Build to rent booms as US-style renting takes off in UK

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The UK’s build-to-rent sector could soon take a 20% share of the new homes market if it follows trends seen in the US.

New research from letting agent Ascend Properties reports huge growth potential in the sector where an estimated 11,723 build-to-rent homes – mainly apartments for professionals – are due to complete this year, a 22% increase in just four years.

The comparable Stateside build-to-rent model – known as multi-family – completions are set to top 327,718 units this year, a 19% jump from 2018.

Multi-family completions accounted for 23% of all new builds in the US that year, with this number staying consistent last year (22%), while in the UK build-to-rent accounted for just 4% of all new build completions in 2018, climbing to 6% last year.

However, Ascend believes this is an impressive rate of growth for a sector yet to fulfil its full potential and predicts this could change as the emerging market becomes more established.

Tailor-made

Both countries deliver tailor-made accommodation for long-term living within the rental sector, with a focus on community and plenty of amenities.

As the build-to-rent sector is growing fast, it won’t be long before it’s accounting for the same proportion of new builds in the UK, if not more, says MD Ged McPartlin. “A comparison of the multi-family model and the build-to-rent sector isn’t quite comparing apples with apples, but the ethos is very much the same and so is the end result,” he adds.

“The multi-family market is a trillion-dollar business and accounts for more than a quarter of all real estate investment in the US. While we have quite some way to go in achieving this sort of dominance in the build-to-rent sector, the sharp growth seen in recent years suggests we are well on our way.”

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Government to give go-ahead to convert empty shops into flats

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Under planning reforms to be introduced by housing minister Robert Jenrick, planning restrictions will be relaxed so that empty shops can converted more easily into housing.

In a drive to revitalise high streets, many devastated by long-term decline and more recently the impact of Covid with the shift to on-line shopping, full planning applications will no longer be required to convert shops into housing.

Under expanded permitted development rights (PDRs) developers will find it much easier to obtain permission to convert retail space into housing from this coming August.

It will also be much easier to change the use of empty retail and business spaces into other uses such as cafes or restaurants. Since their introduction in 2015, PDRs have allowed the creation of 73,000 housing spaces, conversions which otherwise would have been turned down under existing planning laws.

Closing stores

Now, with over 17,000 stores closing on Britain’s high streets, the government and local authorities are desperate to see a revival of the many devasted town centres up and down the country. One way to achieve that experts think is to encourage more town-centre living.

The package of measures being introduced by Mr Jenrick will also give additional planning rights for public buildings, for example, schools, universities and hospitals to expand their premises, without the need for detailed planning applications, under the PDR regime.

Currently homes, businesses and public authorities are allowed to build small extensions without the need for full planning applications under PDR, but these new rules will take this process a step further, allowing more flexibility in what is and is not allowed, making the planning process operate as a faster more streamlined service.

The Ministry of Housing, Communities and Local Government (MHCLG) has said converting unused business premises into homes will revitalise many run-down high streets by encouraging people to live, work and enjoy leisure in these locations.

MHCLG insists that this relaxed planning regime will not in any way lower standards, as basic planning and building regulations will still control how the premises are incorporated into, for example, retail space, and ensure that they provide adequate natural light and space standards.

Bounce back

Jenrick said: “We are creating the most small-business-friendly planning system in the world to provide the flexibility needed for high streets to bounce back from the pandemic.

“By diversifying our town and city centres and encouraging the conversion of unused shops into cafes, restaurants or even new homes, we can help the high street to adapt and thrive for the future.’

The Government, under this same legislation, is also seeking to safeguard important heritage assets such as statues, memorials and monuments by way of changes to existing permitted development regulations, to ensure that demolition of unlisted heritage assets must be approved by planners.

Seaports will also come under the PDR regime to give them the same development freedoms already enjoyed by airports when undertaking new developments.

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Latest updated guidance for Electrical Safety Standards in the PRS

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From 1 April 2021 the Regulations for Electrical Safety Standards apply in all cases where a private tenant has a right to occupy a property as their only or main residence and pays rent. This includes assured shorthold tenancies and licences to occupy.

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2% Stamp Duty surcharge for non-UK residents from 1st April

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From 1 April 2021, a 2% Stamp Duty Land Tax (SDLT) surcharge will apply to purchasers of residential property in England and Northern Ireland who are not resident in the UK. Click Here

The 2% surcharge applies to all ‘non-resident transactions’

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Rents for new tenancies rise as demand ramps up, say letting agents

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The rental market continues to show no sign of slowing, as demand for properties increased yet again and landlords raise rents for new tenancies.

ARLA Propertymark’s Private Rented Sector Report reveals that the average number of new prospective tenants registered per branch continued to rise to 82, up from January’s figure of 81 – the same as February 2020 but a big leap from the 65 recorded in 2019.

Regionally, West Midlands branches recorded the highest number of new tenants, with an average of 126, followed by the East Midlands with 123 new tenants. Northern Ireland and The Isle of Wight both recorded the lowest number, with an average of 26.

Healthy demand meant more landlords were able to increase rent, with 49% of agents reporting that they had done this in February compared with 39% in January. Year-on-year this figure is also up from 40% in February 2020. Meanwhile, the number of tenants successfully negotiating rent reductions remained at 2% – the same as during February 2020.

Management drop

ARLA says the number of properties managed per letting agent branch fell for the third month in a row, from 196 in January to 195 in February.

Branches in the North East had the highest number of properties with 284, while those in London – with an average of 94 properties – had the lowest stock per branch.

Four landlords at each branch sold their buy-to-let properties, the same for the fifth month in a row but slightly lower than the five recorded a year ago. 

Chief policy advisor Mark Hayward (pictured) says: “Letting agents have continued to support landlords and their tenants throughout the ongoing Covid-19 difficulties and it is essential that tenancies are maintained wherever possible to ensure rent keeps flowing.”

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Are flats or houses best for Buy To Let investors?

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It can make a massive difference to your bottom line whether you choose to invest in flats or houses. It can also make a massive difference depending on where in the country you are.

Watch this video for a full breakdown on the pros and cons

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March house prices down 0.2% month-on-month

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The latest Nationwide House Price Index for March with prices down 0.2% month–on–month, after taking account of seasonal factors.

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “Annual house price growth slowed to 5.7% in March

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What can tenants do about noisy neighbours?

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Many people have spent more time than ever before at home over the last year. Some have been trying to work from home with children, dogs and cats to look after. And what of the neighbours? Perhaps your tenant has only just realised how noisy or disruptive they are but what can they do about it?

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Will Legal & General will soon be poaching your tenants?

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Build to rent or BTR developments, funded by institutional investors such as insurance companies and pension funds, have been growing in numbers dramatically in recent years.

And this sector of the residential property market will become a force to be reckoned with in the future and a challenge to the small-scale buy-to-let landlord.

But so far this segment of the market is quite small – it occupies less than 2% of the private rented sector.

Out of approximately 24 million households, over one fifth (20%) are now in private rented accommodation and this market is growing – demand still outstrips supply, which means, despite the Covid effect, there is considerable upward pressure on rents.

The potential size of the market and the relative security of asset values and rental cash-flow returns makes the industry an attractive proposition for institutional investors for the long-term.

To take one example, Legal and General (L&G), the insurance company, is becoming a major investor in build-to-rent.

L&G’s existing presence in the build-to-rent sector has over 5,000 rental homes in operation or currently under development across the UK’s major towns and cities.

1k homes a year

Their latest announcement says it plans to build 1,000 family rental homes per year as part of its recently launched “suburban build to rent business”.

This will be focused on family rental communities, by developing family homes in areas connected to schools, transport infrastructure and key amenities.

L&G says it has identified a gap in the market, a need for single family homes which are professionally managed, offering a high level of flexibility and security of tenure largely unavailable in urban centres. It is basing its planning assumptions on a forecast growth which will result in a UK residential market of well over £200bn.

L&G’s investment will go into a mix of houses and low-density apartments, with facilities meeting today’s needs.

Some will incorporate home offices with more extensive outdoor space designed to meet the changing needs of home renters, changing patterns of work and the increasing desire for a better home-life balance post the pandemic.

Built into the planning is the need for increasing environmental efficiency, both in the build requirements, home running and management. L&G says it has a sustainability commitment throughout its business and plans are to make its build-to-rent operations carbon net-zero by 2030.

David Reid who is joining managing director on the build-to-rent management team (pictured) says they will collaborate with housebuilders to develop some large-scale sites, as well as pursuing a direct delivery programme.

He adds: “As we gear up towards the acquisition of our first sites, our major focus has been to put together a stellar team to match and support our growth ambitions. With working practices and demands changing rapidly in light of the pandemic, it’s more important than ever that we deliver high-quality homes to meet societal demand.”

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Short lets boom: Channel 4 TV show rides huge surge in Airbnb market

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Landlords could be tempted to invest in short-lets by witnessing the rush to book staycations and a new reality TV show where designers revamp holiday homes.

As hosts starts to welcome guests back from 12^th April, Channel 4’s Hire My Home is sparking more interest in the sector. It features two interior designers – Anna Campbell-Jones (above) and Zeena Shah (left) – who transform bland rentals into unique holiday destinations, with budgets provided by their owners, anxious to increase custom.

The end results are then judged by a panel of 100 people via the Hire My Home app, based on the pictures and listing info.

After the government announcement in February that self-contained accommodation could open up in April, searches by guests or potential guests in the UK nearly tripled, according to Airbnb.

Visits to the platform’s landing page for new hosts were also up in both January and February compared with December.

An Airbnb spokesman says: “As we prepare to be able to travel once again, where previously, our Most Wishlisted homes have been dominated by far-flung and exotic destinations, this year it’s all about the rural retreats to explore on domestic shores.”

Shomik Panda (pictured), director general of the Short Term Accommodation Association, agrees that self-contained accommodation is likely to be very popular this year because they let people comply with Government guidelines and stay safe from COVID-19.

He adds: “Staying in self-contained accommodation has the added benefit of supporting the hospitality sector and local economies in which they are located which will help them to recover some of the lost income from the last 12 months.”

Watch the first episode.

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