It’s been five years since Get Living launched London’s first recognised Build to Rent (BTR) scheme: a 1,400-home development in East Village, Stratford. At that time, conversations about rent controls, reputational risk and smaller returns were scaring off investors and limiting growth of the sector.
Despite a slow start initially characterised by Permitted Development conversions of tired office blocks, Build to Rent is now recognised as a viable long-term investment option (RICS, 2018). In Q1 2019, BTR comprised 21% of all residential starts (Molior 2019) and was scaling at a rate comparable to the student housing boom of the noughties – completed units rose from 5,000 to 30,000 in three years – a growth of 600% (Savills, 2019).
In response, Future of London’s Alumni Network convened a roundtable to discuss the current landscape and future of Build to Rent. Could it become the tenure of choice for Londoners?
The roundtable began with brief provocations from three speakers. First, Director at Assael Architecture Félicie Krikler presented an overview of design techniques learnt through their Union Wharf scheme in Greenwich. A riverside 23-storey development of 249 homes built using modular construction, the design prioritises access and inclusivity. The building maintains public access to the Thames with 72% of the ground-floor footprint comprising public realm.
Union Wharf is marketed as ‘intergenerational living’, intended to appeal to wider demographics including families and older people. This approach translates to smaller private units that are offset by larger communal areas and shared amenities, designed to encourage resident interaction and community-building. Wider corridors, lifts and entrances are suitable for prams and wheelchairs, with secure storage for bicycles, motorbikes and mobility scooters.
Affordable and intermediate leases are ‘pepper-potted’ across the development to promote social integration and ensure that access to amenities and standard of service are equal. Design follows hotel-like typology: front of house, back of house, and communal and private rooms, with components like CHP plants and refuse chutes built to withstand multiple occupant usage.
James Pargeter, Senior Director at Greystar Europe, provided a developer-operator perspective. Greystar’s Greenford Quay scheme in LB Ealing is a 2,118-home mixed-use development which includes four high-density BTR blocks that have been designed to address the widening affordability gap between private and social rents.
Greystar brings experience of building homes at scale for the US multifamily market and considers the quality of the building and the level of customer service as keys to success. As with Union Wharf, the development is tenure blind with affordable units – Discounted Market Rent and London Living Rent – benefitting from the same standards as market units.
Importantly, there are no ‘red lines’ separating affordable and market-rate units from one another. Their proportion over the development is protected but residents have the freedom to change their lease type or move to a larger/smaller unit based on their circumstances.
As covered in Future of London’s Making the Most of Build to Rent project, the GLA requires BTR schemes to be held under a minimum 15-year covenant and affordable units protected in perpetuity (GLA New Draft London Plan, 2019).
Although it doesn’t aspire to replace private sale as the tenure of choice, BTR does provide greater flexibility and aims to reduce barriers to entry into the housing market for many people. One proposal, according to James, is to remove tenancy deposits, a scheme that Tipi has already started in Wembley Park. BTR spreads the risk of damage to the building and contents over a much larger number of residents than traditional, single-unit private rented homes. The insurance deposits provide isn’t necessary at the scale of BTR developments.
Reducing set up costs can make BTR a viable option for a larger number of people, including families and older people who may find renting out of reach otherwise.
Build to Rent can also help the sales cycle: blocks can fill up quickly, reducing the likelihood of housing voids and providing a critical mass to support shops, schools and infrastructure that would otherwise take longer to appear – and building a sense of community that can attract private buyers. This is good news for developers and investors.
Darren Parker, Director of Project Management & Development at L&Q rounded off presentations by sharing his experience of the US multifamily market – a significant component of the US’s housing market and a major influence on the UK’s BTR. L&Q use BTR to cross-subsidise their affordable housing and contribute to a diverse tenure mix for their residents.
A multifamily development is built specifically for the rental market, held as a long-term asset and managed professionally. Its hook is city-centre living for those who can’t afford to buy there.
At the premium end, the offer includes a concierge, on-site property manager, laundry facilities, digitised entry systems, access to additional storage and (on occasion) even a pet wash. It embraces technology to reduce costs while providing efficient customer service to residents.
US developers achieve high-quality services by offering micro-living (small private units with flexible layout like pull-out beds) or co-living (a private bedroom and bathroom, but shared kitchen and living space) models. This won’t appeal to all, but the greater range of options gives residents the power to vote with their feet and challenges developer-operators to deliver better value.
Compared to the rest of the private rented sector, the UK’s growing BTR market represents a stable, long-term option for tenants, developers, operators and investors. However, it’s too early to say if Londoners would elect to rent long-term over home ownership.
BTR will take time to mature in the UK. The sector is currently geared towards professional young couples and sharers and lacks specialists who might cater to more niche areas of the market. BTR’s ability to appeal to a broader market while keeping operational and resident set-up costs down will be critical to its future success.
This event was part of a series of Future of London Alumni Network events, provided exclusively for our Alumni. Find out more about the network and upcoming events.