Help to Buy putting house builders off Build to Rent

25 companies have abandoned a £1 billion fund created by the government to build new homes for people to rent (Getty Images)

Dozens of developers have pulled out of the Government’s controversial Build to Rent fund, as a result of rising demand for homes bought under the Help to Buy scheme. The shift to building homes for people willing and able to buy will come at the cost of those who are unable to get mortgages and need to live in rented accommodation.

25 companies have abandoned a £1 billion fund created by the government to build new homes for people to rent, according to Construction News. The list of those who have dropped out of the first phase of bids includes some of the country’s biggest homebuilders, such as Persimmon Homes, Countryside, Lovell Partnerships, and Taylor Wimpey. There were originally 43 developers on the first phase shortlist, announced in April 2013. One year on, there are just 18 on the list – a list which includes housebuilders Crest Nicholson and Bovis Mill Group, and contractors Bouygues and Kier.

The Build to Rent fund, set up in 2012, is managed by the Homes and Communities Agency and aims to create 10,000 new homes to rent by 2015 – by offering loans to developers.

Dave Sheridan, chief executive of Keepmoat, one of the companies to pull out, said that Help to Buy had diverted interest away from the Build to Rent fund as “more liquidity entered the market” and that the fund had not been “the right investment model".

Another developer that has withdrawn from the scheme, who would not be named, said: “the Build to Rent fund was just another vehicle [for] bringing more availability and more supply to the market… but most listed housebuilders and developers build for sale because that is their business model.”

Mark Farmer, head of private residential at asset consultants EC Harris, said that promoting the purchase of homes could come at a cost. “In the run-up to the election, the Government will be looking to play the card around enabling people to access home-ownership. The danger here is that the Build to Rent fund and some of the other initiatives brought in to get PRS [private rented sector] to take off might start to play second fiddle.”

Rachel Fisher, the head of policy at the National Housing Federation, said: “We are concerned that Help to Buy isn’t necessarily increasing supply and may be diverting interest away from building new homes for people to rent. This demonstrates the challenges around delivering private rental at scale.” She added: “We need to be building around 250,000 new homes a year – whether for rent or to buy - but we are delivering just over a 100,000 a year.”

Housing Minister Kris Hopkins said: “Tenants are being given a greater choice of newly built homes to rent thanks to the Build to Rent scheme, which is heavily oversubscribed by developers, and we are well on track to deliver up to 10,000 newly built homes.

“Construction has already started on developments in Southampton and Manchester and today [Friday] we are announcing an agreement for a further 190 homes across six sites including Cambridgeshire and Hampshire.

"This new approach revolutionises the way new homes are built for the rental market, providing more choice and quality for tenants, and increasing competition between landlords offering decent, reasonably priced accommodation."