Developers are to be encouraged to build new housing estates where all the properties will be for rent, not sale.
The idea, currently being explored by the Government, could mean the introduction of a separate planning class for new-build residential property that will be rented out, and would mark a fundamental shift in the structure of the UK housing market.
Institutions and property companies would own, and trade, these ‘build to rent’ developments.
Asset management company Schroders believes that this buying and selling activity between profit-chasing corporates would mean that property prices in this particular sector would be highly competitive – possibly resulting either in more competitive rents on ‘build to rent’ estates or in a higher specification of facilities.
The idea has been floated after research by Grainger, the country’s largest listed residential landlord, highlighted the huge shift in public opinion over home ownership versus renting.
Grainger chief executive Andrew Cunningham says build to rent will be the ‘next big thing’.
More than two-thirds (67%) of those questioned by Grainger believe long-term renting will become increasingly common in this country, as it is on the continent.
Over half (54%) believe that in 15 years’ time, more people will rent than own their homes.
Grainger itself predicts that the average age of the first-time buyer will be in the early 40s, putting increased pressure on the private rented sector.
‘Build to rent’ schemes would almost certainly be aimed at younger professionals and possibly retirees stepping away from home ownership, and incorporate social and sporting facilities such as pools and gyms.
Another possibility would be that landlords like Grainger build on land offered by local authorities, rent out the homes at affordable rents, and at the end of an agreed period, sell the property on.
Currently, 90% of landlords in the private rented sector – which houses 3.6m households – are private individuals, but with demand for accommodation continuing to rise, there has been increasing pressure for bringing corporates into the sector.
The Government is taking the issue seriously, looking at how to encourage Real Estate Investment Trusts (REITs) in the residential sector.
The Communities and Local Government department has also this week launched a new consultation reviewing the barriers to institutional investment in private rented housing. Led by Sir Adrian Montague, it is due to report in June.
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Comments
The advent of the "Buy-to-Let" mortgage is a scourge on society, removing houising stock from first time buyers and making homes unaffordable. 'Rentiers' extracting money out of the land market for nothing in return.
I believe the government should establish a series of regional 'building societies'; mutuals that actually arrange for the building of new homes to rent to suit a range of pockets, rather than just pumping credit into the existing parlous housing stock.
Profits to be recycled back into housing in order to improve the quantity and quality of our homes. Improved tenancy agreements to provide stability for families and a right to buy option at market rates to be a part of the overall package.
Such an idea could provide a huge boost to our down at heel economy whilst providing real improvements to living standards.
As somebody forced out of ownership by new Labour's offshoring promotion. And now trying to get back in. This initiative fills me with dread. But it's democracy in action, I guess. Over-valuations being propped up by constant QE, which raises the prices of gold holdings, and allows idle wealthy to add even more ways to make money out of idle capital. Britain needs more virtue in the economy, but hey, it's far easier to pedal downhill instead.
I agree that build to let is the way forward for investors. I have had a few clients that have done so, however if there were some form of tax break and planning incentive then the whole concept would have a far greater take up.
Advantages
- Highly efficient buildings.
- Happy tenants living in clean low maintenance dwellings.
- Happy investors not having to deal with as many problems normally associated with older dwellings.
- Builders and their associated trades are busy again therefore paying tax. Happy tax man.