Build to rent – Is this the future?
Over the last few years the Build to Rent Scheme has been initiated due to significant demand for rental properties within the current housing market. The Build to Rent Scheme funds large developments built with the intention to let rather than sell. The Royal Institution of Chartered Surveyors (RICS) says it can cover up to 50% of the developments costs which are recoverable once the properties are built. Housing developments of this sort were originally introduced in the 1920’s, at a time where financial investors would purchase land to build with the intention to let out for profit. However the Build to Rent scheme was introduced in 2012 to encourage quality rental properties to be built.
Recently the number of this type of property being built has rapidly increased. This demonstrates how the property market has changed substantially. First time buyers are struggling to get onto the property ladder and are subsequently settling for the manageable alternative. This is supported by the government as has been reflected in the 2017 Housing White Paper which emphasizes the need for more affordable housing. For some time there has been a housing crisis in the UK which is a problem that needs addressing and this looks as though this scheme would help ease this burden.
There are benefits for those looking to rent a property within the Build to Rent Scheme, one includes its promotion for longer tenancies which would be favourable amongst many families. For example, East Village Newham the new development launched in 2015 which replaced the London Olympic and Paralympic village offers tenancies for up to 3 years. This provides families with more stability and encourages economic growth which inevitably boosts supply, quality and choice.
Contrary to this, developers still struggle to get the green light when it comes to planning these large developments. A recent consultation paper (Planning and Affordable Housing for Build to Rent – 2017) expresses that barriers such as acquisition of land, the predictability and speed of planning decisions for this emerging sector and the negotiation of planning obligations relating to affordable housing are all on-going restrictions in the successful development of Build to Rent sites.
Furthermore, developers need to also consider if the yield generated would make it a good investment. The Resolution Foundation states the criteria weighed up in making this decision would include the character of the local area including whether amenities are available locally (this could be rural or city centre), the target audience for the development whether this be students, families or professionals and lastly the stock already available locally and established competition.
However with any policy comes uncertainty, whether changes will be made to the funds available and that teething issues within new developments are notorious. It is a step away from helping first time buyers onto the property ladder which David Cameron promised whilst prime minister, and a step towards expanding the rental market but creating stability for those choosing to do this.
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