While walking my daughter to nursery this week, I noticed an advert in a local lettings window attempting to comfort renters by promising the dream of a “forever home” was still within reach.
It made me realise that even though we think progress has been made about the concept of renting as a ‘lifestyle choice’, this is primarily the property industry talking to itself.
There are a variety of reasons why people choose to rent: stamp duty, increasing deposits for home buyers, decreasing household savings, maintenance costs and the expanding need for global flexibility. These all mean that homeownership is unfeasible for many.
The government is mulling over changes to overhaul residential property taxation, moving to an annual flat-rate tax, but it remains to be seen if this will improve affordability.
In 2010, 44% of the UK population were mortgaged owners, but by 2018 this had declined to 38%. Market renters increased from 12% to 30% over the same period, according to Eurostat. At these growth rates, renters will overtake mortgage owners by 2024, a trend that could be expedited by Covid-19.
But it does not need to be an “either/or” outcome. There is room and demand in the market for both renting and owning.
We are not trying to convince people who want to buy not to, we are trying to point out to people who choose or need to rent that there is a better option in professionally managed and purpose-built rental housing.
People are buying later, renting for longer and the build to rent industry is catering for a whole range of people. Maybe they’re saving for a deposit but want a gym in their building or room to entertain friends.
Co-working space to make working from home more enjoyable, an on-site maintenance team with fast communication, and a range of virtual and in-person activities can make BTR a tenure of choice.
Now that BTR has emerged as an institutional asset class in the UK, we should look at the overall rental housing landscape. It is important to note that 98% is managed by ‘mom and pop’ landlords that may or may not meet quality standards. According to data from Green Street, just 2% of rental product is institutionally owned.
A lot has happened since I arrived in the UK seven years ago, but the controversy around poor quality, undermanaged and outdated rental housing hasn’t gone away. Frustratingly, the home I rented last year had no hot water and when I asked for a reduction in rent the property manager told me hot water was not essential!
Lack of quality
The English Housing Survey’s Headline Report for 2018-2019 states: “The private rented sector had the highest proportion of non-decent homes, at 25%.”
The fragmented nature of the private rented sector and lack of quality control has exacerbated this issue.
As the hectic pace of normal life has slowed and home has become the centre for most people’s morning, day and night, it must now work harder than ever before – it has to be a space to sleep, live, play, work and educate.
The build-to-rent industry is catering for a whole range of people
Due to my need for consistent homeworking, I have recently moved my two-year old daughter into my four-year old son’s room, which allowed me to transform her bedroom into a home office. We turned the basement into a classroom by day and a living space in the evening.
Stretching our homes to become multifunctional is a movement that Greystar noticed and began incorporating pre-pandemic, but Covid has accelerated this trend. Quality and use of space are more fundamental than ever before.
Fascinatingly, the BTR sector has remained resilient during Covid, with a 96.6% occupancy rate, according to JLL. This points to a value being placed on customer experience. Our focus is on managing successful rental communities into a future where people can put down roots.
The operational execution needs to centre around the resident to drive a thoughtful and holistic encounter. Bringing a standard of quality that delivers the ultimate rental living experience is not just about bricks and mortar, it’s about intentional design building from conception to communities.
Michela Hancock is managing director Europe of Greystar Europe Holdings