What does a Truss-led Government mean for the Build to Rent sector?

Director of Policy at the British Property Federation shares his views on a what a new Truss-led Government means for the Build to Rent sector.

Ian Fletcher, Director of Policy at British Property Federation shares his views on a what a Truss-led Government means for the Build to Rent sector | BTR News
Ian Fletcher, Director of Policy at British Property Federation shares his views on a what a Truss-led Government means for the Build to Rent sector.

It seems like the Conservative Party leadership election ran forever, but as the dust now settles, what does a new Liz Truss-led Government mean for the Build to Rent sector?

By Ian Fletcher, Director of Policy, British Property Federation

Probably the most relevant talking points for Build to Rent, from the various hustings Truss took part in, were what she had to say about planning. No more top-down housing numbers, but there was also a promise to speed up the planning process. For the housing sector overall, the loss of targets and presumably the Housing Delivery Test, will be seen as a step backwards in pursuit of housing need in certain local authority areas. Build to Rent, however, has been working more with brownfield sites than new land released for housing, and increasingly investment has been in our regions. Most local authorities will still welcome the regeneration of their towns and cities. Build to Rent now features in 45% of local planning authorities and much of the sector’s output is concentrated in the 20 key cities identified by the Johnson government for housing growth, and so the sector may not be as impacted by disappearing housing targets as much as the volume housebuilders.

An unfinished planning issue that may impact more on the sector, is where the Government lands on its proposed Infrastructure Levy to replace CIL and Section 106. A technical consultation on this was expected over the summer, but with the political changes, remains outstanding. Ensuring that the Levy takes account of the different development economics of Build to Rent is important, and we continue to await the detail.

The new Secretary of State, and Housing Minister at DLUHC, will find they have full in-trays, with other policy proposals that will affect the Build to Rent sector. First and foremost, there is the Fairer Renting White Paper – the most fundamental reform to the way the sector operates in 45 years. It seems inconceivable that Government will shelve what was a 2019 manifesto commitment to reform the sector. However, there is only one full Parliamentary term left before a general election, the 2023/24 session. Ministers will therefore need to pick up the pace if a White Paper, is to become a Bill, and then an Act before 2024.

Some key issues for Build to Rent operators to focus on in the White Paper will be the proposal to abolish rent review clauses, and with greater and easier access for tenants to challenge market rents, what impact that will have on the resources of First-Tier Tribunal? More generally, the ability of the courts to deal with an increased workload in a world where there are no no-fault evictions, and what consequence that will have for the minority of tenants who wreak havoc with anti-social behaviour? Digitalisation of the eviction process and courts may make the new regime operate better, but resource would also help, and if reform is to work it all needs to happen before the abolition of no-fault evictions goes live.

Larger landlords will also have distinctive needs with respect to proposals for providing compulsory redress and joining a portal (a landlord register). And an issue begging for reform, is local authority landlord licensing schemes. The bureaucracy and cost of these can bear heavily on larger landlords with no value-added. Any forthcoming Bill provides an opportunity to reform some of the parameters of local licensing schemes.

The Government has also made promises on how to fund building safety remediation in buildings between 11m and 18m. A building safety levy is to be raised, and a consultation on that is overdue. What is in and out of scope remains to be seen. Will Build to Rent and other rental assets be included?

Perhaps the most unchartered part of how Build to Rent could be affected by the Government’s agenda is, however, the elephant in the room – the cost of living. The Scottish Government has declared a rent freeze until next spring. Such an extreme measure is less likely in England, but it is important the sector both talks about the cost pressures it faces and acts responsibly on rent increases.

So, as you can see, there are a lot of potential banana-skins for Build to Rent, but the fundamentals of the sector remain strong. The imbalance between the supply and demand for quality rental accommodation is not going to disappear, and if anything could get more acute as more small landlords exit the sector. As the Build to Rent sector grows it also has greater opportunity to showcase that it supports other key Government objectives, levelling-up and regeneration for example, with the majority of Build to Rent investment out of London. The sector also has a good story to tell in support of residents’ wellness, and the communities it creates support smaller independent business with resident footfall.