A budget for PRS?

With an England win setting up a World Cup second-round tie with old rivals Germany, twin victories over Australia at rugby and cricket and the longest-ever tennis match played out at Wimbledon, this week has been sportier than most.

All have been very entertaining, but will ultimately pale into insignificance compared to Tuesday’s emergency budget, George Osborne’s first as Chancellor of the Exchequer.

While the full implications of Osborne’s announcement on capital gains tax will take some time to be properly realised – there are complications, for example, where property is jointly held by two or more individuals – it is the reform of housing benefit that has piqued my interest.

With benefit set to be capped at £280 per week for a flat and £400 for a four-bedroom house, it is clear that housing provision is set to be an ongoing issue throughout this and subsequent parliaments. But could this provide yet another opportunity for nascent institutional involvement in the sector?

I wrote in May about Birmingham City Council’s plans for a private rented  housing joint venture, one of the aims of which was to provide accommodation for the 27% of future demand that will be for ‘intermediate’ rent, ie: 80% of market levels that the private sector would not provide independently.

The new housing benefit restrictions are going to impact on the demand for ‘intermediate’ rent, notably where circumstances are in flux. For example, a couple on benefits will probably be forced to move to smaller accommodation when their children leave home, whereas before they could probably afford to stay in the same property.

Flats similar to those proposed by Birmingham City Council would provide the perfect location for such couples to move into, as well as creating investment-grade property for institutions to buy. With the income security provided by Government money, and presumably a significant level of demand, the foundations are good.

A report release by the Building & Social Housing Foundations (available through www.bshf.org) revealed that the private rented sector is set to overtake the social rented sector by 2013; if this is to happen, then institutional involvement is key.