Renting in the private sector can be a bit of a gamble. The price of your flat may bear more relation to how much money the landlord thinks he or she can squeeze out of you than its size, condition or location; you can be kicked out at the end of the contract for someone who’ll pay more and as for getting things fixed properly and quickly, quite often you can forget it. Which is why the idea of Build to Rent is quite appealing.
As a tenant, living in a Build to Rent property means you’re in a development that’s been specifically designed for renters. In some developments, that means an on-site maintenance team, a concierge who’ll take in the mail and communal areas where you can hang out with your neighbours — or have a large group of friends over rather than the four or five who’ll fit into your kitchen. It also means tenancies of up to three years, allowing you to put down roots in a community instead of expecting to be moved on every 12 months. There are no agency fees because you rent direct from the landlord, no extra service charges and annual rent increases agreed in advance — say, pegged to inflation.
Build to Rent is an idea that’s being supported by the government as a way to provide new, decent quality, private rented housing. Instead of a large development being built, then sold off individually to owner-occupiers or to various people for buy-to-let, the developer keeps hold of all the properties to rent out itself. Instead of recouping the construction outlay through initial sales, the rent provides a steady income. It’s a popular proposition with institutional investors like pension funds, insurers and charities — organisations more interested in a regular return than a one-off cash bonanza. “It’s a bit like being a hotel owner rather than a house builder,” is the analogy offered by Andrew Teacher, who represents Essential Living, which is building blocks in Greenwich, Archway, Swiss Cottage, Croydon and the Helix in Canary Wharf.
To help finance building, the government has a £1bn fund to invest in Build to Rent schemes (the money should be recovered by developers later selling or refinancing) though it’s been slow coming to fruition. Although the fund was announced in autumn 2012, only £300m has so far been allocated, including projects in Greenwich and Notting Hill. For the rest of the cash, 36 bids have been shortlisted nationally, 22 of which are proposing a total of around 6,000 new homes in London (not all of these will get built). Compared to the number of new homes we’re said to need — around 800,000 by 2021 — this is clearly a drop in the ocean, but it’s early days for this housing model.
While this is all well and good, what we really want to know is: will these new flats be affordable? Many of the developments are yet to break ground, but Essential Living says their properties will be ‘average market rent’ while Get Living London, which owns the East Village in the Olympic Park, markets 1 bed flats from £310pw and 2 bed flats from £370pw. Looking at Zoopla that it is about average for Stratford at the moment, but when the average household in London earns £2,600 a month after tax that’s still beyond the reach of many. Even the “affordable rent” homes run by a housing association aren’t cheap: Alex Hilton, director of Generation Rent, lives in such an “affordable” home in the East Village, priced at 80% of the standard rent, and says the income threshold needed to qualify for a 2 bed was £44k pa.
Obviously then, Build to Rent isn’t a solution to the housing crisis but it could herald a new way of living for the ‘young professional’ demographic. The two developers we spoke to emphasised that their business model hinges on keeping tenants happy so they stay for longer; longer tenancies mean fewer empty properties and less of the full-on redecoration needed before someone new moves in. “It’s more of a consumer business than a property business,”explains Derek Gorman, CEO of Get Living London, adding that his staff’s bonuses are based on customer feedback rather than volume of transactions. Alex Hilton says that, although his tenancy agreement contains bans on things like holding political meetings in his flat, it’s new to have a landlord that’s “not trying to screw me”.
We’ve all got nightmare landlord stories (share them in the comments) and we think that the principle of decent, professional landlords is something to be encouraged. It’s also interesting that the Build to Rent model matches very closely to the rental sector reforms proposed recently by the Labour party (with the exception of rent caps) — something that the National Landlords Association called “poorly thought through and completely unworkable”. Yet here are institutional landlords doing it voluntarily because they think it makes sound business sense. With any luck, we could be on the verge of a breakthrough in standards for renters.