Berkeley Group has become the first housebuilder to commit to the Homes and Communities Agency’s private-rented sector initiative in a joint venture that will create 555 new homes for rent by June 2012.

The venture involves Berkeley receiving £45.6m of HCA funding – £29m from the agency’s Kickstart programme – to bring forward further phases of development on 10 of the housebuilder’s existing schemes across the south-west and south-east.

The money will enable 1,778 homes to be built – 555 of which will be purchased by a new private-rental fund established by Berkeley and the HCA.

The HCA’s chief executive, Sir Bob Kerslake, described the agreement as “genuinely landmark”.

Under Kickstart, the agency usually recoups its money from house sales. The arrangement with Berkeley, however, will result in the HCA taking a 20% interest in the rental fund in return for its upfront investment.

The fund represents a radical departure for the HCA, which has been seen mainly as a provider of land to prospective investors in the private-rented sector.

Kerslake told PublicPropertyUK sister title, Property Week: “We will have the opportunity to take our money out at a later stage in the deal. That will potentially be an opportunity for Berkeley to secure other financing. We don’t expect to be in the fund forever.”

He added: “We’ve talked about institutional funding coming in [to the sector] but the key point here is how we secure new sources of supply alongside the funding and move to a model for large-scale, professionally managed rented property.”

Berkeley becomes the third private sector group to declare its involvement in the private-rented sector initiative but the first with a firm date to provide rental housing.

“It will add a level of tangibility to this initiative,” said Kerslake.

In July 2009 Aviva Investors became the first fund manager to become part of the private-rented sector initiative but it is still fundraising.

The HCA is also in talks with Aegon and Terrace Hill, which earlier this year announced plans to inject £250m of assets into a new fund. A fourth investment consortium associated with the initiative is yet to declare its hand.

Rob Perrins, Berkeley’s managing director, said the group had been working on the fund since 2008, hailing it as “a significant innovation” for the private-rented sector. He also suggested that cash-strapped councils should consider this model when determining planning applications for large-scale developments.

The bonus for Berkeley is that it can bring forward development in some of its biggest regeneration projects, such as Kingshill in Cirencester, Royal Clarence Yard in Gosport and Kidbrooke in south-east London.

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