What does the chart shows?
It shows the number of UK homes built specifically with a view to being rented out and professionally managed, otherwise known as the “build-to-rent” model.
The numbers are the first set of annual data on the sector to be published by the British Property Federation, which represents property owners, developers and agents.
The number of such homes that have been completed, are in construction or being planned across the country has risen by 30 per cent to 117,893 in the past year to the end of March.
Jacqui Daly, a director in the research team at agent Savills, which produced the research for the BPF, said growth in the sector had been boosted after the government gave it a bigger role in its national planning policy.
The development pipeline is growing strongly at both ends,” she said. “At this rate of growth, we expect that the build-to-rent pipeline could double to around 200,000 within the next two years.”
“Being planned” sounds a bit vague. How many have actually gone up?
The total completed was 20,863, representing a healthy 45 per cent increase on the total a year before. The number under construction has gone up by 47 per cent.
The totals are cumulative, the BPF says, so include completions that occurred in previous years. A proportion of those marked as under construction in one year will switch into the “completed” category in the next.
What’s driving the growth?
Build-to-rent has attracted long-term institutional investors because it offers a stream of rental income that can pay for, say, pension liabilities. But many local authorities have also swung behind the sector, realising that it offers a way to generate a long-term income stream as well as helping meet housing targets. Councils and housing associations are increasingly partnering with developers on build-to-rent schemes.
London appears to have more build-to-rent than the other regions put together
Yes, but the recent figures suggest construction in the regions is catching up, with areas outside the capital accounting for 62 per cent of the total under construction. This is partly driven by changing attitudes among local authorities, which have become more welcoming to rental-focused developments. Hotspots outside the capital include Manchester, Liverpool and Bristol.
London, in fact, is regarded as a more challenging market for build-to-rent developers, even though many mortgage applicants face affordability difficulties amid high house prices, and its robust economy supports demand for a high-quality professional rental market. This is partly because developers of homes for sale can construct and sell properties in phases. A build-to-rent developer must wait until a site is completed and rented out before seeing any returns.
Can the planning rules help?
Yes, and the London mayor has said developments that offer a minimum of 35 per cent “affordable housing” will be able to take a fast track through the planning process. The build-to-rent industry as represented by the BPF — has argued that having the same 35 per cent threshold for both kinds of developers — those building for sale and for rent — unfairly penalises the latter, since it “cannot compete with build-for-sale on land acquisition and pricing”. But City Hall remains committed to its targets on affordable housing.
Does build-to-rent really address the demand for family-sized accommodation? This is one of the criticisms frequently levelled at the build-to-rent model. But the Savills research suggests that is beginning to change, with 17 per cent of schemes being planned or under construction including houses, not just flats. And in London, developers are now including the kinds of large, family-oriented apartments commonly found in established US rental developments.
Source: FT News