Data from Savills and the British Property Federation on the growth of build-to-rent (BTR) sounds impressive. The latest figures from July showed there were 124,037 homes complete, under construction and in planning across the UK, up from 98,723 at the same point last year.
That’s quite some growth in 12 months, but it is becoming increasingly apparent that it is not enough to make up for the loss of rented homes caused by the government’s crackdown on the buy-to-let market.
Last month, the RICS warned of significant increases in rent in the absence of a step change in the delivery of BTR homes or government-funded social housing.
“At the present time, there is little evidence that either is likely to make up the shortfall,” its chief economist Simon Rubinsohn added.
Reports that the government is planning to kill off plans to introduce minimum three-year tenancies may well be influenced by fears of rent hikes. If that is the case, it would be wrong-headed. Guaranteeing three-year tenancies would offer renters much-needed security.
A better policy would surely be to moderate the tax changes that have caused the supply squeeze in the first place or introduce policies to rocket-propel growth in BTR, such as the introduction of a special use class or quotas for BTR developments on large sites.
Measures like these could make a big difference because they would tackle one of the biggest challenges BTR developers and investors face: finding viable sites in the face of tough competition, particularly from build-to-sell developers.
The good news for the sector is that, in London at least, the market is now turning more in the industry’s favour. The slowdown in the for-sale market is creating more opportunities for BTR – as one investor put it to me this week: “A year ago we were calling the housebuilders; now they’re calling us.”
However, this doesn’t take away from the fact that in a normal, healthy market the cards aren’t exactly stacked in the BTR sector’s favour and there is more the government could do to help.
It is encouraging to see that the industry is also making its own luck by coming up with innovative ideas. As we reveal this week, Moda, which last year made national newspaper headlines by offering free Uber rides to its tenants, has struck up a partnership with Hero, a ‘digital wellness’ company led by a former WeWork executive. It remains to be seen whether its tech-filled ‘performance hubs’ will catch on, but it at least shows that the industry has the courage to try out new things.
Join BTR debate at RESI Convention
The RESI Convention next week will offer a chance to hear from others in the industry about what they’re trying, what has worked and what hasn’t. There will also be a chance to hear the government’s latest thinking on BTR and other housing matters in new housing minister Kit Malthouse’s address, and much more besides. The Property Week team will be at Celtic Manor in force and looks forward to catching up with you there.