What is Build-to-Rent, and how will it affect Private Landlords?
So, just what is ‘Build-to-Rent’ – and how may it impact private landlords?
More than a decade ago, a comprehensive report into the Private Rented Sector was released which concluded there was an urgent need for institutional investment into private rented homes in the UK.
Some believed the plan was to squeeze private landlords out of the market – however the reality is that Build-to-Rent has emerged as a brand-new housing option, sitting alongside the existing choice for private rented tenants.
When compared to the Private Rented Sector, institutional investment in private rental schemes is in its infancy. There have been an estimated 30,000 homes built so far, which equates to less than 1% of privately rented homes.
However, the sector is set for future growth with an estimated 140,000 units either in construction, or in the planning process.
So just what is the difference between the traditional Private Rented Sector, and Build-to-Rent homes:
Build-to-Rent schemes are mainly located in cities. Naturally London has the most, however cities like Bath, Birmingham, Liverpool, Manchester, Glasgow and Edinburgh all have their fair share of schemes.
Although these are cities which are traditionally rental hot-spots, they are also locations where supply doesn’t typically meet demand.
Many Build-to-Rent schemes are described as ‘hotel-type’ homes, offering concierge services. Some residents can enjoy on site gyms and hot desking facilities. Meanwhile, the building manager will sometimes collect a tenants dry cleaning or even walk the dogs!
Tenants of Build-to-Rent schemes such as these are prepared to pay a premium above average rents.
In some locations, rents on Build-to-Rent schemes can be hundreds of pounds per month more than traditional rentals.
Are traditional landlords about to be squeezed out?
We don’t believe so.
The demand for rental homes continues to outstrip supply – by a significant margin. Any addition to the housing stock in a particular location is only likely to reduce the pressure on the current market, rather than challenge it.
The beauty of the private rented sector is that high quality, family homes can be found in all neighbourhoods – often thanks to accidental landlords who chose to rent out a former home, or property they inherited. This means that in towns and cities up and down the UK, families are able to rent homes close to the school they’ve chosen their children to go to, or in the villages they grew up in themselves.
We welcome investment in quality rental homes which continue to drive up standards in the UK’s rental stock, but we don’t feel Build-to-Rent poses any threat to private landlords.