We need a very British model of 'build-to-rent' if it's to work
It’s not enough to simply ‘cut and paste’ European or American models, if ‘build-to-rent’ is to really take off and prove long-lasting here in the UK then we need our very own British approach, argues Jules Bickers.
Build-to-rent schemes are increasingly touted as one of the solutions to the UK’s housing crisis, with developers, local authorities and housing associations exploring the possibilities that the model can offer.
Recent reporting from Molior shows that over 29% of new housing starts in London in the first quarter of 2015 were ‘build to rent’. Early players in the ‘build to rent’ development scene are now increasingly being joined by other developers and funders – with over £10bn now committed to the sector.
Despite this growth – and huge success in both America and Europe – a separate, professionally managed and institutionalised ‘build to rent’ sector is not widely established in Britain. There is some evidence that this position is changing. Institutional investors/developers and managers are starting to appear and, at the same time, the indirect support for buy-to-let investors is now moving to a more neutral place.
However, the novelty of ‘build to rent’ has meant that there is not yet a defined asset class nor a set of proven UK design standards to work from.
This is encouraging, although some carefully targeted tax breaks aimed at institutions who are prepared to commission the construction of new, purpose built private rented homes would provide a further boost to both housing supply and mix.
Everyone is aware that the UK – and particularly London – is in the grip of a housing crisis, and I believe that ‘build to rent’ is one of our most effective new tools to help alleviate the issue. However, its novelty comes with a risk.
Capita’s resident ‘build to rent’ expert James McStay argues that there are a range of existing models of ‘build to rent’ schemes, split between the American approach, which contains highly serviced amenities and shared communal facilities such as saunas, private dining rooms and kitchens, roof top terraces, barbeque areas and lounges, and a more European approach which sits much closer to the majority of the UK rental market with little more service provided than a concierge.
Building to rent means that developers and funds are entering directly into competition with the whole gamut of the UK private rental sector. Given the relatively embryonic stage of ‘build to rent’ development in the UK, the reality is that neither of these approaches have been rigorously market tested.
The amenities provided in the American model don’t directly generate revenue, and we don’t currently understand what impact these will have on the rental value. They could be the key to delivering ‘build-to-rent’ development with returns that will make it the hugely appealing development opportunity we believe it should be.
However, without this data we can’t develop an ideal standard of a British model of ‘build to rent’ – and we don’t know how this standard will need to adjust between the London and regional renting markets. The high-cost / high-service model that is gaining prominence could well work in London locations – but may not be sustainable outside of that market.
With investors showing real interest in the UK ‘built-to-rent’ property market, I suggest that we need to develop a much stronger understanding of what British renters will embrace to avoid schemes failing to deliver what British renters wish to pay for.
Attempts have already been made to develop a set of standards, but these haven’t driven forward change and they haven’t received much buy-in from the industry. The data we need is already beginning to filter through, and firms like mine are well placed to take advantage and help guide our clients through the development process.
I suggest that the industry need to come together and develop our own set of British design standards for ‘build to rent’ that ensure we’re building what future tenants want and will pay for. The standards need to reflect what we already know about the British market, not merely echo what has worked elsewhere.
As we learn from the American and mainland European models we should ask ourselves what a new UK model should look like – one that takes the best from international experience, and mixes this with our direct experience in the UK. We also need to be mindful of feedback from our tenants and prospective residents.
Now is the time to develop a UK vision and model for an expanded and more mature ‘build to rent’ sector. We need more homes – but let’s also make sure that we build the right ones with the in-built design and resilience to last.
This article was first posted on www.housingexcellence.co.uk. Jules Bickers is director of housing for Capita’s property and infrastructure business