Build to rent housing has come on in leaps and bounds and now represents a great opportunity for the construction industry, says Richard McCarthy, but we have to get it right, which means a strong commitment to a positive renter experience
Build to rent is no longer a pipe dream. New developments are being built and people are starting to move into their new homes.
The story has moved on significantly in recent months with some relatively new key players now becoming established in the industry, both starting and completing new developments specifically designed for the build to rent private rented sector (PRS). This represents a really important development and potentially the start of something quite significant. We have just seen a hike in buy to let acquisitions ahead of the stamp duty changes and speculative blocks of new housing continue to flow into the PRS. However, it is now time to celebrate and nurture the growth in purpose-designed and built private rented housing.
Following on from funding programmes and policies delivered by the government’s PRS taskforce, the recent publication of the Urban Land Institute’s best practice guide has highlighted just how far we have come since the first edition a couple of years ago. For the first time it includes fully-fledged case studies. The London Borough of Barking and Dagenham has just, in the past couple of weeks, granted planning consent to one of the UK’s biggest schemes, which will provide almost 600 homes for the area. Anyone keeping an eye on the British Property Federation’s interactive build to rent map will have seen for themselves that this market is soaring.
Build to rent has the potential to become the norm for growth in the private rented sector and the new build rented housing of choice for the next generation, already being dubbed “generation rent”.
What this now means is that the industry needs to make sure we’re doing this properly – right from the off. We need to make sure we’re designing and building the homes for rent that work for the people that will be living in them, not just at the beginning but also in the future. We also need to make sure that they work for the owner and manager, rather than just responding to market forces. The industry can at times be too focused on capturing early value and not thinking and investing for the long term.
The industry can at times be too focused on capturing early value and not thinking and investing for the long term
This needs to change. We have the chance to work with local authorities to help provide the mix of homes, both in terms of tenure and affordability, which are needed for their communities. It is important that we do this while giving developers and owners the freedom to allocate and manage their new homes, to deliver the financial returns that are essential to attract the necessary investment.
Build to rent housing can offer quality, security, stability and facilities to those who aren’t ready or able or simply don’t want to buy.
If we get this right, institutionally-owned build to rent can provide exactly what many prospective tenants are looking for; whether that is space to store buggies and bikes, the provision of concierge services in larger schemes or shared facilities such as a gym or a rooftop garden. It should be like renting from a landlord but more professional, more stable, and more long term. As people get used to this new sector with professional landlords, so they will also start to see the benefits of the long periods of tenure that are now on offer.
As housing pressures grow, build to rent homes are a perfect way for authorities to ensure that they can house those crucial key workers and middle earners that are being priced out of the area but are unable to access affordable housing provision. And that’s not just in London, where this need is acute, but right across the country. If we work to get this right first time, cities up and down Britain can get the housing they need to encourage and retain the mix of economically active households they will need to build their economies in the future.
With around 18,000 new households entering the PRS market every month, demand still outweighs supply – the opportunity for the industry here is huge. And demographic changes seem to show generation rent is likely to continue growing. The ONS has stated that four in 10 people aged 26 to 30 were private renters in 2014, up from one in 10 in 1987. In 1996, more than half of 25 to 29-year-olds owned their own home, and now it’s less than a third.
This is why scale matters so much. We need to get this moving on a scale that allows institutional owners to keep rents reasonable while maintaining the value and return on their investment.
After years of effort and some false dawns, we are now on the move. But there is so much more to do. For local authorities, this means doing more to encourage new build to rent housing. For developers and future owners and managers this means designing rented housing for the future and ensuring that it is built to the right durable standard. Only this will mean it remains an attractive product for many years to come. We need to remove more uncertainties, most notably with regard to planning policy and expectations, and demonstrate a real commitment to providing homes that contribute to meeting local housing needs. And we also need to send clear messages about the sector’s housing management standards, length of the tenancy periods that will be on offer and a strong commitment to a positive renter experience.
If we can get this right it will benefit all of us, as well as helping to sustain and grow construction activity at a time of some uncertainty. We have a great opportunity to attract more investment into the residential sector – and to build the right homes that will give our communities and key workers the rented housing they want to see.
Richard McCarthy is executive director for central government at Capita