Singles minded

The Joseph Rowntree Foundation has for the past century faithfully followed the exhortation of its founder to “search out the underlying causes of manifestations of weakness and evil”. Its research reports and findings on social problems and issues are authoritative, and many have influenced Government policy. But think-tanks risk the accusation of living in ivory towers - it is easy to pontificate, much more difficult to put ideas into practice.

This charge cannot be levelled at JRF. For the past decade it has been promoting the need for a revitalised private rented sector, and for change and innovation in homebuilding. And for the past two years, it has been busily putting its money where its mouth is by investing £6m in its CASPAR (City-centre Apartments for Single People at Affordable Rents) initiative.

This year it has completed 100 new apartments for private rent in Birmingham and Leeds.

This has been done to provide demonstrations to investors and others that there is a market out there which can provide significant returns. “We have been open about our costs and are aiming for a net return of about 6% - in effect, index-linked - plus capital gains,” says JRF director Richard Best, who has been the driving force in the initiative.

But other property sectors provide higher returns than that, and Blueroom, the North British group’s new PRS subsidiary, is aiming for much more.

“Actually, we are likely to do substantially better,” Best admits. “We have had accountants calculate the actual return, taking into account inflation, and our return should be about 9%, plus capital growth. We have had the Birmingham block independently valued at £4m - a gain of nearly a third already.

“I also believe that others could make more. Perhaps our ‘weakness’ is that we are so conscientious - all our homes are built to Lifetime standards.”

Best is convinced there is a huge market. Projections published in March show a total of 4.3 million new households forming over the 25 years to 2021, of which, 40% will be single people in the 25-55 age group. Even if only a quarter of these want to rent, it points to the need for 20 000 new rented apartments each year.

He believes conditions are right for expansion of the market and pays tribute to Labour politicians, such as Jeff Rooker, and Nick Raynsford, who promised when in opposition not to bring back crippling legislation.

But won’t it need tax incentives? “I don’t think so,” replies Best. “What we need is a tax-neutral position which removes the double taxation that occurs if investors do not own the property themselves.”

He says that the Housing Investment Trusts introduced by the last Government failed because of the tax rules, red tape and property value ceilings.

But, he points out, they face one problem - lack of existing portfolios to buy. “We need a liquid market. In Europe and the US there is a big market for those wanting to buy property portfolios. In those places, investors are used to buying and selling blocks and balancing their investments.”

What about further investment by JRF? “We have no schemes planned, but might look at further developments. We aim to balance our investments so there is a limit to what we can do,” he says.

JRF is currently involved in planning another demonstration project - the development of a new ‘model village’ community on the outskirts of York. That is likely to occupy them for the next couple of years.

Not that there isn’t interest in what they have done so far. Best says major investors can now “see and believe”: the word is spreading. One local authority has approached JRF with a view to refurbishing one of four tower blocks on the CASPAR model. That idea has been passed on to another housing association.