2018 set to be ‘landmark year’ for Build to Rent
A new generation of Build to Rent (BTR) developers creating homes aimed at the modern tenant could help solve the housing crisis in coming years, industry experts have said.
While purpose-built blocks of rental homes are common in other countries such as the US, Germany and France, they are a relatively new phenomenon in Britain.
But recently, the sector has begun to expand across England, with 80,855 homes either completed or planned, according to recent official figures.
And as the buy-to-let business continues to be hit with tax and regulatory changes, shrewd investors are likely to consider Build to Rent developments to create tomorrow’s housing communities.
Last year, the government’s housing white paper proposed changes to the National Planning Policy Framework 2012 (NPPF) so local authorities actively plan for BTR where there is an identified need.
It also recommended making it easier for BTR developers to offer affordable homes and to enable the creation of family-friendly tenancies of three or more years.
Because owning rental homes is a good way for pension funds to get steady, reliable income to pay their pensioners, a growing number are keen to invest.
Legal and General, for example, the giant pensions and insurance company, has earmarked over £1 billion to invest in BTR.
In the US, as well as many European countries this way of renting is much more widespread.
In the Netherlands and Switzerland, institutions have nearly half their property investments in residential, whereas it's just 1 per cent in the UK, according to a 2010 survey by data provider IPD.
The UK has seen seeing record breaking investment into the BTR sector with the total capital committed reaching £2.4 billion for the first time last year – a 22 per cent increase, according to the latest report from real estate consultants CBRE.
BTR land sales also significantly increased during 2017 with a clear shift away from prime to fringe locations, the report also shows.
The substantial growth in investment has been attributed to a considerable increase in volume capital seeking Build to Rent investment, particularly from US investors who are familiar with the model from their domestic market.
In 2017, some 41 per cent of investment came from investors in the US and Canada.
Significant BTR deals included Grainger agreeing three deals for a total of £86 million in Sheffield, Manchester and Birmingham.
Additional investment from Legal & General meant that Birmingham alone secured £81 million worth in investment during the fourth quarter.
One of the landmark London deals of 2017 was CPPIB’s £250 million investment in to Lendlease’s Elephant & Castle project.