The popularity of build-to-rent schemes is skyrocketing in popularity across the UK, with another £4.5 billion worth of deals anticipated in 2022. The initiative has been hailed as a potential solution to the housing crisis, a challenge to landlords to innovate their offerings and the answer to the needs of the rental market.
But the sector faces its own challenges as it grows exponentially, including how the expected level of service will be delivered at scale and how the sector fits into a healthy market of mixed-use housing.
Supply and demand of rentals
The British Property Federation states there are now 212,177 build-to-rent properties in the UK, including those completed, in production and in planning. This is anticipated to grow to between 500,000 and one million in the next five years.
The benefit of these schemes in the face of a continued lack of supply to meet demand is that, with every step of the process managed by one company, they can enter the market faster than traditional buy-to-let properties, bypassing the traditional exchanging of hands.
Long-term housing security
Evidence suggests that 35 percent of build-to-rent tenants hold a three-year lease, which is another reason many believe that build-to-rent offers a more efficient, long-term option for those in the private rented sector.
With more renters remaining in the sector for longer due to rising house prices, build-to-rent grants more home security for those who are looking to remain where they are long-term. This option is also attracting young families, allowing the sector to expand from its original target demographic of just young professionals.
Amenities and technology
In addition, the inclusion of premium amenities like concierge, gyms, coffee shops and other communal spaces make these attractive, community-based living environments, something which has historically been missing from city life in particular.
Technology innovations are also a major draw, with build-to-rent initiatives able to install smart devices and make use of the Internet of Things (IoT). The young professionals targeted by build-to-rent are digital natives and are increasingly expecting this integration in their homes.
Given that build-to-rent units are similar in affordability to other properties in the private rented sector, this means that private renters are getting more for their money from build-to-rent, which in turn is pushing landlords to compete, potentially bringing up the quality of living for all in the private rented sector.
While the promise of an initiative that will ease the housing crisis will be much welcomed by property professionals and the general public alike, build-to-rent will need to reckon with its ability to scale as rapidly as is expected.
To properly meet renter demand and the targets set out for the industry, build-to-rent developers will face challenges in finding the space, securing the planning and covering construction costs before then needing to source staff to manage these properties and meet the expectations of their customers.
Inflation, ongoing supply chain issues and other challenges mean that construction costs are rising rapidly. Construction output is now above pre-pandemic levels, but sales value is rapidly outpacing it. In the first quarter of 2022, value went up 17.7 percent while the volume only increased by 1.5 percent.
Additionally, renters will come to expect high levels of service, including security, concierge managers and facilities management. Particularly in terms of maintenance, ensuring the service is kept at a high standard will require a focus on technology to manage expansive portfolios.
A management platform which allows facilities managers, surveyors and others who are delivering services to log their work would contribute to maximising efficiency and maintaining standards across multiple buildings.
The wider housing ecosystem
In terms of securing space and planning, there are already some councils in the UK challenging the expanse of build-to-rent units, suggesting that they risk creating an imbalanced housing ecosystem.
In Dublin, build-to-rent schemes have risen from 15 percent of residential schemes applied for or granted in 2018 to almost 82 percent in 2020. The council there feel that large schemes with only one use don’t contribute to the development of long-term, viable communities and reduce the diversity of living environments.
With house prices constantly climbing to record highs, the argument for build-to-rent is that demand is constantly increasing from those who can’t afford to own property which could be a long-term issue in the housing market overall.
However, build-to-rent initiatives will have to grapple with the fact that, even in cities densely populated by their target markets of young professionals and young families, homeownership will be an aspiration and land use shouldn’t prevent this from being achievable without moving out of the city.
The community aspect is one of the strengths of build-to-rent but the development of communities within each building shouldn’t come at the cost of developing wider communities throughout British cities through mixed-use housing.
The future of the sector
At Property Inspect, we work with building managers and other property professionals involved in build-to-rent schemes around the country. The way these schemes have innovated the offering for those in the private rented sector, advanced the adaption of new technologies in property management and provided efficient housing to an already strapped market proves there is a great deal of use to be drawn from their continued expansion.
However, developers and management companies will need to carefully plan how they will scale their initiatives in order to facilitate the level of expected growth and maintain the high quality of living standards their customers are expecting. This will include adopting technologies that grant oversight for projects at every step of the way and considering how build-to-rent can sustainably fit into the wider housing market.
For a list of the sources used in this article, please contact the editor.
Warrick Swift is commercial director of property inspection and operations software platform Property Inspect. Property Inspect is a property inspections and operations software platform that works with over 100,000 inspectors, property owners and other professionals to optimise and improve the property management process
For more information please see: https://propertyinspect.com/uk