LONDON (4 March, 2016) – Experts from across global architecture and real estate have created a new guide aimed at helping investors, developers and local authorities deliver and manage thousands of homes for rent.
The Second Edition of Build to Rent: A Best Practice Guide has been published today by the Urban Land Institute (ULI), a non-profit research and education organisation focused on real estate land use, to support the emergence of a corporate rental sector in Britain.
In the guide, ULI explains how developers and local authorities can go about creating clusters of homes for rent so that they appeal to their target markets, often including the next generation of millennials.
It suggests that buildings be designed from “the inside out” – with thinking given to how economies of scale can be gained through building management and shared services.
The aim is to signpost property professionals towards delivering high quality buildings that are designed to offer a real sense of community and customer service. This would undoubtedly mark a step-change from how many see Britain’s inconsistent buy-to-let market.
Research from Savills, an estate agent, predicts an additional 1.2 million households will form in privately rented property by 2020 – around 220,000 additional households per year.
The Build to Rent sector, as it is increasingly known, is being seen as a key part of delivering on the Prime Minister’s promise of building 500,000 homes by 2020, largely because the money behind it is wholly different from finance currently backing housebuilders.
Build to Rent schemes are funded by institutional investors – such as pension funds – and managed for rent under a single owner, like a hotel or purpose-built student housing. Such investors seek slow-burning income returns, rather than short-term capital receipts.
With contributions from both the housing minister Brandon Lewis and London’s Deputy Mayor for Housing Richard Blakeway, the 184-page book also aims to help councils better understand the dynamics of Build to Rent.
One key barrier cited by the industry to delivering rental homes is the way Build to Rent is treated within the planning system as being no different from housing for sale.
When considered by planners, Build to Rent schemes should be valued on the income they produce – rather than the sale value of the homes. Recognition from councils that the properties will be rented for the long-term – rather than sold – would enable more developments to be viable because adjustments would need to be made to planning levies.
The guide urges developers and planners to be flexible, impressing a growing need for homes that cater for the under-served mid-market.
The potential for “branded” landlords to manage blocks under a single ownership is one of the focus areas for the guide. It says that property managers should be brought in at the design stage of buildings, adding that branded developments have the potential to drive customer loyalty and add value.
Richard Meier, partner at Argent and chairman of the ULI UK Residential Council, said:
“Investor appetite for Build to Rent is growing and there’s a real window of opportunity for Britain to harvest this and make a real contribution to the homes everyone agrees we need. The aim of this guide is to pool together expertise from right across the property, design and management sphere to enable both companies and the public sector to fully realise the opportunity we have to change perceptions over renting and make a real long-term contribution to urban regeneration. The Second Edition draws heavily from emerging experience in the UK alongside principles from more established, international markets. It has been written by the industry for the industry.”
Alex Notay, policy director for ULI UK, said:
“Recent new housing supply has tended to target higher value markets leaving those in the mid-market squeezed out by a lack of supply. The delivery of Build to Rent housing aimed at customers living in this under supplied mid-market has the potential to serve an incredibly diverse customer base. Ensuring these homes are designed and built to last will be crucial in supporting the returns long-term investors will be seeking.”
Ian Fletcher, policy director at the British Property Federation, said:
“Build to Rent is fundamentally about satisfying customers, and through it delivering for investors. The good practice in this guide is all about helping anyone who wants to achieve those aims. It pools expertise from across the sector and illustrates that despite competition the sector is collaborating to improve. It is an excellent publication, and the fact the second edition is needed so soon after the first, reflects how far the sector has advanced and grown over the past year.”
In preparation for the guide, the ULI conducted several study tours across the U.S. where “multifamily” housing – America’s name for rental clusters – is commonplace. However, the Guide also recognises that whilst insight can be drawn from abroad, the UK offer will need to be specific to the UK market.
One of the first companies replicating the American model across Britain is Essential Living, which has eight schemes under development across the South East. These include a major redevelopment of a former Elizabeth Arden perfume factory near Old Oak Common and the refurbishment of the Archway Tower, a former 1960s office block above Archway tube.
FTSE 250-listed Grainger, one of the UK’s oldest landlords, recently made an £850m investment pledge into new rental homes following the appointment of its new chief executive, Helen Gordon. Legal & General has also recently established a £600m fund jointly with PGGM, a Dutch pension fund.
Last week saw the topping out of HUB and M&G Real Estate’s Build to Rent scheme above North Acton tube station in west London, one of the first institutionally-funded schemes to near completion.
Notes for editors
Defining Build to Rent
The guide defines Build to Rent properties as developments at scale (100 units+)7 and are schemes which are purposefully designed and built with the customer in mind. It is anticipated that they will typically incorporate dedicated staff (potentially on-site) with a strong management ethos based on maximising the customer experience, together with a level of on-site amenity befitting the size of the development. Irrespective of the overall package of amenities, the creation of a community feel and positive customer experience is the underlying philosophy of any successful Build to Rent scheme.
The Urban Land Institute provides leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. ULI is an independent global non-profit supported by members representing the entire spectrum of real estate development and land use disciplines.
Founded in Chicago in 1936, the Institute now has over 37,000 members in 95 countries worldwide, representing the entire spectrum of land use and real estate development disciplines, working in private enterprise and public service.
ULI has been active in Europe since the early 1990s and today we have nearly 2,500 members across 27 different countries. The UK National Council is the largest in Europe with over 800 members and has had a thriving UK Residential Council since 2011.