‘Build to rent’ (BTR) is being billed as the UK’s newest housing tenure and it is causing a stir amongst industry experts, institutional investors, local authorities and developers. Karl Anders highlights some of the key points to note.

Generation Rent

Regardless whether the EU referendum results in a ‘Brexit’, there is one area in which the UK seems to be moving towards a more traditionally European trend… that is, private home ownership is declining and the private rented sector (PRS) is on the rise.

Department for Communities and Local Government statistics [1] show that there are now nearly 5 million households in the PRS – a figure that has doubled since 2001. Residential mortgage lending is still significantly below where it was pre- the 2007/8 financial crisis[2] and numbers living within the PRS now exceed those living in social housing. As Chris Taylor, president of the British Property Federation, said: “There are profound demographic and lifestyle changes apparent in the UK. Young people want to live, work and play in cities, and the fact of the matter is that housing is not accessible or affordable to them” [3].

Many renters today are young and without dependents, yet difficulties with saving a deposit and stringent mortgage affordability checks mean that almost half of the UK’s renters believe they will never own their own home [4].

Like many of our European counterparts, the UK’s current generation is increasingly likely to consist of tenants as opposed to owner-occupiers.

Build to Rent: A housing tenure for the modern age

The demonstrative rise in the PRS, combined with government support to boost the sector[5] has piqued the interest of institutional investors, local authoritiesand other property developers in recent years, with the resulting emergence of the BTR sector. The largest housing associations are also using their spending power and expertise in property development to get involved via joint ventures with investors.

Unlike the majority of private rentals seen to date, BTR is a significantly scaled-up initiative. BTR schemes typically comprise large blocks of flats or houses that are purpose-built and professionally managed, often based within city centres and close to transport links.

BTR schemes offer regeneration and vibrancy to brownfield and similar sites, with the attendant socio-economic benefits for local authorities and communities; they contribute to housing supply and, in some cases, tick-off local authorities’ market rental and affordable housing requirements.

From the tenants’ perspective, BTR offers longer-term security; improvements and confidence in the quality and consistency of accommodation and management; and the ability for occupiers to personalise their home.

BTR Schemes are often backed by local authorities and/or investors directly and they can represent an opportunity for long term investment combined with a rental income stream, as well as diversification of investment within new housing supply. Developers can invest via offering rental stock assets in return for equity and rental income.

Ones to watch (and get involved?)

The BTR sector already boasts some success stories, including Thames Valley Housing’s Fizzy Living and Manchester City Council’s Matrix Homes.  Many more schemes are already completed, under construction or in the pipeline [6].