‘Investor confidence in BTR falling’ says new lobbying group
Built to Rent Alliance says Government policy, economic problems, developments jammed in planning and red tape are bogging down sector's growth
The multi-billion-pound build-to-rent (BTR) industry is having a rare wobble as it reveals that both Government policy, economic and regulatory issues are making it increasingly challenging to progress new schemes and ‘risk undermining investor confidence’.
So says a new lobbying group called the Built to Rent Alliance lead by the British Property Federation and Association for Rental Living, which is being led y Sheffield MP and former housing committee Clive Betts.
It quotes new Savills research that reveals that new BTR schemes in planning have dropped 18% since the beginning of the year, or just 5,000 home. Although London has seen a rise in BTR homes in planning, the rest of country has not.
The alliance’s launch commentary says: “This provides further evidence that recent planning reforms have so far had little impact when offset against significant viability challenges, with only high value land areas like London being able to absorb some of the additional costs and delays.”
The group is also seeking to bring other as-yet unnamed organisation into its fold with an “interest in the continuing success of BTR as a highly investable asset class”.
Other aims of the group are to persuade the public and Ministers that BTR is one of the keys to building more homes.
‘Consumer experience’
Its initial focus will be two-fold: advocating for the policy and regulatory changes needed to improve investor confidence; tackle current viability and delivery challenges; and improve the ‘consumer experience’ and perception of BTR both within the wider private rented sector, as a housing tenure of first choice.
It says this will be achieved through the adoption of a new Consumer Code.
Melanie Leech (main image, left), Chief Executive, British Property Federation says that while BTR has been a success to date, policy and economic challenges are now holding it back.
“This is now the sixth consecutive quarter where completions have outpaced starts and the number of schemes in planning has fallen,” she says.
“It is now clear that planning reform is not enough, and we need to see real action to address viability challenges and allow the sector to reach its full potential.
Brendan Geraghty (main image, right), Chief Executive, The Association of Rental Living, adds: “Against a backdrop of increased delivery challenges the need to speak with one sector voice has never been more paramount.”
Interesting, as people clamouring for more anti-landlord legislation and licensing claim that their aim is to “professionalise” the sector; they point to BTR as some kind of panacea of high quality build, professional property management and, in time as competition increases, more affordable rents. But most “amateur” landlords value their own time at £0 when finding tenants, conducting viewings, sorting out tenants’ disputes, finding finance, repairs, jumping through innumerable administrative burdens, completing their tax returns, and so on. They hope only to pay the mortgage from their rents, and have something left over to cover maintenance costs, insurance, licensing fees etc. They also generally buy second-hand properties, where the land, build and carbon costs are already largely built in.
Whereas for the BTR brigades, they face modern high land, planning and construction costs, and they have to pay their own staff, and all the professional hangers-on who take their cut from the seemingly never-ending construction process, and all the property managers, letting agents and maintenance people once the rental units are up and running. They may be able to get cheaper finance, but their operating costs are actually pretty high, hence why they seek out only the choicest tenants and the plum locations for their target high-earning market under the age of 35-40. And it’s why BTR rents and annual fees are often really high compared to BTL ones. They want the international student market, not UK citizens Rob and Lexi who are on student loans and the first in their family ever to go to university.
Maybe there’s hope for the small BTL landlord yet? Or maybe not, what with imminent Rental Reform Act and a requirement for EPC Grade C by 2028, never mind all the anti-landlord zealots in local councils as well . . .