The number of people who are renting in newly-constructed built to rent homes continues to grow; and yet the focus of the Cameron/Osborne administration was firmly on home ownership. Their manifesto promise of more starter homes was brought into legislation (but not yet effective legally) via the Housing and Planning Act 2016.
Gavin Barwell, the new housing minister, used his speech at the RESI conference last month to emphasise the significance of a professionally managed, institution-backed build to rent sector. Does this signal a change in policy direction?
Certainly, his statements were very positive, which in all circumstances is highly encouraging for build to rent developers and investors. Speaking in the same week, officials from the Department for Communities and Local Government were doubtful that the Treasury would be pulling back from the Stamp Duty Land Tax changes, which impacted the sector in the last budget.
Build to rent schemes command rents typically 10% higher than the existing local rental market, so the need to distinguish itself from that market is clear.
Successful products are marketed strategically with strong branding, ensuring their product plays to social trends such as the increasing focus on experiences, rather than possessions. Build to rent developers have to deal with the challenge of creating a product which is potentially desirable to a 25 year old and also someone aged 65.
Competing for land against a build to sell product, remains a huge challenge in the sector. Build to rent architects and developers are increasingly learning how they can drive more value from the design of their buildings. They are tearing up long held expectations of the design of a typical flat for the sale market, and seeing how differently designed buildings for rent are producing very different looking floor plates with more rentable space.
Renters in the sector are not just renting a flat, they are buying the experience of the building in which they live.
What of regulation long discussed but not yet on the horizon? The Housing and Planning Act allows for local authorities to set up databases of rogue landlords, for banning orders and rent repayment orders – but this is a world away from the regulation of the social sector. Investors have made it clear that wholesale regulation would not be welcomed. Perhaps the Housing Minister will take note. Whatever he does, the sector will be watching with interest.
Andy Barnard, Partner in Housing and Regeneration, Trowers & Hamlins LLP