The UK’s housing market is facing a torrent of challenges – the likes of which we’ve not seen for years. The turmoil of 2022’s last quarter prompted a cautious start to 2023.
By Joanna Allen, Head of Partnerships and Development at Northstone UK and Operations Director at Letta
Rising interest rates are causing affordability challenges for would-be buyers, whilst the latest stats show supply of rental homes is dropping as private landlords walk away from PRS.
But people need somewhere to live, and the demand for quality properties persists.
This perfect storm means, more than ever, suburban Build to Rent will play a critical role in the UK’s housing mix. For us, 2023 is all about rising to local demand and giving people choice away from the now-established multifamily rental accommodation in the North’s city centres.
Last Autumn, we set up Letta, a suburban Build to Rent company creating a new partnership between Peel L&P and Liverpool-based property managers, Redwing, with the aim of delivering 1,000 family homes for rent over the next five years. We worked with Peel L&P’s homebuilder Northstone as our delivery partner to get our first homes ready. We wasted no time getting going.
By Christmas, our first residents had moved into their Letta home at Glisk in Ellesmere Port. It’s a town where there’s low supply of high quality homes for rent and it really showed when we launched. The first release of rental homes pre-let before build completion.
We’re now planning to bring forward more Letta homes at Silkash and Airie, both new-build communities currently being delivered by Northstone in Bolton, Greater Manchester.
The last 12 months has seen more and more people become aware of the Northstone homes – their striking design and low cost energy-efficiency credentials have helped the team cultivate a growing following. But we were conscious of two things – providing choice and creating vibrant communities.
A big part of that is down to making living in a low cost energy-efficient, quality new build home a reality for people no matter what their position. Step forward considered, mix-tenure sites.
Take Glisk at Ellesmere Port, in Cheshire. This year we’ll have homes for sale, shared ownership, affordable rent and Build to Rent all on the same site – offering a range of options for people that want to put down roots there. The end result will be not only be choice, but a vibrant community with people of different ages, backgrounds and circumstances.
There will always be people who want to buy. But why should those who don’t want to – or are not in a position to – be locked out of a new breed of sustainable homes being built in the village or town where they may have grown up?
For some, rental may be their housing choice due to circumstance or career moves. For others, it’s a stepping stone before home ownership. Genuine mix-tenure sites cater for both.
A myriad of drivers are also dictating the type and tenure of the North’s housing pipeline. Financial factors such as the rise in interest rates, saving for deposits, and the cost of living crisis has hit disposable income and mortgage eligibility.
Both buyers and renters are also wanting to cut their monthly costs and are looking for energy efficient specification and tech that will help curb high energy bills experienced in older properties. The homes we’re bringing to market are more sustainable and provide peace of mind over energy usage, with strong energy performance.
Post-pandemic lifestyle changes are another factor driving rental demand for two and three bedroom homes, as people settle into agile working patterns or crave their own outdoor space. They’re people who may have traditionally gone for a city centre apartment, but are now looking for something different.
We’re leaning into that pent-up demand and focusing on two and three bedroom homes that deliver energy savings. At our first three sites, we’re proud to be providing homes that set a new benchmark for quality in their respective locations.
Do these trends mark the end of single tenure sites? Not exactly. The key is in understanding the local market demands, needs and constraints and responding to these. In Wigan, such is the chronic local demand for quality rental accommodation, we’re bringing forward a mix of one to four bedroom homes, bungalows and apartments all for rent. But, as part of a wider strategic site, the opportunity is there to provide diversification of tenure and choice in the longer term.
Continuing to raise the bar when it comes to Build to Rent will also be critical – a significant growth area will be further improving energy efficiency, as well as the shift to non-fossil fuel solutions to come as standard in Letta and Northstone homes. It’s all part of the drive to ensure we continue to innovate in the sector and exceed the proposed Future Homes Standards on the horizon.
Like everything in the industry, there’s not a one-size-fits-all solution. That said, the necessity of providing choice for people to get into new build market could well be the catalyst for the suburban Build to Rent revolution many have been eagerly awaiting.