Carry on renting... and bring the dog, cat and the kids too
these kinds of developments, which are purpose-built for renters, have professional landlords and are backed by institutional investors such as pension funds. They started appearing in around 2012 in central London and Manchester. In prime locations, and often with a concierge, boasting gyms, swimming pools and spas, they were designed with high-earning millennials and work-hard-play-hard professionals in mind.
First-time tenants saving for a deposit were not the target, yet these schemes – dubbed build-to-rent – were hailed to be one of the major solutions to the UK’s widespread and chronic housing crisis.
Six years on and these swanky flats are still being developed: Richmond Mews in Soho, for example, will set you back £3,445 per month for a onebedroom apartment. However, the £2.6billion build-to-rent sector is now evolving to cater for more tenant tribes, including families and older people. There’s now a recognition that infinity pools and cinema clubs are not a must-have in a rental complex; affordable rents, family-sized units, and longer-term letting agreements are the industry’s new priorities.
“Initially, almost all investment was targeting schemes aimed at young professionals in luxury city centre locations, attracted by the potential for higher returns from this relatively wealthy group,” says Nick Whitten of property firm JLL.
Helen Gray, of consultancy CBRE, agrees: “When the sector was first emerging there was a clear focus on building luxury homes in London and Manchester. The concept was new and there was a lot of nervousness from investors.” Build-to-rent developers were also competing against traditional housebuilders for sites, which pushed land prices up. A top-end product therefore justified the spend, she adds.
But the industry was missing a trick: the mainstream rental market accounts for 2.5million households, according to JLL. Around 500,000 of these homes are lived in by students, but the remainder are key workers and young families on a modest income.
“They tend to live on the periphery of regional city centres and more than half of these households are in 20 UK cities including Manchester, Birmingham and Leeds,” Whitten explains. “Therefore, we need more affordable build-to-rent homes designed with these tenants in mind.”
The number of build-to-rent properties has increased from 0.8 per cent of all new homes under construction in 2012 to nearly nine per cent in 2017, and
Priya and Michael Walters with dog Bailey in their flat in Hayes, main and top right