Good design is the secret for the future success of the build to rent sector in the UK with developers needing to look beyond traditional layouts, says a new report.
Britain is on the verge of a rental revolution with around £30 billion of institutional investment earmarked to build and manage homes for rent, but success means creating homes that foster a sense of community, according to the report.
Indeed, the report ‘Funding Britain’s rental revolution’, by Addleshaw Goddard, a law firm and the British Property Federation, a trade body, says Build to Rent could bring in substantial additional finance for housing.
For example, it says that getting tenants to know their neighbours will help encourage them to stay for the long term, saving operators money on costly voids. The key to this will be creating user friendly living areas that encourage circulation within the buildings.
It points out that much of the concept around Build to Rent is borrowed from North America’s multifamily sector where listed companies own much of the housing stock.
Many of the Build to Rent schemes coming forward will include a range of communal space throughout the buildings and the report suggests this could include top floor amenity decks in the place of penthouse flats allowing all renters to benefit from the views and additional space.
Others will be simpler, such as a lobby area with shared seating but the report says that crucially, all schemes need to be of a decent quality.
Overall it suggests that the shift towards a professionally run rental market with developments owned by single companies rather than multiple speculators and buy to let investors, promises to offer Britain’s nine million renters higher standards, better value and greater transparency with homes purposefully designed for renters.
Institutions such as APG, Hermes, and Legal & General, together with companies such as Grainger, Essential Living and Fizzy Living are spearheading the new sector and the report says that the growth of Build to Rent is good for the economy, communities, investors and consumers.
It also points out that extra finance for housing is unlikely to surface through existing house builders or council funded development so Build to Rent could bring in more than £30 billion over the next five years.
The positive includes that fact that it allows investors to match to long term liabilities such as annuities or pensions with stable returns delivered from rent and it reduces the amount of debt held by individuals at a time where record low interest rates are set to rise.
On top of this Build to Rent investors can take a long term view and residents will be offered long term tenancies since the homes will not be sold off. Also, landlords will encourage tenants to stay by offering onsite amenities and good customer service. In America, this is the way companies seek to beat their competition.
Build to Rent has emerged as a separate new asset class, distinct from commercial real estate and buy to let properties that dominate the housing the private rental market. There are now dozens of high profile schemes in the works, the report points out.
Indeed, around 29% of housing starts in London in the first quarter of 2015 were homes for rent while many predict that renters could soon outnumber home owners, making the delivery of rental homes crucial.
‘Build to Rent has the potential to vastly improve standards in housing and because companies invest for the long term, they are more open to innovative design and more creative approaches which keep customers happy,’ said Marnix Elsenaar, head of housing at Addleshaw Goddard .
According to Ian Merrick, operations director at Essential Living, by having areas to share with neighbours and friends when they visit, tenants are more inclined to stay. ‘This is good for us, as we have greater certainty about customers staying for the long run,’ he added.
Russell Pedley, director at Assael Architecture, believes the crucial difference is that Build to Rent is focussed around lifestyle and not just simply about building houses. ‘As experienced architects in Build to Rent we know, when we’re designing these schemes, that it’s as important to deliver high quality homes as it is to provide spaces that foster communities, offer professionally managed services from centralised receptions to amenity access across multiple buildings, and overall provide great places to live,’ he said.
Ian Fletcher, director of policy at the British Property Federation, said there are exciting new developments that are well managed and delivering quality homes for young renters. ‘The industry, supported by us, now needs to start a conversation with the consumer, about what Build to Rent is about and what it can offer those seeking, or in need of, a home, something different from the private rented sector,’ he added.