The build-to-rent boom – how de­vel­op­ers woke up to mak­ing homes just for ten­ants

Two large-scale hous­ing projects in Lon­don are specif­i­cally in­tended to be let, not sold

The Guardian - - FINANCIAL - Ju­lia Kollewe

Aygul Zagidul­lina is not mad about foot­ball. How­ever, when she re­ceived a newsletter through the door about new rental homes open­ing next to Wem­b­ley sta­dium in north Lon­don, she and her hus­band did not need much per­suad­ing.

They were the first ten­ants to move into Quin­tain’s 7,600-home Wem­b­ley Park de­vel­op­ment, which will in­clude 5,000 pur­pose-built rental homes. It is the big­gest build-to-rent pro­ject in the UK, worth £3bn, and when it is fin­ished in 2025-26, about 15,000 peo­ple are ex­pected to be liv­ing and work­ing on the 85-acre site.

Pur­pose built blocks of rental homes – com­mon in other coun­tries such as the US, Ger­many and France – are a rel­a­tively new phe­nom­e­non in Bri­tain but are fast be­com­ing a hot in­vest­ment for prop­erty de­vel­op­ers and City firms such as Legal & Gen­eral, ea­ger to tap into the ris­ing trend for long-term rent­ing. The sec­tor is ex­pand­ing across Eng­land, with 80,855 homes com­pleted or planned, ac­cord­ing to re­cent of­fi­cial fig­ures.

An­gus Dodd, the chief ex­ec­u­tive of Quin­tain, which was ac­quired by US pri­vate eq­uity firm Lone Star in 2015, said the com­pany had de­cided to switch from build­ing for sale to build­ing for rent be­cause it pro­vided a re­li­able longterm in­come stream, in con­trast to the ups and downs of the house­build­ing cy­cle. He said both gov­ern­ment sup­port for build-to-rent, and in­vestor in­ter­est in it, had been in­creas­ing.

“It’s a so­lu­tion to the hous­ing cri­sis: it could be a big so­lu­tion,” Dodd said. “It sits along­side hous­ing in all its var­i­ous forms – mo­du­lar hous­ing, mi­cro liv­ing.”

Some 16% of the ten­ants al­ready liv­ing at Wem­b­ley Park, where a third rental block has just been com­pleted, are key work­ers such as nurses, teachers, sol­diers and po­lice.

More than 1,300 homes have been built and a fur­ther 3,000 are cur­rently un­der con­struc­tion. The tallest tower will be 26 storeys – not quite high enough to see into the sta­dium. Most of the planned 63 new build­ings will have roof gar­dens. A the­atre, of­fice build­ings, a pri­mary school, doc­tor’s surg­eries and a park the size of four foot­ball pitches are also in the works.

Zagidul­lina and her hus­band left their pri­vately rented one-bed­room flat in Whitechapel in south-east Lon­don, where they paid £800 in monthly rent, and moved into a £1,500-a-month one-bed at Wem­b­ley Park in March 2016. When their baby, Emily, was born nine months ago, they up­graded to a two-bed­room flat with a ter­race, with a monthly rent of £2,050.

The rent in­cludes util­ity bills as well as ul­tra-fast broad­band. Com­mu­nal lounge ar­eas ad­ja­cent to the en­trance come with kitch­enettes and Sky TV, and a concierge is on hand 24 hours a day to deal with de­liv­er­ies and emer­gen­cies.

Quin­tain stresses that its man­age­ment com­pany, Tipi, does not charge let­ting agent fees, or for end-of-ten­ancy clean­ing. The gov­ern­ment wants to ban fees to let­ting agents, which tend to av­er­age £223 but can be as high as £800.

Zagidul­lina de­scribed the flats the cou­ple had rented pre­vi­ously as “to­tal dis­as­ters”. “In Whitechapel, the land­lady said her grand­daugh­ter was com­ing to live there and told us ‘at some point you’ll have to leave,’ but we didn’t know when,” she said. “And our flat in Seven Sis­ters didn’t feel hy­gienic.

“This [Wem­b­ley] is the per­fect area; the per­fect pro­fes­sional land­lord who doesn’t have a grand­daugh­ter. It’s per­fect for a fam­ily. You pay a lit­tle bit more here, but you pay for a nice life­style.”

While Quin­tain ad­mits that many ten­ants will be “pay­ing a premium for the life­style”, it says 32% of the planned homes at Wem­b­ley will be af­ford­able. This is a higher pro­por­tion than seen at many other Lon­don de­vel­op­ments, and just be­low the 35% tar­geted by mayor Sadiq Khan (down from his elec­tion prom­ise of 50%). The bor­ough in which the de­vel­op­ment is sited, Brent, is one of Lon­don’s poor­est.

Nearly 40% of the af­ford­able Wem­b­ley Park homes will be let at a dis­count to mar­ket rents, with the max­i­mum rent set at 65% to 80% of mar­ket value; a fur­ther 28% will be af­ford­able-rent, while 33% are ear­marked for shared own­er­ship and dis­count mar­ket sale.

Brent sup­ports the mayor in seek­ing a min­i­mum of 35% af­ford­able hous­ing on all new de­vel­op­ments, and de­liv­ered 30% in the three years to 2015-16, above the 24% Lon­don av­er­age, a coun­cil spokes­woman said. “We ex­pect to see Quin­tain con­struct 3,000 new homes by the end of the year. This can only help to tackle the dire hous­ing sit­u­a­tion in Lon­don.”

The first big UK build-to-rent scheme to get off the ground was East Vil­lage in Strat­ford, the for­mer Olympic ath­letes’ quar­ters which were turned into 3,000 homes by UK de­vel­oper De­lancey and Qatari Diar, the prop­erty arm of Qatar’s rul­ing fam­ily. Half of the prop­er­ties are man­aged by Get Liv­ing, which prides it­self on its no-fee and no-se­cu­rity de­posit pol­icy and on of­fer­ing three­year ten­an­cies with a res­i­dent-only break clause.

The Duke of Westminster’s prop­erty firm is also get­ting into the game: it in­tends to build 1,500 rental homes on the site of the for­mer Peek Fre­ans bis­cuit fac­tory in Ber­mond­sey, south-east Lon­don, which closed in 1989.

If Grosvenor’s £500m mas­ter­plan comes to fruition, peo­ple will be liv­ing on the site where Garibaldi and Bour­bon bis­cuits were in­vented from 2020/21, when the 12-acre de­vel­op­ment re­opens. Grosvenor, owned by the Duke – 26-year-old Hugh Grosvenor, Bri­tain’s youngest bil­lion­aire – in­tends to file for plan­ning per­mis­sion in Oc­to­ber.

At both Wem­b­ley Park and the for­mer bis­cuit fac­tory, the prop­er­ties are be­ing de­signed for renters, fea­tur­ing ho­tel­style lob­bies and two-bed flats with en-suite dou­ble bed­rooms to ap­peal to shar­ers. There will also be three- and four-bed­room flats for fam­i­lies.

Both Quin­tain and Grosvenor will man­age the rental homes for the long term, and are plan­ning more build-torent projects in Lon­don.

Si­mon Hard­ing-Roots, ex­ec­u­tive di­rec­tor of ma­jor projects at Grosvenor, said: “Build-to-rent hasn’t been done at scale for a cen­tury in this coun­try by the pri­vate sec­tor.”

He be­lieves the pri­vate sec­tor needs to step up its game. “Coun­cils can’t pro­vide all of this, and why should they?” he said. “The hous­ing cri­sis is ob­vi­ously very real. We be­lieve we can make a real dif­fer­ence there.”

Hard­ing-Roots said the Ber­mond­sey flats will cater for a broad range of in­comes, in­clud­ing key work­ers earn­ing £25,000-plus a year – “the nurses, teachers and po­lice­men who need to be in Lon­don”.

A num­ber of flats will be let at dis­counted mar­ket rent. Dis­counts are likely to range from 20% off mar­ket rents to the Lon­don Liv­ing Rent with a dis­count of 50-55% – a new type of “gen­uinely af­ford­able” hous­ing for mid­dlein­come Lon­don­ers in­tro­duced by Khan. Grosvenor wants to make the dis­counts flex­i­ble, so they can be “di­alled up or down” if ten­ants’ in­comes change, so that they are not forced to move.

South­wark Coun­cil ex­pects Grosvenor to de­liver 35% af­ford­able hous­ing at the fac­tory site, in­clud­ing flats at so­cial rent. Coun­cil­lor Mark Wil­liams, cab­i­net mem­ber for re­gen­er­a­tion and new homes, said: “The bis­cuit fac­tory is an in­ter­est­ing pro­ject that sup­ports our priorities, in­clud­ing the pro­vi­sion of much-needed new homes, es­pe­cially for res­i­dents on low to mid­dle in­comes.”

The yel­low-brick fac­tory site is a long way from Grosvenor’s tra­di­tional heart­land in May­fair and Bel­gravia, two of the cap­i­tal’s most ex­clu­sive neigh­bour­hoods. The firm is mov­ing into more af­ford­able hous­ing projects af­ter be­ing hit by the down­turn in the lux­ury prop­erty mar­ket.

Frank Turner, 78, who worked at the bis­cuit fac­tory from 1960 un­til 1989 and be­came its chief fire of­fi­cer, wel­comed Grosvenor’s at­tempt to “breathe life back into the site”.

“The gov­ern­ment are say­ing you should have homes for lower and mid­dle in­come type peo­ple and in the end, with some com­pa­nies, it doesn’t ma­te­ri­alise,” Turner said. “If Grosvenor can do it, good luck to them, be­cause that’s what’s needed.”

Up to 11 res­i­den­tial blocks of vary­ing heights are planned, with the tallest tower, of 25 storeys, to be built in the cen­tre of the site, as well as a new 600place sec­ondary school.

The big­gest of the bis­cuit fac­tory build­ings, a for­mer warehouse, is to be con­verted into a five-storey block of flats with a large atrium lined by shops and cafes at the bot­tom. The planned pub­lic roof garden, with views across Lon­don, will hark back to the fac­tory garden where Peek Fre­ans work­ers used to en­joy a cup of tea (and a bis­cuit) dur­ing break times.

Two new routes un­der a nearby rail­way line will link the de­vel­op­ment with The Blue, a lo­cal street mar­ket that has dwin­dled to a hand­ful of traders. When the Guardian vis­ited, only Rus­sell Dry­den, a fish­mon­ger, was ply­ing his trade in the square. He ex­pressed hope that the Grosvenor de­vel­op­ment, which is ex­pected to cre­ate 50 new busi­ness spa­ces in the Vic­to­rian rail­way arches and 1,300 per­ma­nent jobs, would re­vive its for­tunes.

3 £ bn Value of the Wem­b­ley Park pro­ject, which will in­clude 5,000 pur­pose-built homes for rent 1,500 Num­ber of rental homes hoped to be built at the for­mer Peek Fre­ans bis­cuit fac­tory in Ber­mond­sey ‘Coun­cils can’t pro­vide all of this and why should they? We be­lieve we can make a dif­fer­ence’

Pho­to­graph: Sarah Lee for the Guardian

Above, part of Quin­tain’s Wem­b­ley Park de­vel­op­ment, sur­round­ing the na­tional foot­ball sta­dium in north Lon­don; right, an artist’s im­pres­sion of how it will look when fin­ished; be­low, one of the flats

Nine-month-old Emily, be­low, be­came one of the first ten­ants in the Wem­b­ley de­vel­op­ment when her par­ents moved in

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