While there is plenty of negative or ambivalent media attention surrounding the UK property market at the moment, official figures show that there is much to be positive about.
The British Property Federation, which represents developers like Fortitudo Property, as well as property owners and agents has just released the first set of annual figures specifically for the ‘build-to rent’ sector. The figures represent the number of homes in the UK that have been built specifically to be rented out and professionally managed.
Growth in sector
Figures from the report show that the number of build-to-rent homes that have either been completed, are under construction or in the planning pipeline across the UK has gone up by 30% to 117,893 during the 12 months up to the end of March 2018.
This sector has been boosted after the government specifically gave it a more prominent role in the national planning policy. With a strong development pipeline, it’s likely that the build-to-rent sector could double to about 200,000 by 2020.
Completions also grow
The number of houses completed in this sector was 20,863, which is a 45% increase on 2017. The number under construction has increased even more by 47%. But why is this growth happening?
As well as the government’s support for the sector, build-to-rent generally attracts long-term institutional investors as it offers a rental income stream that can pay for things like pension liabilities. And, following the government’s lead, lots of local authorities have also put their weight behind this sector, as the realisation dawns that it offers a realistic way to generate long-term, useful income and will help to meet those all-important housing targets.
Housing associations and councils are collaborating with developers more and more on build-to-rent schemes. At the moment, London has more build-to-rent developments than other regions, but these figures show that everywhere else is catching up.
Regions outside of London account for 62% of the total of build to rent houses under construction. Again, this is partly thanks to more positive and supportive attitudes from local authorities, which are welcoming more rental-focused developments.
Areas outside of the capital that are becoming hotspots for the build-to-rent sector include Liverpool, Manchester and Bristol. London is increasingly being seen as more of a challenge by developers in this sector. This is even though many mortgage owners in London face difficulties due to the lack of affordability and high house prices.
This is because developers of homes they intend to sell can construct and sell in different phases, while a build-to-rent developer must finish the whole site before renting out and seeing returns.
Fast-tracking affordable housing
London’s mayor has backed the policy changes and said that developments that come with a minimum of 35% affordable housing will be fast tracked through the planning process. However, the build-to-rent industry argues that implementing a 35% threshold for developers who are building to sell, and those building to rent, is unfair as it “cannot compete with build-for-sale on land acquisition and pricing”. But, the affordable housing targets in London will stay.
One of the major criticisms often thrown at the build-to-rent sector is that it doesn’t properly address the urgent need for family-sized accommodation, as it concentrates on smaller homes for professionals. However, the research shows that this is starting to change, with 17% of the build-to-rent schemes currently under construction or being planned include decent-sized houses, as well as apartments.