Why PRS needs its own Tripadvisor

COMMENT Tripadvisor has transformed the way people book their summer holidays at this time of year, but the private rented sector has so far remained stubbornly resistant to grading of customer experience or, indeed, how professional counterparties find the sector. My prediction is that this is the year when the PRS will begin to move into a customer experience fast lane, with reputations made or broken far more quickly than the sedate rate we have seen before. A “professionally managed premium” is long overdue in the sector – with shocking stories still circulating of mould and poor living conditions in the news before Christmas – and I now believe there needs to be a Tripadvisor or Expedia of renting to raise the game. Clear promises The student accommodation sector is a great forerunner for what I believe will happen in PRS. Unite is now the go-to brand for students across the country, operating for 74,000 students in 23 cities from Aberdeen to Bath, Edinburgh to Leeds and Sheffield to Southampton. Its clear promises are: utility bills included; a fixed rental price; great locations; free high-speed Wi-Fi; safety and security; and free contents insurance. No PRS operator has close to the dominance that Unite exerts over the student world, but here are five drivers through which I see a professionally managed PRS premium emerging: 1. Renters are registering that future-proofed homes have lower energy bills. The promise by some volume housebuilders to pay new homeowners’ bills for a year is being seen as an empty giveaway attempting to cover up higher bills for poor-quality homes in the long term. People now have serious questions about energy performance when they rent. 2. Lenders to the sector are seeing big differences in values emerging, according to energy performance certificates. Remarkably, we are seeing lenders lending at lower interest rates for a bigger loan if it improves the EPC rating on a property from B to A. 3. Institutional investors that have seen values slump in office, retail and industrial property but that are seeing values rise in PRS will seek to rapidly increase their holdings in the sector from a low 5%. However, they will only be interested in platforms with strong asset management and ESG capabilities. 4. The increase in importance of social value will also enhance the need for professional management of residential assets. The Covid-19 pandemic led tenants to understand the importance of living in vibrant, managed communities rather than buy-to-let single homes or estates that have been sold off piecemeal by housebuilders. 5. The best owners also realise that retaining renters for five years rather than one is the best way to enhance the value of their property, understanding that long-term tenants are more likely to take care of their property. Making clear to planners how tenant retention can be improved is becoming a key feature of the professionally managed premium. “Placewashing” risks A lot has been said about purpose in real estate since the pandemic triggered a greater understanding of the importance of social value but it is also important that “placewashing” doesn’t become as widespread as greenwashing. By “placewashing” I mean lip service being paid to social value simply as a cynical manoeuvre to win planning consent or as a sales and marketing tool. At PfP Capital, any surplus generated by our PRS asset management work is ploughed straight back into our parent company Places for People, which is the UK’s leading social enterprise and which generated £127m in social value in 2021. Renters, lenders and the public sector are becoming increasingly aware of the premium that professional management of homes can deliver – just watch in the coming years how the world of renting becomes as easy to judge as the holiday you are planning to book this summer. John Tatham is finance director at PfP Capital