The emerging build to rent sector is seen by some as the solution to Britain’s housing crisis, a hot investment for city firms and property developers and also regarded as a sign of the times. More people than ever before are renting with ‘Generation Rent’ – namely Millennials, the 16-34 bracket – being the largest occupiers of the private rental sector. But the demand for build to rent hasn’t been created in a vacuum; there are numerous political, economic and social drivers which have brought us to this point.
Build to Rent properties are typically purpose built private rented residential stock, designed specifically for renting, managed by specialist operators and owned by investors. While the concept is relatively new to the UK market, confidence in the long term investment potential of build to rent developments is high with institutional firms such as Aviva and Legal & General leading the way, romanced by the promise of long-term stable income.
But why build to rent, and why now? Britain is in the midst of a never seen before housing crisis, with simply not enough adequate affordable housing for our rising population. How did we get here? Thatcher’s flagship ‘Right to Buy’ policy giving council tenants the right to buy their home took little more than thirty years to all but deplete stocks of social housing; swiftly followed by the housing crash of 2008, the UK’s worst recession in 29 years and leading to historically low levels of new house building.
Consumers have endured greater mortgage restrictions than ever before, while dealing with a multitude of financial constraints including wage stagnation, restricted access to credit, rising student debt and zero hours’ contracts. It’s little wonder that for many hopeful first time buyers owning a home turns out to be a frustrating pipe dream, especially with it taking seven years on average to save for a first time deposit, despite a monthly mortgage payment being considerably less than their rent.
While the above is certainly reflective of many situations, others choose to rent for different reasons. Social attitudes have changed; young people lead more transient lifestyles than the generations before them, and want more freedom instead of being tied down by property ownership. And Millennials may be wary of investing in property post housing crash, not viewing it as the safe bet investment their parents once considered it to be.
Employers increasingly offer remote working opportunities, with more people choosing to work on their own terms as freelancers since “jobs for life” become less common place. And delaying traditional milestones such as marriage and children means no longer having to put down permanent roots in one place early on in life, as was the traditional path for Baby Boomers.
Additionally, build to rent developments offer tenants, including families, the opportunity to live in a building with a sense of community, and facilities such as a concierge, secure parking or a gym makes renting an aspirational choice rather than housing of a last resort.
Already commonplace in European and American cities, build to rent developments are gaining traction in the UK and have the potential to revolutionise the residential property market, even changing attitudes and lessening the social stigma around renting. In a recent Estates Gazette analysis, chief executive of the British Property Federation Melanie Leech commented that there is a growing appetite among investors for build to rent. The more interest the sector draws, the more supply there will be and therefore more choice for renters – forcing developers to think about how they can attract renters in a way that differentiates them from the competition.
Of course, attractive investments with such great returns mean more demand, so how can a developer retain a greater competitive edge? While it may seem obvious – that a housing solution for the future must be marketed as such – but current renting practices fail the consumer, with 20th century technology battling against 19th century legislation.
Choosing a home, even when renting, is still an emotional decision – so how does your property marketing engage today’s tenants and set you apart from other build to rent property developments being sold off-plan? Is it providing instant access to relevant information online and visually communicating your PRS offering in what will become a highly competitive sector in the market?