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Build-to-rent: the saviour of UK housing?

Predicting a shortfall of 1.8million rental homes by 2025, the Royal Institute of Chartered Surveyors (RICS), announced last year that the UK was on the verge of a rental crisis. The reasons they gave for their dire – but not unexpected – prediction was inevitably the obvious shortage of housing, but they were also quite clear that a major factor was the increased tax burden on landlords and the new Stamp Duty tax on second homes both of which are discouraging further investment in the private rented sector.

The solution to this crisis, RICS insisted, had to be ‘a much bolder and long-term approach.’  Their answer it, appears is Build-to-rent, an approach that has worked on the continent for years (at least France and Germany). In Britain it certainly appears set to revolutionising the industry. We are seeing a steady growth of institutional investors building purpose built facilities for students and we are seeing property developers who would traditionally renovate existing buildings into rental properties turn their attention to new build.

Creating purpose-built rental homes isn’t a new idea for the UK though; the government’s Build-to-rent Fund was created in 2012 with the intention of increasing the number of high quality homes for market rent within the private sector.

The Olympic East Village in Stratford is a great example. Replaced with the Home Building Fund and managed by the Home and Communities Agency, the original Build-to-rent initiative seems to have gone from strength to strength. Recent figures from the Agency point to the fact that around 80,855 homes built specifically for rent under the scheme have been completed or are currently in development.

London leads the charge with Build-to-rent homes

London, with its over-inflated rental market, has been the beneficiary of a number of high-profile Build-to-rent schemes. The largest to date is in Wembley Park in Brent (one of London’s poorest boroughs). But others are planned; a major scheme being in the former Bourbon Biscuits factory in Bermondsey where 11 blocks of homes are planned – some as high as 25 storeys.

There is also a great deal of thought going into tenant needs in these areas with many of the units being let with a 25% discount against market value and are being offered with options for longer term 3 year tenancies with all bills included. Such approaches are often a result of partnership working with the local authority who will help and support the right type developments for their area.

What about the smaller investors?

This type of approach isn’t just reserved for large scale developers and institutional investors. Many smaller investors all around the country have been taking advantage of ‘Permitted development rights’ by converting to commercial buildings into small residential holdings, often of 6 – 10 flats or less. The next logical step for these investors is new build and the appetite is building to acquire small plots of land in order to do small build to let developments.

There will be more Build-to-rent schemes, throughout the UK, thanks to a proposed change in planning rules which will give local authorities the right to offer sites for similar serviced Build to Rent developments. Many within the property industry believe that can only be a good thing by improving standards in the sector as a whole and represents a great opportunity for Landlords and Investors in the private rented sector.

Source: Simple Landlords Insurance