Friday, 13 April 2018

Build-to-rent: how developers are profiting from Generation Rent

More than £2bn was invested in purpose-built rental flats last year – but this is no way to solve the UK housing crisis
A flat in a large build-to-rent development in Wembley Park, London. Photograph: Sarah Lee for the Guardian

The number of UK residents renting privately has doubled over the

past decade, with some 20% of households (30% in London)
now in private rented accommodation. Into this growing gap
between social housing and home ownership the build-to-rent
model has given property developers a new way to profit from
Generation Rent.
In 2017, the burgeoning build-to-rent market, comprising purpose-built
blocks of rental homes, attracted £2.4bn in investment and is forecast
to grow by a further 180% over the next six years.
The attraction for large pension and insurance funds, such as Legal &
General, is clear. They have the capital to develop large blocks of flats,
which are let out and managed long term by a single company rather
 than being sold to individual landlords. This provides institutional
investors with a fairly stable, long-term income stream.
Build-to-rent company Fizzy Living, for example, boasts of providing a 
five-star service and promises to complement the “hectic lifestyles of
work-hard, play-hard professionals”.Tenants are typically offered longer
tenancies than for standard rental accommodation, with contracts of up
to three years or more, and other amenities, such as gyms, communal lounges
and cinema rooms.And for tenants, there’s a promise of a more streamlined
experience, with bespoke, high-quality management rather than an unreliable,
individual private landlord.
Because build-to-rent has the potential to increase the supply of homes
and improve conditions for renters, many in the property world, such as
investment firm Venn Partners and consultancy Lichfields, have touted it
as a way to solve the UK housing crisis. It has also received considerable
government support, including a £1bn build-to-rent fund.
But the benefits of build-to-rent come at a premium. One study found
that London’s new private rental “communities” were, on average, 11%
more expensive than rental properties nearby. In the Get Living development
at Elephant and Castle in south London, renting a one-bedroom flat costs 
£1,841 a month. As the company requires a household income of 30 times
 the rent, you’d need to earn almost £60,000 a year to qualify as a tenant. 
As the government latches on to the promise of build-to-rent in accelerating
housing supply, it seems likely that these schemes will be subject to
 less stringent requirements to provide affordable housing.
So, despite suggestions that build-to-rent will empower Generation Rent,
these high-spec products only really seem to be an answer for affluent young
Meanwhile, a Shelter report in January found that half of families in
UK social housing are being ignored or refused help when they report
poor or unsafe conditions. Driven by the market for the market,
build-to-rent is just another so-called solution that continues to
allocate housing on the basis of wealth rather than social need.

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