Developers, pension funds and housing associations have launched a campaign to promote the delivery of housing for long term rent offering a potential £30bn of new, private finance.
The amount is potentially enough to build more than 150,000 homes – housing around 350,000 people. It would go some way to easing the pressure on the rental market – the fastest growing tenure in England.
In an open letter to the next government, supported by the British Property Federation, the Better Renting for Britain campaign says the Build to Rent sector could play a crucial role in solving the housing crisis, improving the quality of housing and financing more development through additional, institutional capital.
Warning that housing targets will go unmet without additional private sector funding, the campaign believes an American-style rental market – where single companies own large portfolios of homes – could bolster standards offering better value and greater transparency. “We want to create more professionally managed rented housing, purposefully designed and built with the long term occupier in mind,” the letter said.
This approach will enable individuals and families to rent for years, not months if they wish. The offer of longer-term tenancies, inflation linked rents and shared amenity spaces would be made possible because the investors are doing so to earn income – rather than speculating on house prices going up.
“We need genuine acceptance that Build to Rent differs from traditional housebuilding,” the campaign adds, referring to the fact that schemes built for rent are currently treated by planning policy in the same way as those built for sale.
Rental schemes generate profits over a long period, while traditional housing is sold off, netting the developer a capital receipt rather than a drip-feed of income. This affects the amount of development taxes – known as section 106 payments – which can be levied before the whole scheme becomes unviable.
The campaign wants the government to make councils set out the quantity of rental housing needed locally and then partner with developers to build some of it on public land. This could create income for local authorities. It also wants planning rules modernised to reflect the fact that building for rent is wholly different from building to sell.
The group also wants a commitment to market economics to ensure vital new investment isn’t put at risk.
“We stand shoulder-to-shoulder with those calling for improvements across the entire housing sector”, adds the letter.
The letter has made five requests to the future government:
- Councils should identify how much rented housing they need and allocate land to it. It can ensure that housing is rented and not sold by agreeing covenants with developers.
- Idle public land should be used to generate income for councils by developing rental blocks.
- A modernised approach to affordable housing which recognises the wholly different funding structures relating to build to rent compared with housing for sale.
- The sector to continue operating as a free market, which is vital to securing investment.
- Work with us to promote best practice, better inform the public and help improve the perception of the entire rented sector.
Harry Downes, managing director of Fizzy Living, said:
“Because we’re backed by long-term capital we can make a cast-iron commitment to not sell-off the homes we build. It means we can do so much more in offering hassle-free, high quality urban living that’s priced fairly and available for years, not months, offering a genuine alternative for Britain’s growing army of renters.”
Martin Bellinger, chief operating officer of Essential Living, said:
“Smart phones, taxi apps and the sharing economy have disrupted many things in recent years and now it’s our turn to positively disrupt the housing market. Renting can and should be about making people’s lives easier, offering them value for money and long-term certainty enabling them to create a home. By taking a long term view, we can do this and offer the next government a vital additional source of finance.”
Nick Jopling, executive director for Property at Grainger plc, the UK’s largest listed residential landlord, said:
“Not only do we need to build many more homes, but we need to make sure renters get a better deal. As a business that’s been around since 1912, we want to see a rental market that provides long term options as well as good value for money and customer service. By supporting ‘build to rent’, the future British government can encourage companies like ourselves to help increase housing supply and improve standards of living in the rental market.”
Melanie Leech, chief executive of the British Property Federation, said:
“Supporting the build to rent sector will help the next government meet the housebuilding targets that all the main political parties have pledged to voters during this election. It will help reinvigorate our city centres and support local authorities that want to help retain their young people who need homes. And most importantly, for renters, it will revolutionise the sector, providing greater choice of tenure length, rent certainty and high levels of customer service.”
Andrew Brentnall, Head of Funding & Development, Residential Capital Markets, at Savills, said:
“Build to Rent could offer a large quantum of capital for additional homes across the UK which will further help to service the needs of an increasing number of renters in the locations that we need it most. Private renting has increased by 79% since 2003 and institutional investment is vital for its continued growth. If the considerable demand from new tenants is not met by new stock, rents will rise due to lack of supply. It is therefore very important to attract, and retain, new investment into the sector. Our forecast is that rental demand will rise by a further 1.2 million households by the end of 2019”.
Toby Nicholson, PRS team at JLL, said:
“Build to rent has a key role to play in creating additional housing supply. 4 million people need quality rented accommodation and the next government has a responsibility to support solutions that will make a genuine difference to the supply crisis.”