RESIDENTIALlettings
Philip Evans believes the shortfall will have to be made up by
new forms of development. He says there is a clear need “for private companies to cooperate with the Homes and Communities Agency to develop mixed-use blocks at an economic scale, a fusion between private capital and the public sector.” Mixed use will mean that agents have to understand social housing even if they don’t sell or manage it. A single block could have six different types of tenure from rental, rent to homebuy, private rented, private owned or shared ownership, all with different maintenance and finance arrangements. That makes the task of property management much more complex. These changes will mark the end of a world in which owner
occupation and private rentals are sharply distinguished from ‘council housing’ and the affordable sector, as they have been in the past. Instead, as the Knight Frank report suggests, we could see “the general drift of policy towards flexible tenure and a blurring of the boundaries between private, intermediate and affordable housing is the right decision to make.” Again, it appears that affordable housing will move into the mainstream.
end of the day it’s about the industry being able to establish viable models,” he says, and there will be opportunities for the right agents to establish a strong niche in the area. Damon Thomas is Managing Director of FastTrak, a company
that matches tenants with an entitlement to housing benefit with private sector landlords. He says that while the social rental sector has generally been bypassed by the buy-to-let investor, landlords who reject it are missing a trick. “The issue is, historically there’s a stereotype of the housing
benefit, low income tenant,” he says, “and dealing with local authority administration can be testing; those two things combined are enough to scare most people off.” But this can be a highly profitable sector for the private landlord if tenants are properly vetted and the paperwork professionally managed. He believes that particularly in the south-east, social housing is no longer a niche product, it has gone mainstream, and so, “What we’ve produced is a mainstream solution to deal with this end of the market.” Because social tenants stay for long periods. “Sixty per cent of
them stay in the same property for more than five years, 40 per cent for more than ten years, and 20 per cent for 20 years plus”; void periods are minimal, compared with private tenancies which are more transient. And at the same time, yields are good. “If you’re buying low-end property,” Thomas says, “you’ll be getting better than bottom-of-the-market rent.”
Affordable housing – not necessarily a second rate option
If you’re buying low-end property you’ll be getting better than bottom of the
market rent, yields are good.’ DAMON THOMAS FASTTRAK
The longer tenures should attract institutional investors, too.
Unlike other European markets, where leases are generally set for three to five years, the UK’s six month tenancies make private rental an unattractive investment for institutions. Voids are too high, and consequently, yields are too low. Three months’ void in five years may not sound like much, but it can drastically dilute the yield. Social tenants’ longer tenure has a strong appeal to the institutional investor. That is important. Smaller private landlords currently dominate
the rental market. In the buy-to-let boom years most investors were individuals investing their savings, and half of them have only a single rental property. “So it’s become a cottage industry,” says Damon Thomas, “which is not well placed to supply the huge increase in demand.” He points out that this is a fast growing sector. The private
rented market hit a low of nine per cent as owner-occupancy and housing associations became the main modes of tenure, but it has now increased to 14 per cent, as first time buyers are priced out of ownership, and is set to rise further. “Private renting has become almost a second rate option compared to the rest of Europe,” he says, “but that could be set to change.” There are currently over 5 million people on social housing waiting lists, and a number of landlords have already built significant businesses purely by working in the social domain. The imbalance between supply and demand is reflected not just
in the type of landlord, but in the type of property available. Many amateur buy-to-let landlords bought the kind of property they would have liked to live in themselves, at the top of the market, and this is not available for social housing. So although FastTrak can help enable private landlords to access the social sector, it’s not going to be able to bring about a revolution in social housing.
PROPERTYdrum JULY 2011 59
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