Is building to rent the way to beat the housing crisis?

Experts at London’s first private rental sector forum agreed that building homes specifically for rent is likely to be the only way to meet housing demand as London’s population continues to grow.
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Built to rent: The Collective launches 322 furnished flats at a scheme in Old Oak, Willesden, in September with typical all-in rents of £220 a week

London is one of the richest cities in the world and its shortage of housing is a disgrace. That was the view at London’s first private rental sector forum, held in Bishopsgate in the City. Experts agreed that building homes specifically for rent is likely to be the only way to meet housing demand as London’s population continues to grow.

John Dickie, of London First — a not-for-profit group which promotes the capital as a business destination — said that at a record 8.7 million residents, London is growing by 100,000 people a year and by 2025 will have added a population the size of Birmingham. 

The number of renters has doubled in London in the past few years. Since 2005 there have been 1.5 million new renters all wanting decent homes, and in the UK as a whole there are 10 million people aged 20 to 30, which is the classic rental market. Dickie called on the Government and planners to do more to boost the number of build-to-rent properties.

Peter Vernon, chief executive of developer Grosvenor, called the current housing shortage “a threat both to our economic success and to social cohesion; a threat to employers, but even more to employees.

“London’s success depends on remaining a local talent hub, which it can’t be if homes are cramped, poor quality, or have insecure tenure, or if the commute is too long, or if prices are too high for a decent disposable income.

“If the quality of life deteriorates too far,” he warned, “London will no longer be competitive.”

Vernon said the solution was not just lots more housing units but whole new urban neighbourhoods that are “dense but livable.” 

He urged that building more build-to-rent homes would add to the mix of housing types in such new neighbourhoods. He pointed out that, in New York, where housing completions were up 34 per cent last year, a staggering half of those were build-to-rent properties. He argued that to compete with this, London needs policy change, and that planning “lies at the heart of the issue”.

IMAGE GALLERY: BROWSE THE AVERAGE COSTS OF RENTING IN EVERY LONDON BOROUGH


While there are central government initiatives for developers building private homes to sell at starter level, there is nothing like that for build-to-rent schemes, Vernon said, calling for similar backing. He also suggested longer tenancies, of around three years; land made available specifically to the build-to-rent sector, and starting rents below a minimum threshold.

Vernon demanded a “muscular mayoral housing agency” working with local authorities to unlock land for build-to-rent, as part of a wider programme of home building.

Jennet Siebrits, chief economist at CBRE, was scathing about the quality of current buy-to-let stock: “Current stock is poorly maintained and poorly managed, and since 2008, complaints against landlords have doubled,” she said. 

New-build rental homes attract, on average, a third higher rents than older properties, she added. Which is where build-to-rent should come in — and which also makes it a sound investment opportunity. 

Siebrits explained that in America, the massive US pension funds invest 20-25 per cent of their trillions of dollars in the private rental sector. Here, investors as a whole currently only invest three per cent. She also said that analysis shows UK investors have a potential £15-20 billion that could be invested in new build-to-rent homes if the climate becomes more favourable.



Peter Pereira Gray, MD of the Wellcome investment trust division, said the UK private rental sector also offers excellent returns for institutional investors in the long term. He called on the Government to ease the path for build-to-rent developers, and to make aggressive strategy changes across the board, including increasing land supply, attracting investment, and making planning systems more effective.

“Local authorities don’t even recognise the private rental sector today,” he said. Designated land for the sector isn’t a priority, he claimed. “The Greater London Authority needs, each year, to deliver 80 sites and build 250 units on each of them, and in order to help this, the planning system needs to change.

“My real point is that everyone needs to do their bit — go back to the drawing board and work together. We have to dare to do things differently.”

The Collective
The Collective, a property developer and management company, is one of a new breed of build-to-rent developers who aim to accommodate young professionals looking for a smart, hassle-free home.

Coming to market in September, the Collective Old Oak, near Willesden Junction, will have 323 fully furnished double rooms with en suite bathrooms and kitchenettes. Residents share 10,000sq ft of living space that includes a cinema and rooftop terraces, and there’s 30,000sq ft of shared workshop space.

Wifi and round-the-clock security is provided, with average weekly rent per unit of £220 including service charges — excluding a weekly charge made for  linen and cleaning. See www.thecollective.co.uk for further information.

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