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Birmingham council to launch its own PRS development project

Birmingham City Council is to start building homes for open market rent. A meeting of the council’s cabinet on Monday approved plans to set up a company to develop and rent out 90 flats on a council owned site in central Birmingham.

The project, which may well require external finance, is being taken forward with the commitment to spend up to £240,000 hiring in expertise to work up the development scheme, and to review likely returns for the council from building homes for open market rent. The work will “develop a full business case to establish a wholly owned company of the council to develop new homes for market rent”, according to papers. In order to proceed with development, the site in Birmingham’s St Vincent Street would be transferred to the new company at an open market value.

“We know that there’s a demand,” said councillor Tahir Ali at the cabinet meeting. He said the council’s intervention into the market could provide an impetus. “We hope that other developers will see this as a scheme which will bring them on board, to drive forward in terms of building homes that are much needed in the city.” Councillor Ali noted that one alternative, of selling the site to a private developer, would not necessarily deliver homes as quickly as it could then be banked, if prices were on the rise. “There’s a risk of that site not being developed for a number of years.”

In autumn 2013, the council approved its Housing Growth Plan, which foresees a need for 80,000 new homes in Birmingham by 2031. This, the plan acknowledges, will require an investment of around £12 billion by private and public sector stakeholders; the plan also notes that the private rented sector will have a growing role in making up the numbers.

“Over the last ten years, the Private Rented Sector has continued to expand doubling in size and now representing 15% of homes in the city,” noted the report to cabinet. “It provides an important route to housing for those households unable to access owner occupation due affordability or the unavailability of mortgage finance, but also recent research demonstrates that the majority of the households accommodated in the sector are higher earning young professionals for whom the flexibility of tenancy and the ability to move homes in pursuit of career opportunities are more attractive than owner occupation.”

Of that 80,000 figure, around 62% are expected to be provided by the private sector, for rent or sale. And while the council still notes its important role as a provider of subsidised rented homes, it also reckons it needs to demonstrate its position as a pump primer for the private sector: “There is an opportunity for the council to lead by example and act a developer of private rented sector homes, in locations where this form of tenure is most appropriate until the private sector’s expressions of interest become translated into investment in Birmingham.”

The council notes that it has several potential PRS development sites in its control, and that these suit a dense private sector rented project, rather than being built out at a lower density with affordable housing.