insights site lines
With a rapidly-growing population and people living longer, the pressure on housing in Britain has become immense, with demand far outstripping supply. Overall, the current market value of
Geraghy Taylor Architects’ Brendan Geraghty
the rental market is £1.29tn – up 55 per cent over the past five years. But this country needs to build 250,000 homes a year to satisfy need, with London alone under former Mayor Boris Johnson setting a target of building
42,000 homes each year. This is a very tall order – witnessed by the fact that two
years ago the number of new units delivered stood at 112,370. To meet the housing shortfall, deepened by the ever-growing cost of buying a first home, our rented properties are seen to have a vital role to play with 21 per cent of households currently rented. Acknowledging this, in 2012 the Government established
the Build to Rent (BTR) Fund aimed at providing £200m to build a bigger and better private rented sector. Indeed, 5,000 BTR units a year have been targeted to meet London’s needs. The scheme was launched as part of a series of government initiatives to increase the supply of high- quality homes available for market rent in the private sector. The BTR Fund is a fully recoverable commercial investment.
The investment enables the Government to share risk or to provide finance, enabling schemes to be delivered. The fund offers finance on a commercial basis, with returns to Government being realised upon refinancing or sale of a developer’s interest to an institutional investor within one to two years of completing the scheme. At the same time, it is hoped that by encouraging
institutional investment into the sector, additional housing supply would be created to meet local need. The BTR Fund is sometimes confused with the Private
Rented Sector (PRS) Housing Guarantee. BTR assists with the development phase, while the PRS assists with the long-term holding of property once construction is completed. In PRS, the Government’s investment comes in the form of a loan, and is available to cover up to 50 per cent of eligible development costs.
Integration
Blocks of flats in private ownership usually suffer from patchwork management arrangements. With BTR, everything is integrated, with one manager for the whole building.
How the scheme works
BTR is a model that is new to the UK, but it has been in the US for nearly 20 years and almost as long in Europe. In the UK version, which most closely resembles the US model, homes are designed and built specifically for renting – catering for the mainstream market. Some 51 per cent of private renters are under 35 years of age and 54 per cent have no dependents, and so are unlikely to get social housing. BTR has features which distinguishes it from the rest of
private renting. Traditionally, the rental market provides a ‘for sale’ product, whether it is a room, apartment or house. The building design and general arrangements are therefore geared to multiple ownership in a single location. By contrast, the BTR model is for long-term income from
rent. To start with, the buildings display a greater equality of design. For example, every bedroom has an ensuite bathroom (see the floorplan diagrams). The general environment – such as maintenance of the
common areas – is also key to the attractiveness of the social side of the building as statistics show that lease renewal is often based on friendships with other renters. So, investors seek to keep their buildings fully occupied with
satisfied tenants. This can be done through offering longer tenancies and other flexibilities such as personalising the home, good onsite amenities and convenient transport links for easy commuting.
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Layout comparison of typical for sale unit (left) and typical build to rent unit (right) © Geraghty Taylor Architects
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