Build to Rent was once considered something that could never work in the UK. That pessimistic prediction has been wholly disproved, with the past decade seeing huge growth. Despite being a concept born from the US, British renters of all types have embraced Build to Rent – with single-families being no exception.
By Niki Kyriacou, Sector Lead – Build to Rent at NHBC
Competition in the UK for renters is fierce. There are 20 requests to view each available rental property, according to data commissioned by the BBC earlier this year. The average number of viewing requests has more than tripled since 2019, the figures from property portal Rightmove show. This figure soars in some regions, reaching 30 viewing requests for every available property in the North West of England. This kind of demand is an ideal opportunity for Build to Rent providers.
Savills estimates that there could be 30,000 single-family rental homes in operation by 2027 and 70,000 by 2032. This would see the single-family demographic take an increasing share of the UK Build to Rent market, growing from 12% to 18% over the next ten years. While overall Build to Rent investment was £1.9bn in H1 2023, a significant 21% below the same period last year, the single-family housing sector saw record volumes of investment of £460m in H1 2023.
Various factors have driven the growth of single-family housing; economic turbulence in the building industry being one. As well as building their own developments for the single-family market, providers are increasingly buying off-plan from volume housebuilders. This is an attractive proposition for the housebuilder, as the provider is likely to buy multiple units in one transaction and the provider benefits from buying a finished product ready to market, while negotiating a bulk-sale discount. Depending on when a Build to Rent operator/investor enters the deal has a big impact on the level of influence they have over the specification process. In the future we’re likely to see more flexibility in the product with earlier engagement on the concept and design.
With uncertainty in the wider housing market and volatile mortgage rates, buying a property for many families is either an unattractive prospect or simply not feasible at present. Product quality in the private rental market varies wildly – and some feel more comfortable renting from a specialist provider and prefer living in a well-regulated and properly managed Build to Rent home. Often such housing is better tailored to their needs.
Housebuilders are well positioned to partner with the Build to Rent sector, as they’re often developing in desirable areas and forming long-term partnerships can prove beneficial for both parties – it’s evident there’s a growing appetite for joint ventures and other collaborations in the sector.
Single-family housing offers a different proposition to the stereotypical Build to Rent development – renters might imagine glitzy multistorey apartment blocks with shiny on-site amenities when they think of Build to Rent – but single-family housing is more likely to be suburban houses than city centre flats. This is where the likes of Love to Rent and the newly formed UK Single-Family Association (UKSFA), as well as UKAA and BPF, come into play. There’s still a disconnect between the consumer perception and what the Build to Rent industry is offering.
The Build to Rent market has grown with maturing consumer tastes; many people need to wait longer to buy but don’t want to put off having children, hence the popularity of suburban Build to Rent developments. Easy access to local schools, nurseries, strong local transport links, access to health and retail amenities, and green space are all attractive to the single-family market. Some purpose-built Build to Rent suburban communities offer 24/7 security, are all-inclusive of bills and offer a range of additional services such as cleaning, gardening and even dog-walking. For the sustainability-conscious, some have electric vehicle charging points and are powered by a district heating system, using clean, renewable energy, removing the need for a boiler – or even an energy bill.
Tenures are also generally more secure in Build to Rent – unlike a private landlord with small portfolios of just one or perhaps a few properties, Build to Rent providers are better placed to weather economic storms and are less likely to sell up. Britain’s rental sector has lost an estimated 127,000 properties since 2022 according to real estate adviser CBRE. Younger or single renters with fewer responsibilities might be more relaxed about this prospect, but residential security is important for families, especially those with school-age children. It’s these advantages the industry must get better at communicating – Build to Rent should be an attractive option for all renters, but some may disregard it as a premium urban option. Different locations will attract different renters, with different amenities appealing to these different groups – there’s no one size fits all solution for Build to Rent operators, but getting it right will deliver long, secure tenures from renters wanting to put down roots and raise families.
The growth in working from home has had an effect too. Renters may well need a more flexible space for them to work in, as well as live and socialise. Older properties may not be suited to this, with less-than-ideal work set-ups shoehorned into a bedroom or spread across a kitchen table. Open plan living has increased in popularity in recent years, but being able to separate work life and home life when they share a space is challenging. A plethora of online articles suggest ways home workers can flex their space to accommodate all their needs, but single-family home operators are taking notice and presenting the solution themselves, incorporating a home workspace, lending themselves to the contemporary lifestyle.
Moving forward, Build to Rent can also benefit from the end of Help to Buy, the government-run scheme to help first-time buyers get a property with a lower deposit. This scheme saw approximately 53,000 homes purchased per year between 2019 and 2022, but now with fewer people buying new homes, housebuilders are engaging more with Build to Rent operators to maintain sales. The hope is housebuilders continue this dialogue with the Build to Rent sector when the housing market picks up.
Investors are adapting their approach and diversifying their portfolios, a trend likely to continue into 2024. The transactions we’re seeing taking place in the market range in scale and structure showing the flexibility of single-family homes, an appealing quality for investors. The squeezed middle is a market which has not been well-catered to previously – investors are increasingly recognising this market as a potential growth area. There is no one-size-fits-all offer for Build to Rent – each demographic must be catered for individually.
With the heightened regulatory environment regarding multi-storey developments, single-family homes are a more appealing proposition. While some of these upcoming legislative changes will affect all residential construction, single-family developments will likely be more resilient, with a better profit margin ensuring viability.
The importance of single-family housing should not be underestimated in the coming years. If the rental market grows, so will renter expectations and Build to Rent providers must be ready to meet them. Build to Rent has always been adaptable, shifting and tailoring itself to match market trends, keeping pace with consumer demands – it must continue to evolve and look to the single-family market to continue driving the sector.
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