Build-to-rent is part of the solution

Last week’s EG did an important job of highlighting the affordability issues faced by renters, which was underlined by this week’s news that – after months of stagnation – rents in London, already the highest in the country, are starting to rise once more, writes Alan Druckman, operations and commercial director at Platform_ The increase has been driven by a fall in the number of private rental homes available, for which additional stamp duty charges imposed on buy-to-let landlords are largely to blame. It is the yawning gap between supply and demand in the rental market, especially in London and the South East, which makes the build-to-rent sector so critical to the future of the UK housing market. This isn’t to say BTR is the sole solution to the housing crisis – there is no one silver bullet, as we are frequently told. The industry has been saying for years we need to build more homes of all types and tenures, and that means private rented alongside for sale, affordable and traditional social housing. Yet the claim made in last week’s magazine that BTR isn’t the answer based on a handful of operational schemes is misrepresentative and prematurely judges a sector in its infancy. Firstly, as the British Property Federation notes, there are only around 16,000 completed build-to-rent units – a tiny fraction of the UK’s total housing stock. Many of these are high-end flagship projects, in prime locations where early investors are comfortable placing bets. But as the sector matures, it will broaden out and provide more choice across different price points. More broadly, the like-for-like comparison of buy-to-let and BTR is somewhat misleading. The premiums charged cover additional services such as professional management as well as access to amenities such as gyms, communal lounges and roof terraces. At Platform_, our five developments have all of the above and are still affordable to at least 60% of local workers. These new add-ons aren’t an excuse to charge extra, but instead reflect a changing society: the growth of the sharing economy and the rise of co-working highlight a more collaborative approach than previous generations, while consumers now want the same level of customer service in housing as they get in other industries such as retail. There is also the wider issue of build quality. Many buy-to-let properties are ex-council flats sold off through right-to-buy or cannibalised from ageing Victorian townhouses. The result is a third of homes in the traditional private rented sector fail to meet the decent homes standard. This is partly due to private landlords not being subject to the same regulations as local authorities or social landlords. But it is also because there is little incentive for them or the managing agents, especially in high-demand areas such as London, to provide decent accommodation or a good service as they effectively have a captive market. By providing an alternative, BTR will inject some competition into the rental market. Moreover, for the institutional investors backing the sector, there is a commercial imperative to ensure buildings are well designed, maintained and run – as maintenance works and high tenant turnover eat into that all-important gross-to-net ratio, and therefore the net operating income. Clearly, at its current small scale, BTR alone is not the solution to the UK’s housing crisis. However, it will become a crucial part of the housing mix, especially with private rent being the fastest growing tenure. Alan Druckman is operations and commercial director at Platform_ Click here to read the full analysis.