Pidgley says 300 home fund to bid for new high-rent social housing cash

Berkeley Group is setting up a second private rented housing fund to build 300 homes in the next year, chairman Tony Pidgley said today.

Berkeley, which in the summer became the first developer to build homes for rent under the Homes and Communities private rental initiative, will now set up a second fund, using its own cash, to take forward homes for rent.

Pidgley said the move, which he admitted was driven in part by a need to keep construction turnover on sites during a depressed period, would look to take advantage of the new social housing funding regime, announced in the spending review yesterday.

Chancellor George Osborne yesterday outlined a new social housing system whereby landlords will be able to receive government funding to build homes which charge rents at 80% of market value.

Pidgley said: “When you’ve got a development like Kidbrooke of 4,500 homes, how can you have that site and not continue with building where you can? If we take a commercial view over ten years, you can imagine what the capital increase will be by then, and, well, you’d buy shares for a 3-4% yield. So really it’s not a bad business decision.”

Pidgley said Berkeley will own and manage the homes. Unlike the deal with the HCA in August, to build 555 homes through a fund 20% owned by the HCA, this second phase will not have joint ownership. However, Pidgley confirmed it would look to receive grant under the new social housing grant regime.

Speaking at the property industry’s Movers and Shakers breakfast this morning HCA chief executive said that developers would start to realise that moving toward private rental was the future of the industry. He said: “Mortgage lending isn’t going to improve, and rents are rising significantly, as people can’t access home ownership. Others will follow Tony Pidgley in my view as the numbers and logic are driving in this direction. Over time this will become clear to the market.”