Berkeley to be first to break into private rented sector

Housebuilder Berkeley Group is set to become the first major developer to build homes for the government’s Private Rented Sector Initiative (PRSI) in a deal for nearly 1,800 homes.

The firm has won conditional approval for funding for the developments from the Homes and Communities Agency (HCA), to cover a package of 13 sites in London and the South-east.

The PRSI was set up to attract investors such as pension funds to enter the private rented sector. The HCA has been trying to get a private developer or investor to build homes for private rent for almost two years.

Building understands from three separate sources that the HCA has now approved funding for the scheme in principle, but is to use the next month to finalise the details of the agreement with the developer. The portfolio of sites, which include five in London, is earmarked to produce 1,764 homes, although it is thought that only a percentage of these will be built to rent.

The news comes as Berkeley’s five schemes in the capital, including part of the £1bn Kidbrooke regeneration scheme, were notably absent from a list of London projects approved for HCA funding, published this week. All uncontracted HCA funding decisions were put under review after the body was forced to cut £450m from its annual budget by the government.

A source said: “As the agency has been asked to take an investment position, these [Berkeley private rented] schemes are a little bit more complicated. We’re hoping there will be an announcement in September.”

Berkeley had been provisionally allocated £71.2m for the 13 sites before the HCA funding was cut; this figure is likely to be trimmed.

Berkeley’s plans to build homes for private rent come as the HCA’s attempts to set up similar programmes with pension funds Aviva, Legal & General and Aegon and listed landlord Grainger have so far come to nothing. HCA chief executive Sir Bob Kerslake has previously said up to £5bn of private money could be waiting to fund similar schemes.