Build To Rent: Threats & Opportunities For Landlords and Agents

Zahraa Valu

By Zahraa Valu

13 October 2015

It's well known that Britain is in the midst of a housing crisis and with house prices soaring at a rate at which most earnings can’t keep apace, it’s the crowded rental market that’s bearing the brunt. Onto this housing landscape comes property’s latest American import – the birth of Build to Rent in Britain. Although it’s currently in fledgling mode, this new style property rental has big implications for the existing market, leaving traditional buy to let landlords with a lot to learn.

What Is Build To Rent?

While we may have seen large-scale property development designed solely for the rental market before, what makes build to rent so different is that the institution responsible for the building’s development maintains the ownership for all the flats in the development, rather than parceling them out and selling them off.
This long-term investment approach, which sees a steady return from rental rather than the immediate dividend that comes from sales, guarantees that every renter in the building has the same landlord, and with that the same treatment. This communal approach extends to the facilities that build to rent developments tend to offer – with concierges, on-site gyms and on-site maintenance all fairly standard.
For renters, the advantages of build to rent developments are clear – by renting from an institution (pension funds, insurers and charities are all keen investors in build to rent) rather than an individual they’re less likely to be subject to the whim of a landlord, who is convinced the market, and consequently his rental income, is rising or who happens to be on holiday the day your oven gives out. In addition to this more even-handed approach, build to rent offers longer tenancies of up to and including 3 years – it’s in the institutions’ interest for its tenants to stay put.

What Does Build To Rent Mean For Landlords?

So far, so good, so what does this mean for the existing market? Build to rent is still a relatively new endeavor in the UK, but it has proved popular with the government, who see it as a potential solution to the housing crisis. To help finance it, the government launched a £1 billion fund in 2012, but so far things are moving slowly. Currently concentrating on major cities like the capital, critics of build to rent also claim that the flats and houses it offers will only appeal to the higher end of the market and will be beyond the reach of many. A lack of housing stock also means that there’s a shortage of buildings available for this kind of development. So, while with its government investment, focus on communal areas and longer-term view, build to rent may bring about a sea-change in the market, its impact on the day-to-day of traditional landlords won’t be immediate.

Lessons To Learn From Build To Rent

It may take time to really feel its effect, but that doesn’t mean there isn’t a lot to learn from build to rent. For the first time in the rental market, we are seeing the development of branding, with build to rent companies trading on their name and reputation to secure tenants. While the traditional smaller-scale buy-to-let landlord, who in 92% of cases* may be doing his job part-time, isn’t in a position to build a national brand, he can employ the tools of brand management: building up a reputation amongst tenants for being efficient, swift to act and reliable.
Landlords also need to recognise that with brand being key, the relationship between a property manager and the tenants becomes far more like that between a supplier and a customer than has traditionally been the case. For the moment, with build to rent still finding its feet – and its sites for development – small-scale landlords have the edge. But in preparation for a new future, they must remember that, no matter how small the business, the customer is always right.
* Recent figures show that 89% of this country’s landlords are private individuals, with 92% of them part-time, or in full time employment doing something else. [ Private Landlords Survey 2010]

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Zahraa Valu

By Zahraa Valu

13 October 2015

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