Newsroom

Future for consumers is build to let, business tells residential conference

Leading figures from the property industry outlined how changing attitudes to renting and developing a branded build to let sector could be a vital component in meeting government housing targets and giving consumers the quality homes they want.

Industry figures from the British Property Federation, Grainger, Unite and CB Richard Ellis, believe a large-scale branded rental sector to mirror Germany or Holland would be the shot in the arm needed for UK housing. The industry hopes that a government review due on 23 October will initiate a step change in how rental is perceived.

In the first half of the twentieth century, major institutions such as Prudential, Norwich Union and Standard Life owned huge swathes of rented properties. However, now the sector represents just 11 per cent of total UK housing stock.

Speaking at the Resi conference in Newport, BPF chief executive Liz Peace said that for consumers, being able to rent fairly priced and good quality homes would be vital in meeting the demand of those unable to afford or not wanting to buy.

“The commercial property industry is well placed to use the same techniques it has used so successfully in commercial property development and management to create a professional, branded rented sector, which would have the added advantage, over time, of driving bad landlords out of business,” Peace said.

“The key is to get the financial returns we need, which requires changes to the tax and regulatory framework. The business philosophy of building to scale and generating an income stream can work. At the moment, central government has been politely interested, but officials need a lot more convincing. If we can build relationships with local authorities we could go forward directly with them.”

No legislation is currently needed for councils to incentivise the delivery of build to let.

“We don’t need legislative changes for local councils to say ‘we want this plot for build to let’,” Peace added. “If we could get some big residential vehicles going, it would soak up some of the surplus residential stock and also help to get the house builders building again. It’s a win-win situation if we can get things going.”

Mark Allan, chief executive of student housing developers, The Unite Group, which has 37,000 units across 29 cities, said:

“Every cloud has a silver lining. In terms of build to let, it’s clear when you look at new building start figures that we’re not going to get to the government’s targets just using the house builder model. There’s a fantastic opportunity to discover what build to let can bring. We need to remember there is a very significant proportion of people renting because they want to rent. Students are probably the most visible of those but we can take the lessons learned further a field, by identifying others who want to rent. We build and manage entire properties. We build something with management in mind and design it for our customers, to be run for many years.”

Rupert Dickinson, chief executive of Grainger, the UK’s only FTSE-listed residential landlord, said:

“There is no short term fix. We don’t need any legislation in planning to encourage people - it can be done without central government intervention. However government does need to completely change its attitudes towards landlords and renting before we can move forward. Perceptions towards landlords need to change. Residential is not a short term high return investment that goes through the cycles. It’s a steady return investment.

“Changes to the real estate investment trust (Reit) regime could do that, as could changes to VAT on maintenance and repairs which is another enormous disadvantage for investors.”

Nick Jopling, executive director at property agents, CB Richard Ellis, said:

“We have to find a model that goes between the over regulated versions of northern Europe and the very free service-culture market of the USA. We must be able to build something around the US multi family housing model. The average size of those developments is around 200 units and that enables on site management and maintenance, as well as extra services like gyms. Everything can be centrally coordinated and run by branded managers. They operate the whole thing around a service culture.

“The second you drive out of a multi family block there is another similar looking one across the road. If you’re not polite to your customers then they’ll disappear over to the next block. Developing this model in the UK is ambitious but at the point we are at now with construction levels of 50pc, we have regeneration opportunities where developers can manage or keep a stake in what they build.

“We won’t bring institutions in right away, as it’s too early, but after we’ve got the market stabilised with opportune money, we can then get the institutions in and develop a Reits structure around it all.”

David Salusbury, chairman of the National Landlords Association, said:

“There is room for initiative improvement and raising standards. With build to let, if the developer is not too greedy and looks at a ten year window, then everything will take care of itself. If prices fall within that period, it doesn’t matter, as long as the landlord or developer can manage the property.”

Mira Bar-Hillel, the renowned campaigning property journalist with the London Evening Standard and Spectator, added:

“Owner occupation is an expensive sector and at the route of a lot of the country’s economic problems. It costs around £20,000 to move from a property to the same property in London. When capital values are falling we have an opportunity to encourage people not to aspire to a tenure they cannot afford until their late thirties when they are settled and don’t wish to move. A lot of the problems in the market could be solved by a branded, build to let sector. We must lobby government to sort out the tax and legal framework.”

She added: “It’s all very well for a bunch of buy to let landlords to say the courts are unfair but that won’t get anyone anywhere. If you have big institutions lobbying government and saying that landlords would not risk their reputations, on that basis, creating a much more sensible and incentivised tax and legal structure will go a very long way to bringing us up to the same level as our European colleagues.”

James Wright, chairman of Modern Construction Methods, said:

“We’re building dreadfully in the UK – just for what the builder wants rather than what the tenant wants.”


For more information call Maddie Williams at the BPF on 020 7802 0113 / mwilliams@bpf.org.uk