BPF and Savills launch debut report for build to rent sector

7 Feb 2017

Policy area: Residential

  • Build to rent could deliver 240,000 homes by 2030
  • Explains case for policy recommendations to support emerging sector’s growth

The British Property Federation and Savills today launch a new report ‘Unlocking the Benefits and Potential of Build to Rent’, which for the first time seeks to understand the sector's progress, potential and policy recommendations to support its growth.

The report produced in conjunction with the London School of Economics arrives just ahead of the government’s Housing White Paper, which is expected to be seminal in seeking to roll back 20 years of housing undersupply.

Recognising build to rent's ability to increase the supply of homes will play an important role in the Housing White Paper’s success. The evidence gathered in this report shows that on large urban sites, well connected to employment markets, build to rent can accelerate housebuilding three-fold. If this can be achieved on, for example, just one fifth of the large sites that are currently being built out, that equates to additional delivery of 6 per cent.

Relative to the 164,000 new homes completed in England in 2015/16, this is around an additional 10,000 homes per annum. Together with the level of supply expected to be completed over the next three years, this would equate to circa 15,000 build to rent homes per annum. This would result in a total of 240,000 homes being built by 2030 and provide a sector comparable in value to US Multi-Family REITs (£60bn).

Of particular importance to the sector, and its ability to accelerate housing delivery, is better recognition of it in the planning system. The sector is therefore seeking a greater codification of the government's preferred planning approach to the sector in the Housing White Paper, with a statutory planning definition of what build to rent is, an acceptance that discounted market rent may work better than other forms of affordable housing on such developments, and the use of covenants and clawbacks to give local authorities the assurances they need that such homes will remain in quality rental.

Ian Fletcher, Director of Policy, British Property Federation comments: “Build to rent is a relatively new phenomenon in the UK, but already has a significant development pipeline, which will see it deliver thousands of homes over this Parliament.

“By measuring build to rent’s growth and the other benefits it delivers, and what gets in its way, we want to show to government the sector can be an important partner to its ambitions to build more homes, on this most important of days for housing policy."

Jacqui Daly, Director, Savills residential investment research and strategy, adds: “There is no doubt that we need to boost housebuilding significantly to address years of undersupply and begin to impact housing affordability. However, historically the rate at which new homes are built is closely linked to rates of sale. 

“Build to rent is a model that breaks this link.  It also holds the key to getting institutions back into the housing market and increasing the supply of good quality, well managed homes.

“We hope that this report will give local authorities a deeper understanding of the benefits of build to rent and the tools they need to have a meaningful dialogue with developers and housebuilders and thereby secure long term institutional funding.”

ENDS

The full list of recommendations in the research report reads:

  1. Build to Rent (BTR) Definition - A statutory planning definition will help accelerate and maximise delivery of homes. It is a prerequisite for implementing other planning policies and to ensure consistency of interpretation across local authorities.
  2. Discounted Market Rent – National policy such as the National Planning Policy Framework (NPPF) should outline that discounted market rent is an acceptable form of affordable housing for BTR where there is a requirement to provide affordable housing in the same block as the private rented units. 
  3. Covenants and Clawbacks – Provide guidance within National Planning Policy Guidance (NPPG) on the use of covenants to ensure that in circumstances where there has been a concession to enhance viability in terms of the affordable housing provision local authorities are using consistent clawback mechanisms.
  4. Planning Preference for Build to Rent on Large Sites – National and local guidance should encourage local planning authorities to recognise the significant additionality benefits of BTR when working with developers to bring forward phases of large sites so that they are built out earlier than otherwise planned, alongside the early build-for-sale phases. 
  5. Design and Space Standards – National policies and guidance should promote greater flexibility on design and space standards in high density, town centre, urban locations with good transport accessibility. It should offer guidance for local authorities on the key factors (car parking, unit mix, unit size, single aspect, units per core) that can impact on the viability of build to rent.
  6. Government Debt Guarantee for Private Rented Sector (PRS) – The government should consider extending the £3.5bn Debt Guarantee for PRS in terms of time and scope to give confidence to lenders in the space that there will be investment / end buyer finance available to help the market scale up and mature.
  7. Home Builders Fund – The HCA should use an explicit tranche of the Home Builders Fund for PRS to demonstrate the government’s continued commitment to delivering good quality rented housing that is owned and managed by professional investors. 
  8. Market Information and Transparency – Both the HCA and Venn have access to a useful range of information and data on the new BTR sector which would be helpful to lenders underwriting transactions if the data were made available in aggregate form. 
  9. SDLT Amendments – Exempt large scale investors from the 3% SDLT surcharge. There appears to be precedents set by the Scottish Government's decision to exempt institutional when the surcharge was introduced and this should be investigated further.
  10. VAT Amendments – Changes to the VAT regime in terms of zero-rating the costs of repairs and maintenance would improve the viability of a large number of BTR sites. These changes should be considered post-Brexit.