A blueprint to tap the huge potential for private investors to back a wave of build-to-let housing schemes has been set out in the Montague report published today.

The report says that a combination of recent tax changes and wider market conditions have cleared the way for this sector to take-off.

And the Government needs to deliver just a few targeted incentives to trigger a major house building programme that would ease the housing shortage and create much needed jobs in construction.

The Government asked Sir Adrian Montague, chairman of 3i, to explore ways to tackle the housing shortage, especially in the private rental sector.

His recommendations include forcing councils to relax requirements for developers to build affordable homes in favour of private housing for rent and releasing land earmarked for rental schemes.

Sir Adrian said: “My review shows that the rental housing sector offers potential investment opportunities of interest to institutional investors.

“But real momentum has been inhibited by constraints affecting the supply of stock, the treatment of rented housing schemes under the planning system and the need to create confidence among investors.

“The recommendations in today’s report are designed to challenge this, and remove the barriers that prevent the kind of investment that our private rented sector needs.”

The report also calls on Government to provide a number of targeted incentives to encourage the development of build-to-let business models.

A key element would be to release Government land for schemes, sharing development risk in the short-term to get spades in the ground and building started.

Sir Adrian also recommends that a task force is set up to encourage and support build-to-let investment from the private sector.

This would also develop voluntary standards that future landlords would meet and tenants could expect.

Housing minister Grant Shapps said: “We’re determined to encourage greater investment in the build-to-let market and boost the country’s Private Rented Sector, which plays an integral role in meeting the nation’s housing needs and aspirations.

“In the past it’s often been seen as the Cinderella of the housing market, but when over three million people rely on this sector for their home, this is clearly no longer the case.

He said: “A major part of this is to attract and encourage new players to the market, while at the same time avoiding the excessive regulation that would force up rents and reduce choice for tenants.

“Sir Adrian Montague’s findings offer both a blueprint for achieving this goal, and for setting the standards of accommodation that people should expect. I will be considering his recommendations very carefully.”