed across all tenures in London, and particularly the private rented sector, which is home to around one in four of the capital's households today.

London's local authorities have an interest in promoting a sustainable private rented sector that provides high quality accommodation and good standards of management as part of mixed tenure communities able to meet the range of needs of local people.

Since the 1990s buy-to-let investors have largely dominated the private rented sector, usually managing a small portfolio of investment properties.

Since the credit crunch of 2008, however, restrictions on new finance, tougher lending terms and uncertainty over future house prices and interest rate levels, have all put the brakes on buy to let expansion.

In the present economic climate the buy-to-let model seems unlikely to be able to meet the number of new homes in the private rented sector that London needs.

With direct public spending for new housing development also severely curtailed following the autumn 2010 Comprehensive Spending Review, new mechanisms for funding the delivery of housing able to meet London's growing demand are actively being sought by London local authorities.

Institutional investors, such as large pension funds and insurance companies, are one of the few groups with the resources available to deliver new housing on a significant scale. However despite the potential to draw investment in, to date few deals have come to fruition. Our recent guide 'Invest to Rent' was developed in partnership with the British Property Federation Opens in a new window to examine what investors and councils are looking for in future partnerships, and what type of mechanisms councils can use to catalyse housing delivery in their area.