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TRANSCRIPT
Build to Rent Unlocking the potential of an emerging property sector
Contents3 Foreword
4 Executivesummary
5 TheevolvingBuildtoRentsector
11 ThebenefitsofBuildtoRent
15 ThechallengesofBuildtoRent
18 What’snext?
About the British Property Federation
TheBritishPropertyFederation(BPF)representsthecommercialrealestatesector.ItpromotestheinterestsofthosewithastakeintheUKbuiltenvironment,anditsmembershipcomprisesabroadrangeofowners,managersanddevelopersofrealestate,includingallmajorinvestorsinthenew-build-to-rentsector.TheirinvestmentshelpdrivetheUK’seconomicsuccess,provideessentialinfrastructure,andcreategreatplaceswherepeoplecanlive,workandrelax.
About this report
ThereportwasproducedfortheBritishPropertyFederation(BPF),withresearchandanalysisledbySavills’ResearchandEconomicsteams,inconjunctionwiththeLondonSchoolofEconomics.BarclaysisproudtosponsorthestudyandpresentthisabbreviatedversionoftheBPF’sUnlockingtheBenefitsandPotentialofBTRreport.Theresearchincludedround-tablediscussionsandinterviewswitharangeofBTRoperators,housebuilders,developers,investors,lenders,policymakersandrelevanttradebodies.
Thefullreport,includingdatatablesandpolicyrecommendations,isavailableonlineatwww.bpf.org.uk/what-we-do
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ForewordBarclaysisdelightedtosupportthisresearch,whichassessesthefurtherpotentialoftheBuildtoRent(BTR)market,givenitsrapidemergenceasanassetclassoverthepastfewyears.
TheresearchaffirmsthevalueofBTRtotheUKpropertyindustryasitseekstoacceleratenewdevelopmentstohelpaddressthehousingcrisis,whilealsodeliveringbroadersocialandeconomicbenefitstolocalcommunities.
Buildinghomesandcommunities
Decadesofbuytoletlandlordactivityhavedrivenanincreasinglyfragmentedprivaterentalsector(PRS),withover98%ofstockcurrentlyinthehandsofindividuallandlordsandsmallcorporateentities.Whilemuchofthisstockisofgoodqualityandwellmanaged,thereisanelementofsub-standardaccommodationwithtenantsreceivingapoorservice.Thelinkbetweenqualityofaccommodationandqualityofhealthandeducation,atalocallevel,pointstothesignificantsocialbenefitsthatcanbederivedfromwell-thought-throughhousingschemes.However,theseprojectsrequireascaleofinvestmentthatisunlikelytobedeliveredbyafragmentedmarket.
Bydeliveringhigh-quality,well-managedhomesandcreatingnew,sustainablecommunities,BTRwillenhancetheoverallstandardofhousingintheUKandbecomewovenintotheresidentiallandscape.Inordertoachievethis,itisimportantthatBTRdeliversacrosstheresidentialspectrum,withhigh-riseschemescomplementedbylow-risehousingandlocatedinregenerationzonesasmuchasestablishedareas.
Deliverywillneedtocaterforalldemographics,withmoreaffordablefamilyunitshavingasmucharoleinthesectorasthehigh-endschemesprovidingextensiveamenitiesandservices.Thiswillhelpensurethat,overtime,thesecommunitieswilleffectivelybecomeblindtotenure.
Thereisnoescapingtheoldadageoftheneedtosupplytherightproduct,intherightplace,attherightprice.
Predictedpopulationgrowthof9.7millionbetween2014and2039indicatesthatdemandforhousingintheUKwillonlyincrease.Ifthedivergencebetweenmedianwagesandmedianhousepricespersists,demandforPRSoverthemidtolongtermwouldappearrobust.Recenthistoryhasseenrentsenjoyaboveinflationgrowthandscaleoperatorsshouldbeabletotapeconomiesthroughouttheirsupplychain–efficientup-frontprocurement,coordinatedmarketing,programmedmaintenanceandcost-effectivedailymanagement.InadditiontothefinancialbenefitsoftheBTRmodel,thereisalsoanargumentthatnewdevelopmentinthissectormaybecomelessvulnerabletotheeconomiccyclethanthetraditionalbuild-to-sellmodel,butthereisnoescapingtheoldadageoftheneedtosupplytherightproduct,intherightplace,attherightprice.
Intuitively,BTRshouldbeanattractiveassetclassforinvestorsandlendersseekingsustainablereturns;however,itisstillarelativelyyoungsector.Establishinggoodquality,transparentinformationonabsorptionrates,grosstonetcosts,occupancylevels,marketrentsandvalueswillbefundamentaltoBTRcementingitselfasamainstreamassetclass.Asthesectorgrowsandevolves,increasedtransactionalvolumeswillnotonlyhelpsetmarketnormsbutalsoencouragemoreparticipants,moreinnovationandmoreoptionsfortenants.
Ihopeyoufindthisstudythought-provokingandinsightful.AtBarclays,wearealwayskeentosupportthegrowthofindustryandIwouldliketothanktheBritishPropertyFederation,SavillsandtheLondonSchoolofEconomicsforcompilingavaluableanalysisofthesector.
DennisWatsonHeadofRealEstateBarclays
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Executive summaryDespitethesignificantneedforhousingintheUK,thesupplyofnewhomesisconstrainedbythebuild-to-selldeliverymodel.Ourreportlooksatthepotentialforlargerinvestors,especiallythosebackedby‘institutional’capital,toexpandresidentialsupplythroughBuildtoRent(BTR).
ThisresearchidentifiesthebenefitsofBTRandthepotentialincreaseinhousingsupplyitcandeliver.ItisthefirststudytoquantifythescaleofBTRdeliveryacrossthecountryandtoidentifythenatureofschemesintermsoftheirplanningstatus,scaleanddeliveryapproach.
EvidenceoftheimpactofBTRonhousingsupplyhasbeendrawnfromconsultationwitharangeofstakeholders.Thebenefitstheyidentifiedinclude:
• Asanoutcomeofaccelerateddelivery,mostnotablyonlargerurbansites,fastermarketabsorptionthatbenefitsregenerationandplacemaking
• Viabilityinmarketswherebuild-to-sellismarginal
• Improvedmanagementandservicetotenants
• Additionalon-sitejobsandthepotentialtoenhancelabourmobility.
Theresearchsuggeststhatthemosteffectivepoliciesinovercomingmarketfailures,deliveringadditionalnewhomesandrealisingthebenefitsofBTRarelikelytoinclude:
• ClarifyingtheroleofDiscountedMarketRent(DMR)asmeetingaffordablehousingrequirementsforBTRdevelopments
• Changing planningregulationsandstandardsforBTRdevelopments
• Continuation ofpublicsectordevelopmentloansforBTR
• ExtensionbytimeandscopeofthePRSDebtGuaranteescheme
• PlanningpreferenceforBTRonlargesites
• Exemptlarge-scalelandlordsfrom3%SDLTsurcharge
• Zero-rateVATonrepairsandmanagementtomakeBTRmorecompetitive.
“TheBTRsectorisavitalpartofthesolutionintacklingthehousingcrisis.InLondon,theimportanceofthesectorshouldnotbeunderestimated,asitcurrentlyrepresentsoneinfivehousingstartsinthecapital,andincitiessuchasManchesterandLiverpoolBTRisgainingmomentum.TheBPFBTRmapshowsasignificantandincreasinglydiversedevelopmentpipelineacrosstheUK.But,asthisreporthighlights,therearechallengestoovercomeifthisgrowthistocontinue.”
Duncan SalvesenChair,BritishPropertyFederationResidentialBoardDirector–Residential,Dorrington
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2012 2013 2014 2016
London Housing SPG,March 2016
HCA Build toRent Fund 2
£1bn2013 Budget
ULI Build to Rent Guide Edition 2, March 2016
PRS Taskforce,April 2013
ULI/DCLG Build to Rent Guide
Edition1–2014Industry Report
£3.5bn Debt
Guarantee Scheme
& appointment ofVenn, December 2014
HCA Build to
RentFund, 1 Sept
2012, £200m – purpose was to create
a step change in supply of rented homes
MontagueReview
Sept2012
NPPF – Changes to Viability
and Decision Taking, March 2016
The evolving Build to Rent sectorTheUKneedstoincreasehousingsupplyfrom200,000to300,000homesperyearinordertomeetabacklogofhousingneed.However,thesupplyofnewhomesisconstrainedbythebuild-to-selldeliverymodel.
Typically,thismodelwilldeliverhomesatthespeedatwhichthemarketwillabsorbthenewsupply,usuallywithnoincentivetoacceleratedelivery.
BTR–theUKtermformulti-unitblocksofpurpose-builtprivaterentedhousinginsingleownership–hasthepotentialtomakeasignificantcontributiontowardsreachinghousingtargets.
ThebenefitsofBuildtoRent
BTRoffersanadditionalsalesoutlettothebuild-to-sellmodel.Itprovidesanalternativeendbuyerforhousingdevelopments,whichhelpstode-riskschemes.
Itisespeciallyhelpfulonlargersites,wheretherearemultiplephasesofdevelopment.Inthesecircumstancesitcanoftenacceleratedeliverybecauseadeveloperorhousebuildercandeliverstockforbothopenmarketsaleandmarketrentatthesametime.
BTRalsoprovidesbenefitssuchascreatingfootfallanddiversityofoccupiersfornon-residentialusesonmixed-usesites,underpinningplacemakingandregeneration.
BuildtoRent:wherehavewegotto?
ThePRSintheUKisworthovera£1tn,withthevastmajority(98%)tiedupinthehandsofsmallindividualandsmallcorporatelandlords(IPF,2015).Thereisasignificantlackofaggregatedinvestmentstockavailableforinstitutionalinvestorstoacquire,withmanynewinvestorsfocusingonthedevelopmentofnewBTRassets.
Policy
Newstockgivesinvestorstheopportunitytoinfluencethedesign,mixandspecificationinanefforttoultimatelyenhanceinvestmentreturnsfromcompletedandoperationalstock.
timeline
Source:LSE,Savills.
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Initsbroadestsense,thePrivateRentedSector(PRS)incorporatesallthingsprivatelyrentedandBTRisasmallbutimportantsubsetofthewidermarket.Lookingatwhatinvestorsinresidentialinvestin,thereisawiderangeofdifferenttypesofmarketrentedhousing,suchas:
• Buytolet–mortgagedassets
• R entalunitsinhousesofmultipleoccupation(HMOs)
• Singlefamilydwellings
• Studenthousing(purposebuilt,institutionalgrade)
• BuildtoRent,i.e.bespokedesigned,developeddirectlybyinvestors
• BuildtoRentdeliveredbyhousebuilders/investors,forwardfundedbyinvestors
• BuildtoRentacquiredasagoingconcern(stabilisedassets)byinvestors
• Traditionalhousingstock,i.e.turnthesignroundfrom‘forsale’to‘tolet’forwardpurchasedbyinvestors
• T raditionalhousingstockforwardfundedbyinvestors
• T raditionalhousingstockacquiredasagoingconcern(stabilisedassets)byinvestors.
BTRisanewproductfortheUK,particularlyinthemainstreammarkets.Onschemesofover50unitstherearecurrentlyc.55,500newPRSunitscompleted,underconstruction,orwithplanningpermissionintheUK.Thereare32,785unitsinLondonand22,686elsewhere.Notallofthisis‘pure’BTR,butBTRhasbecomesynonymouswiththedeliveryofnew-buildrentedhousing.
ThetypesofPrivateRentedSector
PlanningportalssuchasMolior(London)andGlenigan(UK)includedescriptionsofthetypeofresidentialstockdelivered.
IntermsofPRS,thefourmostcommonlyusedtypesincludestockthatis:
• retainedbythedelivererforthePRS
• purchasedforthePRS
• builtusingtheHomesandCommunitiesAgency(HCA)BTRFunding
• designedandpurposebuiltfortherentedsector,oftenusingaforwardfundingapproach.
BTRandtraditionalformsofPRS
Atthispointinthemarket,moretraditionalapproachestoPRSarestillthemostprevalentformsofdelivery.Ofthec.7,800unitscompleted,about40%havebeenretainedforPRSbythedeliverer(notBTR)and40%havebeenpurchasedforPRSorforwardpurchasedbytheinvestor.SchemespurchasedforPRSareconsideredBTRbecauseofthefundingstructureorsourceoffundingused.
Manyoftheseschemeshavenotbeendesignedspecificallyfortherentalmarketandinmostcaseswereoriginallyintendedforthebuildforsalemarket.Therehavebeenc.1,300units(20%)deliveredusingaBTRapproach(i.e.purposebuiltandintendedforPRSuse)includingthosefundedbytheHCABTRFunds.
20,000
Constructi
on
Detailed
Permiss
ionComplet
e
Num
ber o
f uni
ts
Outline
Permiss
ionOutlin
e
Applicatio
n
Pre-plan
ning
Detailed
Applicatio
n
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Retained for PRS
Purchased for PRS
Built to Rent
PRSunitsbydevelopmentstatusandPRStype,EnglandandWales
Private Rented SectorCommercial property
Institutional investors
Retail investors (buy to let)
Mar
ket v
alue
, £bi
llion
s
200
0
400
600
800
1000
Sizeofmarketrentsector
Source:IPF(2015),TheSizeandStructureoftheUKPropertyMarket.
Source:Molior,Glenigan,BPF,Savills.
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Forwardpurchasedstockincludesschemesthatwerenotspecificallydesignedfortherentalmarketandschemeswherethedesignhasbeenalteredfortherentalmarket.StockpurchasedforPRShascontributedover3,000unitstotherentalmarket.Intotal,whenconsideringBTRasbothpurchasedstockandpurposebuiltstock,deliveryisinexcessofc.4,500units.
NewBuildtoRent
ManycommentatorsonthemarketrefertonewPRSstockasBTR.Thisismainlybecausethestockisownedbyasingleentity,operatedasasingleinvestmentandprofessionallymanaged.BTRisnotjustrelatedtothephysicalformorthetypeofstock,italsoreferstoanoperationalmodel.
BTR,asanoperationalmodel,isbecomingmoreofanacceptedformofdeliveryintheUKhousingmarket.ManymoreschemeshavebeenidentifiedaspursuingaBTRapproach,assumingthedeliverystrategydoesnotchange.Intermsofstockunderconstruction,BTRunitsmakeupc.9,900ofthec.15,100unitscomingforward.Longerterm,BTRmakesupc.27,500ofc.32,500unitsbeingdelivered.
Newandqualitypurposebuilt
Largescale
Longtermandattractivetoinstitutions
Clearexitstrategy
Singleormultiplesites
100unitminimumsize
Privaterentatmarketrentsonly
ASTcontractswithpotentialtoofferlongertenancyoptions
Newmultipleunits
Nominimumsize
Large-scaleinvestor
Notalwayspurposebuilt
Generallyblocksandunbrokeninvestments
Singlephaseofdevelopment
Risksitswithdeliverer
Littlecontroloverdesignandproduct
Purchasedbeforeorduringconstruction
ASTcontractswithpotentialtoofferlongertenancyoptions
Newmultipleunits
Nominimumsize
Large-scaleinvestor
PurposebuiltforPRS
Blocks/groupsofhousesandunbrokeninvestments
Singlephaseofdevelopment
Risksharedbetweendelivererandfunder
Morecontrolforfunderoverdesignandproduct
ASTcontractswithpotentialtoofferlongertenancyoptions
ApproachestodeliveringPRS
Source:Savills,Molior,Glenigan,BPF.
Newmultipleunits
Nominimumsize
Large-scaleinvestor
Notnecessarilypurposebuilt
Couldbemultipleunitsindifferentblocks/phasesofdevelopment
ASTcontractswithpotentialtoofferlongertenancyoptions
BuildtoRent
PrivateRentedSector
RetainedforPRS BTR(HCAFunding) PurchasedforPRS(inc.forwardpurchase)
BTR(inc.forwardfunding)
Approachestodeliveringpurpose-builtBTR
Asmoreandmorepurpose-builtPRSstockemerges,wecanexpecttoseeashiftinthekeydeliverersandfundersinthemarket.Analysisoftheplanningandsupplydatashowsthatinvestorsareusingavarietyofapproachestobuildupscaleintherentedsector.
Thetableabovesetsoutthedeliveryapproachesthathavebeenused.Thecommonfactoracrossthedifferenttypesofstockisthattherentalsupplyisallnewmultipleunits,insingleownershipandprofessionallymanaged.
BuildtoRentcanmakeupc.27,500ofc.32,500unitsbeingdeliveredinthelongerterm.
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PRSdeliveryschemesunderway
SomeexamplesofPRSschemesaresetoutinthetableoppositethathavebeenincludedintheplanninganddevelopmentdatabasesagainstthedescriptionsgiven.
ManyoftheseschemesareconsideredBTRbuttheyhavenotbeendescribedasBTRinthesedatabases.Forexample,awell-knownschemewaspurchasedbyDelancey&QatariDiarforPRS.WhenthevillagewasdevelopedbyLendLeasefortheOlympics,itwasnotdesignedforthePRSmarketpost-Olympics,butfollowingtheacquisitionitwasretrofittedforthePRSmarket.
CompletedBTRschemes
Thereareatotalof12completedpurpose-builtBTRschemesacrosstheUK,comprisingc.1,300units.InLondontheseschemescompriseatotalof555completedpurpose-builtBTRunitslargelyinEastLondonandBarking.OutsideLondon,deliveryofPRSunitsaspurpose-builtBTRamountsto775units.
Private Rented Sector
Built to Rent
Stratford Halo, Genesis
CQ London, A2D
Dolphin Square, Westbrook
Saffron Square, Notting Hill
Centenary Quays,A2D
3 Towers Manchester,Tribe
Archway Tower, Essential Living
Portfolio in Birmingham, Leeds and Manchester, Dandara
Newfoundland, Canary Wharf Group
180 Stratford, Aberdeen
Wick Lane Wharf
Abbeville Apartments, Grainger
East Village, Delancey, Qatari Diar & APG
Royal Wharf, L&Q
Rathbone Market Phase 1 – Vermilion, Fizzy Living
West Plaza, A2D
Epsom, Fizzy Living
Rehearsal Rooms, M&G
Redclyffe Road, M&G
Aberfeldy New Village, Be:here
Clipper's Quay, Grainger
Build to Rent (HCA Funding)
Purchased for PRS (inc. Forward Purchase)
Build to Rent (inc. Forward Funding)
Retained for PRS
Examplesofschemesbytypology Therehavebeenafurther30schemesintheUKpurchasedforPRS,deliveringc.3,200unitsunderwhatisconsideredtheBTRoperationalmodel.
EastLondonhasemergedasastrongrentalmarketoverthecourseofthelast10to15years.TheincreaseinthenumberofPRShouseholdsbetweenthe2001and2011censuswasaresultofnewhousingdevelopmentbeingskewedtotheeastduringthisperiod,withmanyofthesenewunitsacquiredbybuy-to-letlandlords.Morerecently,large-scalelandlordshavedeliveredrentalstockintotheEastLondonmarketbecausegoodtransportconnectionsandrenterappealhavegeneratedhighrentsinproportiontocapitalvalues.ThismakesPRSschemesmoreviablethaninotherpartsofthecapital.Inaddition,Delancey,backedbyQatariDiar,purchasedtheOlympicAthletesVillageforPRSanditisnowbeingrunandmanagedusinganintegratedmanagementmodel.
TheremainderofcompletedPRSschemeshavebeendeliveredfordifferentusesandretainedforPRS.Therehavebeenc.3,300unitscompletedaspartof26developmentsitesacrosstheUK,whichhavebeenretainedforPRSbythedeliverer.
47%1 9%
Developer
Contractor
21%
RegisteredProvider
13%Housebuilder
CompletedPRSschemesbytypeofdeliverer,EnglandandWales
Source:Savills,Molior,Glenigan,BPF.
Source:Molior,Glenigan,BPF,Savills.
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Abbeville Apartments,Barking and DagenhamGrainger100 PRS units
Enid Wood HouseBracknellCriterion Capital97 PRS units
Bath WesternRiverside, BathCrest Nicholson97 PRS units
IpsusWandsworthRealstar52 PRS units
Aberfeldy New VillageTower HamletsBe:here138 PRS units
Lincoln PlazaTower HamletsGalliard Homes32 PRS units
Bradstowe HouseHarrowComer homes177 PRS units
The KeelLiverpoolGlenbrook Property240 PRS units
Norris GreenLiverpoolDiffrent132 PRS units
New BroughtonSalfordDiffrent120 PRS units
Broadway PlaceSt HelensDiffrent89 PRS units
BuildtoRentschemesinthepipeline
Intermsofscaleofdelivery,fewcompletedPRSschemeshavehadmorethan250units.Developmentsunderconstructionandintheplanningpipelinearebeginningtogetlarger,withdevelopersandregenerationspecialistsstartingtoallocateblocksandphasestoPRS.Alldevelopmentslookingtobringforwardover1,000PRSunitsarelocatedinLondon,althoughManchesterisalsosettoseesomesignificantPRSdevelopments.
Therearecurrentlyover44BTRschemesunderconstruction,deliveringover9,900PRSunitswithinthenextthreeyears.Ofthese,21arebelievedtobeinstitution-backed,withcompanieslikeWestrockandCriterionCapitalfundingschemesinLondonandtheSouthEast.ThelargestvolumeofBTRiscomingthroughinurbancitycentreswithc.2,700unitscurrentlyunderconstructioninManchesteralone.DevelopersarethekeydeliverersofPRSunitsinschemescurrentlyunderconstruction.
Thereareatotalofc.27,500unitscurrentlyintheplanningpipelinebeingbroughtforwardaspartof71BTRschemesacrosstheUK.
ThelargestproposedvolumesofBTRunitssitwithinwiderstrategicsiteslikeBarkingRiverside,BrentCross,CricklewoodandEastVillage.Whilemanyoftheseunitsaredeliveredasnewbuildproperties,alargenumberoftheunitswillbecompletedaspartofachangeofusetoexistingcommercialproperty.Intotal,12%ofallPRSunitscompleted,underconstructionorintheplanningprocessaredeliveredthroughPermittedDevelopmentRights(PDR).InLondon,thisfigurerisesto14%.
CompletedBTRschemes,EnglandandWales
Source:Molior,Glenigan,BPF,Savills.
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Source:Molior,Glenigan,BPF,Savills.
Keylandlords
ThekeylandlordsofcompletedschemesincluderegisteredproviderssuchasFizzyLiving,L&Q,PlacesforPeople,A2DandNottingHillHousingAssociationandpropertycompaniessuchasCriterionCapital,GraingerorDelancey.RegisteredproviderssuchasL&Qhavepurchasedseveralhundredunitsacrossmanyoftheirownschemesandotherdevelopers’schemesinSouthwark,WandsworthandTowerHamlets.TheseunitshavebeenpurchasedtoexpandtheL&QportfolioofPRS.
Developersleadingtheway
DevelopersaretheleadingplayersinthedeliveryofPRS,havingsuppliedalmosthalfofallcompletedschemes.Themajorityoftheseschemescompriseunitsoriginallyplannedformarketsale,whichwerethenpurchasedfortherentedsector.MoretraditionalapproachestoPRShavealloweddeveloperstoplayakeyroleinthesector.
Lookingahead,thereareamuchhighernumberofunitsplannedasBTR,withregisteredprovidersandcontractorsdeliveringonbehalfofinvestors.
120
100
CompleteConstructionPlanning
80
60
40
20
Up to 50 50–100 100–250 250–500 500–1,000 Over 1,000
0
Number ofschemes
PRS units
Totalnumberofschemesandunitsbyschemesize,EnglandandWales
DevelopersaretheleadingplayersinthedeliveryofPRS,havingsuppliedalmosthalfofallcompletedschemes.
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The benefits of Build to RentOurresearchersconsultedarangeofstakeholders,includinginterviewsandround-tablediscussionswiththoseinvolvedinthedeliveryofBTRfromboththeprivateandpublicsectors.
TheresearchhelpedtodrawoutevidenceoftheimpactofBTRonhousingsupplyanddemonstratesits‘additionality’characteristics.TheresearchfoundthatBTRhasadditionalbenefits:
• Accelerateddelivery
• Theabilitytounlocksites
• Intensification ofsites
• Acceler atedmarketabsorptiononlargesites
• Placemaking andregenerationbenefits
• Improvedmanagementandservicetotenants
• Provisionofon-sitejobsandenhancedlabourmobility.
ThekeyaimoftheresearchwastounderstandthefuturegrowthpotentialofBTRsupply.WehavetakenprecedentsfromthegrowthtrajectoryofinstitutionalinvestmentintheUSmulti-familyREITmarketandtheUKPurposeBuiltStudentAccommodation(PBSA)market.TheUSmulti-familymarketgrewfromamarketworthUS$1bnin1992tooverUS$80bnin2016.Overthe25-yearperiod,asimplerplanningsystem,lesscompetitionfromotherresidentialuses,zoningofregenerationareasinurbanmarketsandhigherdemandforcity-centrelivinghaveenabledthemulti-familymarkettogrowtooneofthelargestinvestmentsectorsintheUS.Atanationallevel,however,themulti-familymarketrepresentsjust20%ofallprivaterentedhousing,whilethebuy-to-letsector(commonlyknownasthemomandpopmarketintheUS)isstillthelargestsectorwith80%ofthestock.
Duringthesame25-yearperiod,theUKstudenthousingmarkethasgrowntoasectorworthover£15bn,or240,000units,basedonanaveragebedspacevalueof£60,000.Expansionofthestudentsectorhasbeensignificantlyhelpedbyuniversitiesloweringoccupierriskthroughnominationagreementswhenthemarketwasimmature.Furthermore,ithasdevelopedoutsidetheC3residentialuseplanningcategory,whichhasmeantthatitdoesnothavetocompeteforlandwithhighervalueresidentialuses.
IftheBTRmarketisabletomatureandreachasimilarscaleofinvestmentastheUSmulti-familymarketortheUKPBSAmarket,itwouldcreatearound15,000newhomesperyearintheperiodto2030.Ifthesearebuiltintherightlocationsontherightsites,therewillberelativelylittledisplacementofhomesbuiltforsale.
Theevidencegatheredinthisprojectshowsthatonlargeurbansites,wellconnectedtoemploymentmarkets,BTRcanacceleratebuildoutratesthree-fold.Ifthiscanbeachievedonsay20%ofthelargesitesthatarecurrentlydelivering,thatequatestoadditionaldeliveryof6%.Relativetothe164,000newhomescompletionsinEnglandin2015/16,thisisaroundanadditional10,000homesperannum.Ifthisdeliveryiscombinedwiththelevelofsupplyexpectedtobecompletedoverthenextthreeyears,thiswouldtakedeliverytoc.15,000unitsperannum.Innumberterms,thiswouldresultin240,000unitsdeliveredby2030andprovideasectorcomparableinvaluetotheUSmulti-familymarket(£60bn).
240,000unitscouldbedeliveredby2030andprovideasectorinvalueof£60bn.
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Acceleratingdelivery
Itisimportanttorecognisethattherelationshipbetweenacceleratinghousingdevelopmentandgeneratingadditionalhousingisnotstraightforward.Speedingupdevelopmentcanbringagivennumberofunitsintousemorequicklybutdoesnotnecessarilyincreasethetotalnumberbuilt.ForBTRtogenerateincreasedoutput,theaccelerationindevelopmentmustleadtoasustainablestepchangeincompletions.
AccelerationandPDR
MoststakeholdersinvolvedintheresearchconsideredresidentialsupplydeliveredthroughPDRas‘whollyadditional’.Whetherthismeansthatthereisnoneedtooffsetreductionselsewhereinthedevelopmentchainisnotclear,butitiscertainthatPDRincreasesopportunities.
AnalysisoftheBTRsupplypipelineshowsthat12%ofunits(8,000)arelinkedtoPDR.Clearlythere’salsoadditionalrentalsupplyenteringtherentedsectorthroughbuytoletsalesonPDRschemesthathavesoldintotheopenmarket,soPDRisanimportantcontributortorentalsupply.
StakeholdersconsideredthatthedeliveryspeedofPDRunitsisduetoasimplerandfasterplanningprocess.PDRisnotconstrainedbydesignstandardssuchasminimumunitsizesortheprovisionofaffordablehousing.Thismeansthat,asschemesdon’tgothroughlengthynegotiationsandviabilityassessmentsforaffordablehousing,theycanbedeliveredmorequickly.
ExamplesofPDRinaction
Westrock Westrockhasplannedinvestmentof£300min1,000BTRunitsunderitsbrandedoperator,PLATFORM_.Currently,ithasc.600BTRhomesunderconstructionacrossfivePDRschemesinBedford,Crawley,Bracknell,Stevenage,andExeter.AllWestrock’sschemesareofficetoresidentialconversionsdevelopedunderPDR.“PDRallowsWestrocktobringforwardmorehomesfaster,asitdoesnothavetoengageinlengthySection106negotiations.”Thecompanyconsidersthatallthehomesthatitisdevelopingareadditionalasitisnotdeliveringmarketsaleproduct–itisaggregatingresidentialunitsforlong-terminvestment.
Miflats MiflatsisCriterionCapital’sPRSbrand.Itcurrentlyhas11schemesinitsportfoliolocatedaroundtheLondoncommuterbelt,witharound700unitscompletedandadevelopmentpipelineof1,700.AllMiflatsschemesareformerofficesbeingconvertedtorentalunitsunderPDR.Thisallowsthecompanytodesignunitssuitablefortherentalmarketwithoutconstraintfromdesignguides,planningrestrictionsorspacestandards.
Accelerationonhousebuilders’sites
Sigma Sigma,thePRSspecialist,developedapartnershipwithGatehouseBankplcforthedeliveryoflarge-scalePRSportfolios.SinceconstructionbeganinDecember2014,Sigmahascompletedits1,000thunit.ByNovember2016,Sigmaisdeliveringinexcessof2,500newrentedhomes.
BecauseSigmaisnotreliantonsalesrates,itcandeliverunitsmuchfasterastheabsorptionofrentalunitsishigher.ThisapproachtodeliveryhasallowedSigmatobuildupsignificantnumbersofassetsatafasterpacethanseenpreviously.
ThedeliveryspeedofPDRunitsisduetoasimplerandfasterplanningprocess.
ThePerfumeFactory,EssentialLiving
ZinniaMansions,EastVillage
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SigmaisdeliveringrentalhomesonsitesbeingdevelopedoutbyCountryside,whichisbuildinghomesformarketsaleandaffordableuse,whilealsoactingonadesignandbuildbasisforSigmaonthesesites.AsitdoesnotcompeteforsaleswithCountryside,therateofdeliveryismuchfaster.Actingasanenduser,thecompanyisalsode-riskinganelementofdeliveryforCountryside.
Countrysidehasdelivered543marketsaleunitsonthesesites.ThismeansthattotaldeliveryhasbeenthreetimesfasterasaresultofBTR.SigmahasusedanalternativesourceoffundingfromCountrysidethroughitspartnershipwithGatehouse,whichhaspermittedhigherratesofdelivery.
L&QAnotherexampleofaccelerateddeliveryonlargeregenerationsitesunderhousebuildercontrolistheBarkingRiversideredevelopmentintheLondonBoroughofBarkingandDagenham.Theschemeasawholeisamixeduse,multi-tenure,multi-sizednewcommunityexpectedtodeliverc.10,800newhomes.Thescheme’scurrentbuildoutrateis500unitsperyear.DuetoL&Q’smixedtenureapproach,itexpectstoincreasedeliverytoc.1,000peryear,whichwillhalvethedevelopmentperiodto10years.L&QattributesthefasterbuildoutratetotheinclusionofPRSanditsstrategyislargelytoretainunitswithindevelopmentsforPRS.
L&QsecuresfundingupfrontforPRSbecausethecompanypre-sellsachunktoitsPRSsubsidiary.Inthiswayoutputcanbeincreasedanddoesnotdisplacethedeliveryofothertenuresonsite.
Fromanassetmanagementperspective,L&QviewsblocksofPRSasbetterinvestmentsbecausetheyprovidemorepotentialexitroutes,suchassellingwholeblocksto
investorsorindeedbreakingthemupandsellingtheunitsindividually,shouldtheprofileofrentaldemandchange.L&Qenvisagesholdingtheseinvestmentsindefinitelyastheyproduceincomethatcanbeusedtocross-subsidiseotheractivitiesandbecausetheytendtoappreciateinvalue.
Accelerationandfastermarketabsorption
Marketabsorptionofrentedhomesissignificantlyfasterthanforopenmarketsale.Typically,housebuildersdeliverstocktomeetaprojectedmonthlysalesrate,whichisadjusteddependingonmarketconditions.Thestrongdemandforrentedhousingandscarcityofnewsupplymeanthatunitscanbedeliveredfaster.
Quintain QuintainmanagestheredevelopmentofWembleyParkinnorthLondon.EmeraldGardenswasthefirstofmanyresidentialphases,comprising473homes,ofwhich141werebuiltforprivaterent.
Quintainsold332homesintwoyears,butleased141insixmonths,soroughlytwiceasfast.Itsexperiencesuggestsleasing415unitsin18monthsandsellingthesamenumberwithinthreeyears.
Thecompany’sviewisthatrentaldemandismuchmoreconstantthanbuy-to-letinvestordemand,andmuchlessaffectedbymarketconditions.Buildingfortherentalmarketisconsideredlessriskythandeliveringintothesalesmarket.
East Village AnotherexampleofhighlevelsofmarketabsorptionthroughthedeliveryofrentedhomesisatEastVillageinStratford,EastLondon.ThisisthelargestBTRschemeinLondonandemergedfollowingthe2012OlympicGames.Thevillagecomprises2,818homes,ofwhich1,439aremarketrenthomesownedbyclientsofDelaney,QatariDiarandAPG,operatedbyGetLivingLondon(GLL).
GLLreportsthatEastVillageisfullyletandthat,onaverage,duringtheletupphase(oneyearand10months)itsawc.15unitsabsorbedeachweek.Deliveringthesamenumberofhomesasopenmarketsalewouldhavetakenabouteightyears.
AcceleratedmarketabsorptionatEastVillage
Accelerationandunlockingdevelopment
Stakeholderssuggestedthattheprovisionoflargevolumesofrentedhomescanhelptounlocksitesthathavepreviouslyremainedundeveloped.AnexampleistheformerGlaxoSmithKlineandSunblestBakerysiteinGreenford,whichwasacquiredearlierthisyearbyGreystar,whoisthelargestUSmulti-familyoperator.
ThesiteinGreenfordwasacquiredbyGreystarwithanoutlineplanningconsentfor593homes.Bydeliveringamixed-useschemethatlargelycomprisesrentedhomes,ratherthanopenmarketsale,Greystarhasmadeanupdatedplanningsubmissionforamuchlargerschemeof1,965units.Adeliverystrategythatisfocusedonrentalhousinghasleddirectlytoaplanningapplicationforanadditional1,372homesthatwouldotherwisenothavebeenbuilt.
BTR Buildtosell
Numberofunits 1,439 1,439
Letuprate 15perweek 15permonth
Deliveryperiod 95weeks 95months
Thestrongdemandforrentedhousingandscarcityofnewsupplymeansthatunitscanbedeliveredfaster.
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Thenewrentalneighbourhoodisalsoexpectedtobedeliveredsignificantlymorequicklythanacorrespondingfor-saledevelopment.Therecentplanningapplicationalsoincludesprovisionforaproportionofrentedunitstobedeliveredatadiscounttothemarketrentlevel.
Acceleratingbuildoutrates
Buildoutratesareconstrainedbytherateatwhichdeveloperscanselltheirunitstoindividualbuyers,particularlyonlargerschemes.BTRcanhelpacceleratehousingdeliverybecauselettingupratesarefasterthansalesrates.CommentssuggestthatbuildoutratesonBTRschemescouldbebetweenthreeandfivetimesfasterthanonfor-saleschemes.
Buildoutratesarerelativelysimilaracrossalltypesofmarketonsmallersitesoflessthan50units.However,onlargersitesbuildoutratesaremuchhigherinstrongermarkets,inwhichmorelargesitesarebroughtforward.
Onlargeurbansites,wellconnectedtoemploymentmarkets,BTRcanacceleratebuildoutratesthreefold.Ifthiscanbeachievedon,forexample,20%ofthelargesitesthatarecurrentlybeingdelivered,thiswouldequatetoadditionaldeliveryof6%.Thisisaroundanadditional10,000homesperannum.
Jobcreation
ThejobcreationbenefitsofBTRareillustratedbytheFerryLaneschemeinWalthamstow.Plansforthedevelopmentincludenewcafes,afoodstore,communalworkingspaces,openlandscapedareasandcommunalleisurespacesforresidents.Thisisexpectedtocreateupto100long-termlocaljobsaswellas3,000temporaryrolesoverthelifetimeofthedevelopment.Withinthescheme,aproportionofaffordableunitswillbeletonadiscountedmarketrentbasis.
ThePerfumeFactory,EssentialLivingMirabelleGardens,EastVillage
EastVillage,GetLivingLondonVestaHouse,EastVillage
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The challenges of Build to RentOurresearchalsoidentifiedthechallengesholdingbackthesector.AkeyconclusionfromthestakeholderengagementisthatpolicyrequiresaclearplanningdefinitionofBTRtohelpprovidecertaintyforplanningnegotiationsandforinvestors(usedinitsbroadestsense)tocompeteforopportunities.
DefinitionofBuildtoRent
AkeyfindingfromthestakeholderworkshopswasthatpolicyrequiresacleardefinitionofBTRtohelpprovidecertaintyforplanningnegotiationsandtoensurecertaintyforinvestorsbiddingforopportunities.
StakeholderswereclearthatiftherewerecertaintythattheaffordablerequirementforaBTRschemewouldbediscountedmarketrent(DMR),asopposedtootherformsofSection106(S106),thiswouldgreatlyimprovetheviabilityoftheschemeandtheirabilitytobemorecompetitiveonbiddingforpotentialopportunities.
SincethepublicationoftheGreaterLondonAuthority’sSupplementaryPlanningGuidance,thereareanumberofprecedentsofBTRbeingdeliveredwithDMRinsteadoftraditionalformsofS106affordablehousing,whichallowsinvestorstomanageschemesholistically.Publicauthoritieshaveusedcovenantstoensurethattheschemesbuiltintheirboroughsandthediscountedrentalunitsremainintherentalmarketforadefinedperiod.
Thisapproachhelpsrentalschemescompetewiththevaluesderivedfrommarketsale.Italsomeansinvestorscanvaluetheinvestmentoveritslifetime,programmerepairandmaintenanceofabuildingwithouthavingtonegotiatewithathirdpartyand,mostimportantly,quantifythecostofrepayinganypreferentialtreatmentthattheschemehasreceived.
Thecovenantperiodisonlyrelevanttotherepaymentoftheaffordableunitsshouldtherebeacaseforrecovery.ThemechanismworksintheUS,wheretherestrictionorcovenantislinkedtothefinance,soinvestorscanquantifythecostofanyconcessions.
Planningandaffordablehousing
ManyintervieweeshighlightedtheconstraintsoftheplanningsystemforBTRandtherelativelackofexperienceandknowledgeacrosslocalauthoritiesofBTR,comparedtobuildforsale.
AlthoughthereissomeguidancefortheBTRsectorsetoutinNationalPlanningPolicyGuidance(NPPG),itwasfeltbyrespondentstotheresearchthattherearealackofclearpolicies.Thecurrentplanningpolicyframeworkisseenasfavouringthedeliveryofowneroccupationandaffordablehousing.ManybelievethatBTRneedsadifferentapproachfromaplanningperspective.
ProblemswithtraditionalformsofS106affordablehousingwerealsohighlightedbystakeholders.ThereisgeneralconsensusthatdiscountedmarketrentworkswellforBTRandinvestorsarekeentoprovideitalongsidemarketrentunits.Inparticular,DMRunitscouldbetenureblindwithinschemes,‘pepperpotted’amongopenmarketrentalunits.
AcleardefinitionofBTRcanhelpprovidecertaintyforplanningnegotiationsandtoensurecertaintyforinvestors.
ManystakeholdersbelievethatBTRneedsadifferentapproachfromaplanningperspective.
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DMRisconsideredthebestaffordableproducttositalongsideBTRbecauseitdeliversatenure-blindproductforoccupiersandadevelopmentthatcanbemanagedseamlesslybytheinvestor.Incaseswhereacovenantisgiven,keepingadevelopmentasrentalforasignificantnumberofyears,DMRisregardedastheaffordablehousingprovision.TheunitsinthedevelopmentremainatDMRforadefinedperiodandmayreverttobeingaPRSatfullmarketrent.
DMRismoreflexiblethanotheroptionsasitenablestenantsto‘staircase’betweenrents.Forexample,thismightinvolveatenant’ssalarybeingreviewedeveryfiveyears.Ifthetenanthasmovedincomebands,heorshewouldalsomovebetweentherentaldiscountbrackets.Insomecircumstances,atenantmightalsoaskfortheirrenttobereviewediftheircircumstanceschange.
Thismethodalsobenefitsthelocalauthority–ifatenantonDMRmovesuptomarketrent,aseparateunitbecomestheDMRunitandsothepercentageofunitsatDMRremainsat25%forthewholeoftheagreedcovenant.
TheneedforcovenantstoensurehomesremaininthePRSforaminimumamountoftimeiswidelyrecognised.Withoutcovenants,itisdifficulttogetthesupportoflocalpoliticians,whowouldfearthepotentialriskofpeopletakingadvantageofthesystem.
Planningandregulations
AlackofflexibilityinplanningregulationscanbethebarriertoBTRhousingdevelopment,inparticularcarparkingstandards,designandspacestandards,andunitmix.Forexample,unitmixBTRoperatorsreportthatdemandforPRSunitsdiffersfromthatforunitstobedeliveredforopenmarketsale.Inparticular,policyrequirementstodeliverthree-andfour-bedroomunitsarenotalwaysappropriateforBTRschemes.
Engagingwithlocalresidents,particularlyonparkingandtraffic,isalsohighlightedbystakeholders.BTRschemestendtobesituatednearpublictransportandrequirelesscarparkingandthisspacecouldbeputtomoreeffectiveuseforadditionalrentalincome,whetherthroughmoreresidentialunitsoramenityspacefortenantstouse.
Pricingandvaluation
ManyintervieweescommentedthatBTRschemestendtoputalowervalueondevelopmentsitesthanforsaleappraisals.Residentialdevelopmentisdifferenttocommercialinthatithastwopotentialendusers–ownersandrenters.Wheredeveloperscansellonaretailbasistoowners(orinvestorspayingretailprices,i.e.buy-to-letinvestors),thishasbeenthepreferredroutetomarket.Valuestendtoexceedinstitutionalinvestmentpricing,whichisbasedonamultipleoftherentalincome.
BTRisverymuchayield-basedpricingmodel.Investorsstatedthattheirbiddingpricereflectsthetargetyieldtheyrequire.A20%discountistypicallyrequiredfromthevaluesthatcouldbeachievedfromsalestoretailinvestors.
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However,housebuildersstatethatthe20%discountwhichinvestorsarelookingforistoohigh.Oneofthehousebuildersinterviewedsuggested:“Inthecurrentmarketitdoesn’tmakeanysense,butinaweakermarketwecanpotentiallysupportadiscountfrom7%to10%ofmarketvalue.Giventhathousebuildersoftenofferincentivestobuyers,wipingoffthislevelfromtheretailsalespricesbringsthetwoinline.”
Otherstakeholdersstatedthatdiscountsreflectthedifferenceinmanagementcosts–thebuy-to-letmodelinvolveslowermanagementcostsandthereforegrosstonetleakageisaround12%,whileBTRisusuallybackedbyabankandrequiresprofessionalmanagement.Leakageismuchhigherataround25–27%.Managersalsorequireasinkingfundforreactiverepairs,whichmeansthatBTRinvestorsareunabletocompetewiththepricesthatbuy-to-letinvestorsarewillingtopay.
FinancingBuildtoRent
PRSinvestmentandBTRdevelopmentisfundedinavarietyofways.Passivecapitalinvestorssuchasinstitutionalinvestorsarelessreliantondebtmarketsandfundinvestmentwithequityfromtheirinvestors.
However,activecapitalinvestors,operatorsanddevelopersaremuchmorereliantondevelopmentdebttodeliverschemes,manyofwhichareverycashintensiveandlarge.
Fourkeyproblemsrelatingtofinanceareidentifiedintheresearch:
• Capacityofthedebtmarketstolend
• Immaturemarket
• Trackrecordofborrowers
• Scaleoftheassets.
GiventhenascentnatureofBTRandthefactthatschemesareoftenverylarge,requiringverylargeloanswithlimitedinformationtounderwritethedeals,lendersattachahigherriskweightingtotheseloans.ThismeanstheyneedtoholdmorecashontheirbalancesheetandrestrictsaccesstodevelopmentfinanceforBTRdevelopers.
ThegovernmenthassoughttoovercomesomeofthesebarrierswiththeintroductionoftwofundingschemesforBTR–theHCABuildtoRentFundsandthe£3.5bnPRSDebtGuaranteeScheme.TheBuildtoRentfundingschemeisnowpartofthelarger‘HomeBuildingFund’whichcomprises£2bnofinfrastructurefundingand£1bnofdevelopmentfinanceforhousing.
AnumberofstakeholdersnotedthattheHCAandtheDebtGuaranteeSchemeareamassingvastamountsofinformation,whichcouldbeaggregatedandusedbylendersandothersseekingtoworkwiththenewBTRsector,helpingtoreducetheirrisks.
Taxissues
Stakeholdersalsonotedthat“adefinitionwouldbebeneficialfortaxpurposes”.ThereareanumberoftaxissuesthatdisadvantageBTR,includingVATonrepairsandmaintenanceandhigherratesofSDLT.VATonrepairsandmaintenanceactsasadisincentiveforlandlordsandinvestorstoundertakemaintenanceandrepairsbecause,unlikecommercialmarkets,theycannotrecovertheVAT.
TheresearchhighlightsthatthehigherratesofSDLTcomparedtoowneroccupierbuyerseffectivelymeansthatanowneroccupiercanpaymoreforaproperty.Thisinturnisonereasonwhybuild-to-sellschemescanbidmorefortheland.Forexample:“Thestampdutysurchargeeffectstheeconomicsoftheschemeastheyarenotonalevelplayingfieldwithowneroccupiers,”and:“DefiningBTRwillhelpcreatealevelplayingfieldoncompetitionforland.”
StakeholdersdiscussedwhetherthedefinitionofBTRshouldrelatetoscale.VariousstakeholderswerekeentosetaminimumsizeforschemestoqualifyasBTRforplanningandtaxpurposes.Commentsrangedfrom:“Scaleisfundamentalwithinthedefinitionbecausetherearedifferentlevelsofrisksassociatedwithdifferentsizedschemes”tootherssaying:“ScalecomesintothedefinitionofBTRwhenyoustartthinkingaboutAffordableHousing,”and:“Aschemeshouldhaveatleast50unitstoqualifyasBTR.”
OthersstatedthatthedefinitionofBTRshouldbebasedonmanagementandoperationalstructuresandownership,notphysicalattributessuchassize,scaleorpropertytypes.“BTRisprofessionallymanagedstockinsingleownership,whichcouldbecovenantedandcouldincludediscountedmarketrentaspartoftheinvestment.”
ThestakeholdersdiscussedtheideaofimposingcovenantsonBTRdevelopmentstoensuretheyremainedinthePRSmarket.Therewasageneralconsensusthatcovenantsareagoodidea.MakingBTRmorecompetitiveincircumstanceswherethecovenant(arestrictiononuse)bringswithitotherplanningconcessionswouldenhanceviability.
Onepointthathasemergedfromtheinterviewsisthataunitthatiscovenanted,suchthatitcannotbesoldseparately,mayceasetobetreatedasadwellingforVATpurposesandwillincurirrecoverableVATonconstruction.Thisisapotentialstumblingblockforrollingoutcovenants.HousebuildersrecoveranyVATpaidonconstructionbecausetheyselltheassets.
AcleardefinitionofBuildtoRentwouldbebeneficialfortaxpurposes.
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What’s next?Althoughitisstillinitsearlystages,theBTRmarketisrapidlydevelopingasasignificantassetclass.
ThisresearchdemonstratesitsincreasingimportancetotheUKpropertyindustry,bothasawaytoaddressthelackofhousingsupplywhiledeliveringsocialandeconomicbenefitstolocalcommunities.
Theseincluderegenerationbenefits,withresidentscreatinggreaterlocalspendingpower,aswellasplacemakingbenefitsbroughtaboutbyhighabsorptionrates,especiallyonlargemulti-phaseregenerationschemes.
Itisestimatedthatforevery500BTRunits,approximately15long-termjobsarecreated,inadditiontoconstructionjobs.ThesejobswillgeneratewidereconomicbenefitswhicharenotpricedintothenarrowercommercialincentivesrelatingtoBTRschemesandalternativecompetingpotentialusesofpossibleBTRdevelopmentsites.
ConsultationwithindustrystakeholdershasidentifiedanumberoffactorsthatneedtobeaddressedtohelptheBTRmarketfulfillitstruepotential.
BTRdefinitionAstatutoryplanningdefinitionisverydesirableto
accelerateandmaximisedeliveryofhomes.Suchadefinitionislikelytobeaprerequisiteforimplementing
otherplanningpoliciesandtoensureconsistencyofinterpretationacrosslocalauthorities.
CovenantsandclawbacksTherecouldbenationalguidanceontheuseof
covenantsandclawbacks.Thiswouldhelpwheretherehasbeenaconcessiontoenhanceviabilityofaffordablehousingprovision,localauthoritiesareusingconsistent
clawbackmechanisms.
DiscountedMarketRentNationalpolicycouldmakeitclearthatdiscounted
marketrentisanacceptableformofaffordablehousingforBTRwherethereisarequirementtoprovideaffordablehousinginthesameblockas
privaterentedunits.
PlanningpreferenceforBTRonlargesitesNationalandlocalguidancecouldencouragelocalplanningauthoritiestorecognisethesignificantadditionalitybenefits
ofBTRwhenworkingwithdeveloperstobringforwardphasesoflargesites.Thismeanstheycanbebuiltoutearlierthanotherwiseplanned,alongsidetheearlybuild-to-sellphases.
Itisestimatedthatforevery500BTRunits,approximately15long-termjobsarecreated.
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DesignandspacestandardsNationalpolicyandguidancepromotegreaterflexibility
ondesignandspacestandardsinhigh-densitytowncentrelocationswithgoodaccesstotransport.Localauthoritiesneed
guidanceonkeyfactors(carparking,unitmix/size,singleaspectandunitspercore)thatcanimpactonBTRviability.
HomeBuildersFundTheHomes&CommunitiesAgency(HCA)coulduse
anexplicittrancheoftheHomeBuildersFundforPRStodemonstratethegovernment’scontinuedcommitmenttodeliveringgoodqualityrentedhousingthatisowned
andmanagedbyprofessionalinvestors.
SDLTamendmentsExemptlarge-scaleinvestorsfromthe3%SDLT
surcharge.ThereappearstobeprecedentssetbytheScottishgovernment’sdecisiontoexemptinstitutionswhenthesurchargewasintroducedandthiscanbe
investigatedfurther.
GovernmentDebtGuaranteeforPRSThegovernmentshouldconsiderextendingthe
£3.5bnDebtguaranteeforPRSintermsoftimeandscopetogiveconfidencetolendersinthespacethat
therewillbeinvestmentorend-buyerfinanceavailabletohelpthemarketscaleupandmature.
MarketinformationandtransparencyBoththeHCAandVennhaveaccesstoauseful
rangeofinformationanddataonthenewBTRsector,whichwouldbehelpfultolenders
underwritingtransactionsifthedataweremadeavailableinaggregateform.
VATamendmentsChangestotheVATregimeintermsofzero-rating
thecostofrepairsandmaintenancewouldimprovetheviabilityofalargenumberofBTRsites.
VAT
£
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