Build to rent


UK home ownership is at its lowest rate for 30 years [1], the Government needs to build 300,000 homes each year [2] or, if the population looks set to reach 80 million by 2040, it will need to build a new home every ten minutes.[3].  Not a day goes by without one medium or another reminding us that we are headed for a residential calamity.

In an earlier article, Rockfire explored some of the potential solutions that are currently enjoying popularity.  Another is build-to-rent.  Relatively unknown in Britain, this area is “thriving in Germany and the US”[4]  And on the back of all this experience, investors from both countries are turning their attention to the UK market.  One of the biggest operators in the US market, Greystar, has already ratcheted up its activity in the UK, backing a 2,000 unit rental project in Greenford, West London and planning to own 10,000 apartments across London by 2021.

“I think that the opportunities coming our way have increased a little since the Brexit vote”

Mark Allnutt, Managing Director of Investments, Greystar

This view is shared by APG Asset Management, currently backing a 44-storey tower in London and looking for further opportunities

 “If the market remains as it currently is, I feel there will be more such deals to come” 

Martijn Vos, Senior Real Estate Portfolio Manager, APG Asset Management

According to the British Property Federation [5], there are almost 68,000 build-to-rent units completed, under construction or with planning permission.  In total, a mere 22.5% of the annual requirement according to the ‘Building More Homes’ report mentioned above. [2].  This report recommends that the government relaxes the rules governing local authorities and permits them to enter into agreements with housing associations and institutional investors.  This suggestion would go some way towards answering the question posed by the Chairman of the Residential Landlords’ Association:

                “The big issue is not about more housing – but who funds it.” [6]

                Alan Ward, Chairman, Residential Landlords’

Some robust firms, with a pipeline of land that was purchased prior to the stamp duty hike announced by George Osborne in his last budget, are surging ahead with their planned developments: Grainger, the UK’s largest listed residential landlord, plans to invest £850m in build-to-let by 2020 and L&G is in a venture with Dutch pension fund PGGM to generate 4,000 new homes for an investment of £600m.[7]  But others have been put off or pushed out of the market by the increased stamp duty, creating just the sort of vacuum that nature abhors.  If, as hoped, the rules are relaxed regarding partnering with local authorities, some very attractive opportunities might emerge.

[1] Property Week.  Why public sector needs to embrace build-to-rent.  20 October 2016.
[2] Telegraph.  England needs to build 50pc more new homes.  15 July 2016.
[3] Full Fact.  Do we need a new house every four minutes?  10 June 2016.
[4] Reuters.  London builders turn to funds.  21 October 2016.
[5] British Property Federation.  BPF Build to Rent Map of the UK.
[6] Residential Landlords’ Association.  How the PRS can solve the housing crisis.
[7] Inside Housing.  Has build-t-let got a future?  30 June 2016.