Build to Rent Market set to grow further
The UK’s private rented sector has seen significant growth since the 2000’s and now makes up around 20% of all UK households*.
This is partially due to the popularity of the up-and-coming Build to Rent (BTR) market. Whilst to date only around 40,180 units (as of Q4 2019) have been completed, there are an additional 35,415 under construction and an additional 75,475 in planning**.
These figures show that the BTR sector has seen a 15% growth in size since Q4 2018. Whilst previously much of the BTR market was focussed on London, the majority of the growth in the past year stems from key regional cities and several developments have recently begun to be constructed in smaller cities***.
This growth is down to several economic and socio-demographic factors, but has also been bolstered by the decision to define BTR in the National Planning Policy Framework (NPPF) to simplify how it is treated. The Ministry of Housing, Communities & Local Government has also stated that local authorities should take BTR into account during their local housing need assessment.
"As the NPPF sets out, Build to Rent provides affordable tenure options to developers including primarily ‘affordable private rent’."
Affordable private rent provides that, similarly to all affordable housing for rent, the rent is set at a minimum discount of 20% on local market rents, but unlike social housing, there is no requirement for the landlord to be a registered provider.
BTR’s popularity is also due to the flexibility private rent units offer. As these units should be under common management with market units, distributed throughout, and physically indistinguishable from market units, provided a set proportion (according to the National Planning Policy Guidance 20% is generally a suitable benchmark) are affordable rent, units can be readily alternated.
Similarly the proportion of affordable units is also flexible with trade-offs between the percentage of discounted units and the discounts offered on their rent being possible. The above is of course subject to the agreement of the relevant local authority and they may wish to set different proportions linked to their local housing need assessment and local plan.
The details regarding any BTR scheme requiring affordable housing should be set out in a section 106 agreement with the local council.
* Seven Capital
** British Property Federation
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This article was prepared by Stefan Dingelstad.