Why the Government Should Look Abroad for Build-to-Rent Inspiration

29.09.16

Housing minister Gavin Barwell set the cat amongst the pigeons at last week’s RESI Conference with the most pro-rental speech from a government housing minister in recent memory.

The government, he highlighted, must continue to champion home ownership but not “at the exclusion of all else”. He also honed in on the mated “tension” between advocating home ownership and the need to build more homes. Supply is king, he said, but building quality homes for rent clearly has to be an integral part of the supply-demand mix.

It’s a seismic shift from David Cameron’s rousing sound bite at last year’s Conservative Party conference that we need to turn “generation rent into generation buy”, and the first indication of a step change in government housing policy since Theresa May took the helm in July.

There’s no avoiding the shake-up between the generations in terms of homeownership in the UK over the last decade. That said, the national obsession with home ownership shows no signs of easing up just yet. Yet ever-increasing house prices and limited supply are set to keep this out of reach for many.

Barwell’s aim to encourage investment into build-to-rent (BTR) schemes also shows a willingness to address new market dynamics helping to give the ‘rental route’ parity of esteem with ownership – especially after the minister called for a “significant boost- to ensure more choice and quality for people living in rented accommodation.”

BTR could certainly go some way to fast tracking market supply; the time frame to rent takes a matter of days over the often protracted buy-sell process. If the government is willing to support both rental and sale options, that has to be good for the UK as a whole.

One thing we can and should do is look to our European counterparts, who seem to be more au fait with the world of long-term renting as a serious alternative to home ownership. Around 36% of people rent their property in France and laws there are also heavily on the side of the renter. Renters even get first choice to buy if their owner decides to take their property to market. Germany and the Netherlands have embraced the American initiative of ‘multifamily’, which is essentially the build-to-rent scheme here in the UK. Multifamily building initiatives in the States encourage long-lease tenants, which leads to a greater sense of community and improved standards of property maintenance from tenants and landlords.

There is also a tendency for the design of these buildings to be more creative and include lifestyle extras such as gyms, office hubs and pools, all with the objective of enticing tenants who want to create a home, not simply have a roof over their head. Multifamily investments are proving to be hugely profitable and this sector is offering some of the best returns in the current US real estate market.

A further way in which the UK government could turn pro-rental rhetoric into action would be to ease up on Cameron’s flagship starter home policy that promised new homes for first-time buyers at a 20% discount. Pushing for too many starter homes runs the risk of making such schemes unviable, not to mention quashing much needed affordable rent provision.

The government has a manifesto commitment to build 200,000 starter homes by 2020 - so championing buy-to-rent would require a moving of the goal posts – akin to London mayor Sadiq Khan’s furious back peddling from his mission to deliver 50% affordable housing on new development in the capital.

What matters above all else however is the commitment to boosting overall housing supply. Ministers will for ever be wary of talking down home ownership – and for good reason given 85% of the population want to own their own home. But if Barwell truly means what he says about nurturing an enterprising rental sector – once thing he can be sure of is a rally cry of support from the industry.

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