Build-to-rent (BTR) is one of the solutions to the declining number of landlords in the UK’s property market according to a leading property management firm. Apropos by D.J. Alexander, one of the UK’s largest family run property management companies, believes that as greater numbers of landlords exit the market there is an immediate need for more housing in the private rented sector (PRS) and build-to-rent offers a workable model to quickly fill that need.
With landlords coming under increased pressure from tax and legislative changes it has become more difficult to make money out of property investment. BTR is attracting major institutional investors who can take a more long-term approach to the rented property sector and see considerable benefits in large scale rental investment.
BTR currently comprises less than 1% of the total value of the UK’s private rented housing stock but with landlords being financially squeezed at every stage from buying, renting to selling in the PRS market there is an opportunity for large scale investors to replace this market. BTR benefits from being defined as a distinct asset class within the PRS to simplify its treatment in the planning system. This enables local planning authorities to use a local housing need assessment which will identify the range and number of housing types and tenures in a given area including, where appropriate, the provision of BTR homes.
According to the British Property Federation there are 142,999 BTR units either completed or planned in the UK, comprising 32,223 completed, 36,410 under construction, and 74,366 with planning permission.
David Alexander, joint managing director of apropos by D.J. Alexander Ltd, commented: “Although it is still early days for the BTR market it is clear that it is attractive to major institutional investors such as Legal and General, Aberdeen Standard, Goldman Sachs and others. These companies see the investment benefit while the Government understands the need to quickly deliver large numbers of rental properties over a short time frame to meet the current and future demand caused both by landlords exiting and the growing UK population.”
“Even ambitious social housing targets of 100,000 new homes a year will not meet the growing demand within the rental market and BTR is providing a very effective, quick and targeted response which is able to produce quality homes, at affordable prices in key areas.”
David continued: “BTR, retirement living developments and purpose-built student accommodation (PBSA) are the three areas which are currently driving the private rented sector. The PRS has traditionally utilised properties which were built to be sold. Adapting such properties to a long-term rental market can work but not all developments are as sympathetic as they could be.”
“The advantage with BTR is that you can create homes which are ideal for long term renters and create homes which are designed and developed with one aim in mind: to develop properties directly suited to a specific market. This creates more appropriate, bespoke homes able to fulfil the long-term needs of renters.”
David concluded: “The PRS has grown significantly over the last 20 years and the market has often been too slow to respond to changing demands. It has also often reacted in an ad hoc way to the challenges presented by the market which has not always been as appropriate as it could be for the increasing numbers of individuals choosing to live in rented accommodation for longer periods. BTR offers one solution to this complex situation and I welcome its adoption both within national and local governments and among institutional investors in providing a welcome and timely response to a growing demand from diverse communities across the UK.”