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Is 'Build to Rent' an option?The UK's changing property landscape is the subject for this post from our Senior Property Manager, Will Parrick who examines the issue of 'Build to Rent' - could this be the answer for 'Generation Rent'?
For some time now we have heard tell of how people are struggling to get on the property ladder and how those of us in our thirties or younger are faced with the possibility of never owning our own home. Terms such as ‘generation rent’ have been bandied about and I have read in The Guardian that barley half of all families in the UK currently own their own home. Obviously this is an important change in the landscape of UK Property, and change brings with it evolution.
One such stage of evolution that is occurring before our very eyes is the continuing expansion of the “Build to Rent” sector. Recently I attended the annual seminar of the Institute of Residential Property Managers (IRPM) where as part of the afternoon’s attractions I witnessed a panel discussion on this subject. This prompted a little research on my part and it was not long before it became evident we are potentially seeing the beginning of something significant. ‘Inside Housing’ magazine tells us that currently in the UK 70,000 build-to-rent units have been completed or are in the pipeline, either in construction already or in the planning phase. They go on to state that “…after many years of gestation, the market is now beginning to mature and really innovate.”
So what is Build to Rent? Well, quite simply it is what it says on the tin: Developers build blocks of flats and retain ownership of the whole site, offering the individual units for rent rather than sale and thereby skipping several traditional steps such as selling the flats to buy-to-let landlords who then find their own rented tenants. The developer forgoes the profit of selling the flats for longer term gains of rental income. This is the next step in accepting and capitalising on so-called Generation Rent.
The process requires a fundamentally different approach. Landlords are looking to let the flats on longer tenancies and are focused on community building, trying to do away with the transient rented population that we have typically seen in high buy-to-let blocks that we manage. The blocks are built with increased amenity space, including “partying rooms” available for tenants to book, and community events to encourage relationship building between neighbours. The length of the tenancies can be as long as five years in some examples. The actual build of the block is different as well – whereas in the past developers may have cladded a block to make it more attractive to buyers for example, now the focus is on long-term durability. As the Landlord aims to retain ownership of the building they take more consideration of low-cost maintenance.
Although currently the sector is focused in London and on high-end developments, if this works I suspect that we will see it rolled out more frequently in other parts of the country. In fact, in the recent past I had a conversation with a construction manager whose firm was working on one such potential site in Colchester. This will require a new breed of hybrid property manager: someone occupying a space between a letting agent and a block management agent. Something more akin to a role I had in a past life when I worked as a Community Housing Office in social housing. My job saw me managing every tenancy within a block, including rent accounts and maintenance of the individual properties as well as the block itself. No role I have come across in the private sector has been so involved: until now that is.
It is certainly exciting times and in many ways is a simpler model for the future. As well as saving on individual agents’ costs, it allows a more holistic view to property management as an agency becomes responsible for a whole building of multiple units. I believe this is an exciting opportunity for Boydens as well. Since we are the only ARMA registered Managing Agent in the Colchester area who are part of a Sales & Lets company we already have a lot of the skills required to manage these developments in one place. Who knows? As this sector grows this could see the need for a department all of its own. But before we get to that stage we are perfectly set up to take on management of whole buildings simply by ensuring our lettings and block management teams work closely together. This is something we already see in blocks my team manage that have a high number of flats rented through Boydens’ lettings team. I spoke previously of evolution – our processes are evolving too and this is one step along the way.
Personally I would not be surprised if Build to Rent goes one of two ways: it will either be a flash in the pan or a bright future – but one thing is for sure, either way it is likely to go off with a bang!
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