Whether rightly or wrongly, for many years renting in the UK was perceived as second-rate compared to home ownership. But, Build to Rent has unequivocally proven in recent years that apart from homeownership being a potential source of capital gain, there should be no reason why the experiences of renting or owning need be vastly different.
By Paul Winstanley, Director – Head of Living Strategic Advisory, JLL
With it now being less than a month until the Help to Buy scheme closes to new applications, we need to urgently focus the agenda on the need to provide quality housing across all tenures. Through the Help to Buy programme, 50,000 new buyers per annum were helped into homes. This was equivalent to nearly a third of all new build annual private sales. And JLL’s survey of Help to Buy buyers found that 50% wouldn’t have been able to buy their home without it and would have remained in rental accommodation.
So what is the alternative now for these would-be occupiers of new homes? Build to Rent as an asset class has purposefully sought to narrow the perception gap between owning and renting by raising the standard of the rental experience, and thereby offering a long-term solution to this disparity. At the same time, the sector has created a viable long-term investment model for investors by leveraging economies of scale.
Although Help to Buy did assist the first time buyer cohort onto the ownership ladder, a person’s ability to enjoy their home should not be dependent on ownership. It should be more about the presentation of the property, security of occupation, value for money, and how the occupier is treated. All too often, poorly run rental properties are singled out as offering poor value for money, a lack of tenure certainty, and an indifference to the renters’ experience. And while we should always seek to improve standards across the board, it is crucial that we also point out what we are doing well as a sector too.
The Homeviews National Build to Rent Report for 2022 published in March this year is a case in point. Based on more than 3,500 verified customer reviews within their wider dataset, Build to Rent satisfaction ratings outperformed renters living in Build to Sell properties in every category measured: facilities (+9.5%), design (+5.2%), location (+4.5%), value (+6.3%) and management (+14.2%). The average of all these metrics saw Build to Rent receive ratings 7.8% higher than modern, new build, rented build to sell products.
Build to Rent operators have sought to drive a high level of customer service, certainty of tenure with a long-term stakeholder, and a quality and functional place to live. In return, for investors, Build to Rent offers a long-term, stabilised income stream in a needs-based asset class. Build to Rent is proving itself not to be just a passing trend, as it offers something valuable to all stakeholders.
Yet, despite such progress with Build to Rent in the last decade, at a headline level, for private market housing, home ownership appears to remain the go-to strategy for most political parties (alongside a continuing recognition to varying degrees on the critical importance of affordable housing) – a narrative I feel is important that our industry continues to challenge constructively. There is clearly nothing wrong at all with owning, or aspiring to own, one’s own home. But, in today’s complex society, we need a range of solutions to house everyone in the country. We need affordable housing, shared ownership, PRS, Build to Rent and home ownership to all combine to house UK plc. There is no one silver bullet.
To focus solely on the aspiration of home ownership (which is understandably a popular vote winner) is overly simplistic. The continuing large numbers of private rented households (in addition to supporting more social housing too) need forward looking policies too, if they are going to contribute fully to meeting our housing needs across the board. The number of private rental households remains more than 4.4 million households according to the English Housing Survey. Nearly four million more households in England are socially rented.
Being realistic, with comparatively high house prices and the rising cost of borrowing, home ownership is unlikely to get any easier for UK residents in the coming months and years despite measures such as the Stamp Duty cut. Demand for renting in all four corners of the country will almost inevitably increase.
With a new housing minister in place, we have an opportunity as an industry to go back to basics and collectively and constructively demonstrate what we can do to help the UK’s housing crisis across all types of living sector investment. We need to reiterate that the overall philosophy for Build to Rent products is to philosophically rebrand ‘tenants’ as ‘customers’ or ‘residents’, and strive to be conscientious and proactive accommodation providers. This simple non-adversarial and positive concept immediately rebalances the relationship and sets a different tone – and is the cornerstone to a home ownership experience for renters. The investor provides a product that fulfils the customers’ needs and the customer is comfortable and therefore wishes to occupy long-term.
Build to Rent investors in the UK have already discovered that putting the renter first often leads to higher rental income levels, increased customer retention, lower vacancy levels, and sustainable rental growth due to increased competition for units. Investor interest in Build to Rent is certainly continuing to build.
So, in conclusion, customers or residents rather than tenants, and a home ownership experience for all. Let’s take the opportunity of a new housing minister to continue to promote the benefits to renters of Build to Rent and other residential investments as a legitimate alternative to home ownership.