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Can professional landlords make renting more attractive in the UK?

As blocks of purpose-built rental properties spring up across the UK, they're helping to meet demand for high quality homes.

February 12, 2019

With fewer people buying homes in the UK than ever before, the need for good quality rental accommodation is rising fast.

Blocks of purpose-built rental homes are becoming a familiar sight in city centres to cater for a new generation of renters – often young professionals - who want modern homes in accessible locations.

The British Property Federation reported recently that 140,000 build-to-rent homes are either complete, under construction or planned across the UK – with more than half in London. And now developers are looking beyond the big city centres to smaller urban areas to meet growing demand from local workers.

“Build-to-rent development is still intense in the most densely-populated areas,” says Nick Whitten, residential research director at JLL. “But there’s no reason why the success of some of the schemes up-and-running in major cities cannot now be replicated elsewhere.”

Developments are no longer limited to multi-floor blocks. Sigma Capital Group’s Baytree Lane development in Middleton, for example, includes larger, suburban family homes. The 110-home site, on the edge of Manchester, is a mix of two, three and four-bedroom rental homes.

In Glasgow, a new development from Link Group and Park Lane Larkfield SPV on a former bus depot in will provide a mixture of family homes and 1-2 bedroom apartments at mid-market rent. Big names such as Taylor Wimpey and Bovis have also been involved in the burgeoning sector.

Creating family-friendly homes

Families are now increasingly occupying property in the private rented sector, with nearly a million more households with dependent children living in private rented property than in 2007.

Build-to-rent has a role to play in providing more good quality family homes – and offering more security through longer-term tenancies - which are both big issues facing the families with children who rent their homes privately in the current market.

Families have different priorities to 20-somethings, who want a city centre lifestyle, with schools, childcare facilities and recreational activities at the top of their list. This offers an incentive for developers to build in more suburban locations, especially in proximity to sought-after schools, Whitten notes.

“The school catchment area can be a game-changer,” he says. “And when a family puts their children into a local school, that’s pretty much a sign that they’re committed to the home for the medium to long-term.

“Developers offering support to tenants in finding a school for their children is not unheard of and an interesting tactic.”

Yet the average sized UK rental property still falls far short of the space required for family living. While only 5 percent of private-rented sector homes were last year considered overcrowded, according to last year’s English Housing Survey, the most common useable floor area size was between 50 and 69 square meters.

“How much space we need is changing,” says Whitten. “But UK rental homes that are suitable for families are less common.”

Service is the kingmaker

The private rental market is starting to adapt to a new generation of renters. “Development companies are responding,” says Whitten.

With large UK housebuilders typically having focused on the delivery of homes for sale, Whitten says there is now a move towards providing rental homes.

“That’s a real change for housebuilder’s business models,” he says. “There’s a big incentive for them to do so as delivering a variety of homes – both for sale and for rent – brings rental income onto the balance sheet, which diversifies revenue. But it also can help change the rental market for the better and make it a more attractive option for tenants.”

Competition among developers of new rented schemes has risen and, according to the British Property Federation, the number of build-to-rent properties has soared in recent years, up from less than one percent of all new homes under construction in 2012 to nearly nine percent in 2017. New schemes are offering more amenities such as gyms and communal areas with WiFi to stand out from the crowd, especially in areas where there’s high demand for rental properties. The key, says Whitten, is service.

“It’s the kingmaker for the built-to-rent sector,” he says. “By-and-large, tenants want and expect a minimum level of service when renting from professional landlords rather than from the private, buy-to-let market.

“Being in a professionally-managed home on a secure lease is an altogether different proposition to one owned by a slow-to-respond landlord who could sell up at any moment.”

With more homes expected to be built for families, Whitten says the wider UK housing market is set to become more diverse in the coming years.

“What the UK craves is a greater variance of tenure options – and build-to-rent strategies have a big part to play in that.”