The proposed Renters’ Reform Bill is intended to ‘professionalise’ the private rented sector (PRS) and, according to ministers, ‘redress the balance between landlords and 4.4 million private rented tenants’.

It was introduced in the 2022 Queen’s Speech, followed by a white paper A Fairer Rented Private Sector and a consultation A Decent Homes Standard in the private rented sector.

The Bill is likely to legislate for the creation of a register of landlords, new powers to enable local authorities to enforce and protect renters’ rights, the creation of an ombudsman for the PRS and the abolition of Section 21 ‘no fault’ evictions.

At LRG we work with a wide range of landlords – from individual ‘amateur landlords’ who own a single investment property, to institutional investors, who operate larger-scale investments across many geographic locations within the UK and including the growing Build to Rent (BTR) sector.

So we see the pressures of changing market conditions and imminent legislation across the sector. And while we are strongly in favour of high standards in health and safety, security of tenancies and fair rents, we see the major problem facing the sector as being one of supply and demand.

The changing private rented sector

According to the English Housing Survey 2022, the number of households renting privately has increased by 93% in the last 15 years, while the number of owner-occupied households has grown by just 3%. The increased number renting is in response to the preference among younger generations for more flexibility.

The same survey shows a new demographic emerging: the numbers of renting households with dependent children has doubled since 2003/4, making up 30% of the sector and the number of ‘comfortable renters’ is expanding too, now representing 44%.

The lack of supply to meet increased demand has driven up prices. Rental unaffordability is now at its highest level for over a decade: equating to 35% of the average income.

At the same time, the stock of homes for rent is down 38% on the five-year average, mostly due to landlords withdrawing from the market for a complex set of reasons including a raft of new regulations and concerns about further limitations to come, including in likely EPC requirements. This includes not only in the Renters’ Reform Bill but in the likely requirement for new tenancies.

The growth of Build to Rent

Meeting demand and preventing further rent escalations can only be met by increasing supply. Fortunately, there is a substantial increase in ‘professional’ institutional investment in the BTR market. Surveyed in 2022, 70% global institutional investors stated that they anticipated being active in suburban BTR within the next five years: a substantial increase from the 42% currently active. Furthermore, the British Property Federation (BPF) states that BTR units in the UK are due to increase from 76,800 to over 380,000.

And BTR is no longer limited geographically. Regional growth has outpaced that of London: the BPF’s Build to Rent Q3 2022 statistics show regional BTR growing at 20%, compared to 7% in the Capital.

And so the BTR suburban community has evolved. Providing desirable homes for families in fully-functioning serviced communities, this new product – which offers growing families considerable flexibility and a wide range of options for a stress-free lifestyle – is undoubtedly the division of the property sector in which we will see the greatest growth over the next decade.

A BTR suburban community allows an individual or family to occupy a house which can be made their own – but could be swapped for another as the family’s needs change, with each move being free from the complications of buying and selling.

Typically, a BTR suburban community offers 24/7 security, all-inclusive bills and a range of additional services such as cleaning, gardening and even dog-walking. Some are powered by a district heating system, using clean, renewable energy and removing the need for a boiler – or even an energy bill.  Future-proofed, each home will provide an EV charging point. The range of services typically available include a cinema, a BBQ area, a residents’ lounge, or perhaps a dining or party suite.

Our recent white paper BTR suburban communities: the next stage in the evolution of Build to Rent found that suburban BTR is key to meeting growing demand as well as meeting the standards that the Government has set out: BTR suburban communities offer fair leases and rents, along with excellent service and property maintenance.

The future for the PRS

The speed by which BTR is evolving – also evidenced by our increasing work for this sector – suggests that the drastic shortage of rental properties will lessen during 2023.

But to meet unprecedented demand, we need combination of privately owned homes supplied by responsible individual landlords, complemented by increased institutionally-owned BTR units. There is space for both in this growing market.

Andy Jones is Group Director, Corporate & Build to Rent for Leaders Romans Group (LRG).