Single Family Housing (SFH) emerges from the shadows of Build to Rent with an increase of 66% year on year. (YoY) Those shadows are more than mere metaphors. With new Build to Rent schemes now averaging some 308 homes, according to the BPF’s latest Q1 2022 data, the urban centres where Build to Rent proliferates are now becoming home to some very tall buildings.
By Richard Berridge, Head of Strategy and Enterprise, Howsy.com
Lengthening those shadows might be, but they don’t reach to places where SFH is now proving very popular – which is pretty much everywhere other than urban centres, such is the extraordinary versatility that the gentler density of SFH offers.
The YoY numbers speak for themselves. Not yet perhaps in terms of volume, but certainly growth. A 66% increase in operational SFH since Q1 2021 is a phenomenal story of successful growth.
|Q1 2021||Q1 2022||% Growth YoY|
Whist the ‘under construction’ and ‘in planning’ figures could be called consistent rather than growing, it’s the completed numbers that demonstrate the acceleration in SFH over the past year. It’s also evidence of how quickly SFH can be delivered from concept to complete – much more quickly than urban Build to Rent can ever hope to be. Yes, there are still planning issues. But once the excavators move in, houses can be delivered in months not years.
That’s the key to SFH: fast, phased delivery which works in tandem with the more natural absorption rate that the gentler density allows. That’s not to say 100% early lease up can’t be achieved. Take the 64 homes at the Wise Living Springfield Brewery scheme in Wolverhampton; all reserved prior to completion.
As an evangelical advocate of SFH, nearly every day is good news for me as new entrants with big ambitions for the SFH sector are announced.
Alongside Grainger, Sigma Capital, Placefirst and Hearthstone who are already making inroads, we have the following who have all stated their targets over the past 12 months:
- Gatehouse Bank + TPG: 3,000 homes.
- Present Made + Apache Capital: 3,000 homes.
- Moda + ARES: 5,000 homes.
- Packaged Living + Aviva: 1,000+ homes.
- Citra Lloyds Bank: 50,000 homes (half of which may be houses).
- Goldman Sachs: 5,000+ homes.
- Wise Living + ICG Longbow: 5,000+ homes.
- Legal & General: 1,000 homes per annum.
With others, Leaf Living & Mayfair Capital’s Pitch, recently joining the growing list of investors it might seem that Knight Frank’s prediction of £8bn heading to SFH in the next five years may be something of an underestimation.
To my mind, two events have captured the interest of SFH investors:
- The PRS REIT managed by Sigma Capital. Not only were Sigma early movers, everything they have touched has proven the SFH model, but they displayed early confidence in houses as Build to Rent investors rushed to density and scale. As Build to Rent has forged ahead with larger, evermore glamorous schemes, Sigma has refined the simpler SFH model and are now seen as something of a lodestar.
- The Goldman Sachs acquisition of the Gatehouse/Sigma Thistle portfolio of 918 houses across 15 sites in the North of England for £150m at a NIY od 4.1%. The metrics made startling reading: an occupancy rate of 99.8% with rent collection standing at 98%. And this, let’s not forget, during lockdown in 2021 when Build to Rent operational managers were struggling to keep their occupancy heads above water.
What do these two have in common? Scale. The average scheme size in the Thistle portfolio is 61 homes. As for Sigma it’s 65. A gentle, manageable scale where supply doesn’t overwhelm demand and can be phased into the market. Most, but not all, of these assets sit within a wider multi-tenure development. This is the bedrock of unalloyed community. Sited within touching distance of a mature community and all that offers. Of course, schemes can be larger, and I would expect a ‘golden ratio’ of a third of a wider multi-tenure scheme to become common but without going too far over 200 homes per scheme.
It will be interesting to see how the newer entrants, many with Build to Rent experience and ingrained operational management paradigms, approach SFH. The ‘community interventionist’ model, favoured by Build to Rent isn’t required in a more mature environment that favours personal self-determination. Again, Sigma lead the way in this. So, although it might be tempting to go ‘all amenity’ and ‘full on events’ because it ‘worked’ in Build to Rent, it just isn’t necessary.
When the Enterprise team at Howsy analysed the SFH sector which resulted in my paper ‘SFH: The Home of Residential Investment’ we stripped back renting to its basics and looked at the fundamentals of the PRS; what is was, how it worked, what was important. What was helpful was that we were sitting on a vast amount of data from thousands of rental transactions and management interactions in England. Very simply we could see that the more dispersed nature of the SFH sector needed a new approach. One that could be satisfied by using Howsy technology and know-how to streamline operational management and be more efficient.
So, SFH is very much ‘our bag’ – which is why I am so excited to witness the growth I always knew would come. My prediction is that over time the vastly wider opportunities provided by greater and more varied sites, scale, and delivery partners will see SFH outstrip urban Build to Rent within five to seven years and I am looking forward to the BPF reporting continued exponential growth in the sector. Given where we are right now, that might sound a little crazy, but SFH is Real-Estate’s ‘Field of Dreams’. Build them, and they will come. And they’ll keep on coming.