The number of American-style landlord-free rental apartments being built in Britain has soared in the past year. Pension funds and developers are pouring money into a new sector viewed by some as a solution to the urban housing crisis.
According to the British Property Federation (BPF), the number of “build-to-rent” blocks currently under construction — which offer guaranteed tenancies of three years and no deposits or upfront fees — has surged by 40 per cent in a year.
The purpose-built developments, which are often served by concierges and include amenities such as rooftop bars and gyms, are being delivered by both North American and British companies and are frequently funded by millions of pounds of investment from institutions such as Legal & General and M&G.
The UK’s build-to-rent sector is growing so rapidly that it is now attracting the second-biggest amount of investment in Europe behind Germany, according research by JLL, a property consultancy.
The BPF figures show 139,508 homes were either completed, under construction or going through planning by the end of last year – a 22 per cent increase from the figure of 114,806 on December 31, 2017. Of this number, there are now 43,374 under construction – a rise of 39 per cent from 31,250 a year earlier.
The developments are becoming increasingly popular among millennials because of a chronic shortage of urban housing and the trend of regularly switching jobs, which means that people want the flexibility to move at short notice. In the rental sector the number of landlords has fallen by 120,000 in three years after government tax changes, while many urban properties for sale are unaffordable for first-time buyers.
Nick Whitten, director of research at JLL, said: “Britain has a growing population but we do not build enough homes for them — and we also have a population where many young people continue to be driven towards urban areas, where properties still aren’t affordable enough.”
Critics say that “build-to-rent” can only ever be a small part of the solution to the housing crisis; there are currently about five million British households in the rental sector overall, so it will never come close to replacing landlords. The proportion of renting households in Britain has almost doubled since 1996, rising from 9 per cent to 17 per cent today.
Among the biggest developers of build-to-rent properties are Greystar, the American group, and Quintain, the British developer, which is building 5,000 build-to-rent homes near Wembley stadium.
A growing number of such homes are also being built outside London. A total of 24,010 homes are under construction outside of the capital, and 19,304 in London. Manchester contains the largest number of these flats outside London, according to BPF.
“People are finding that owning a house ties you down,” Ryan Prince, head of Realstar, which builds rental blocks under the Uncle brand, said.
Johnny Caddick, managing director at Moda Living, which has projects in Birmingham, Brighton, Edinburgh, Glasgow, Liverpool and Leeds, said: “Most recent graduates spent their time at uni living in modern student accommodation and so have a certain level of expectation when it comes to service, management and amenity, which is currently lacking in the traditional private rented sector.”
Critics say that schemes are disproportionately geared towards affluent young professionals and charge rents far in excess of what most people can afford. A recent analysis by JLL of 25 rental schemes found they were an average of 11 per cent more expensive than their respective local rental markets.
Daniel Bentley, of the think tank Civitas, said: “It tends to be targeted at richer young renters — the type of people who 20 years ago would have been buying by this point — and that’s the biggest problem.”
Source The Times 17th January 2019