The challenges of build to rent for UK housing providers
24th June 2013
Britain’s housing crisis is well documented. Supply has failed to keep up with demand for many years, keeping prices historically high despite a prolonged downturn. This has become particularly pronounced in the private rented sector which in many parts of the country is now more expensive than owning a home.
Kick starting the development of purpose built rental accommodation in the UK to increase the supply of private rented homes for those who are shut out of home ownership must now be a priority. As well as growing supply, build to rent could bring to market a new rental offer for tenants: purpose built accommodation, greater security of tenure, more transparent rental increases and more consistent management quality, with a new breed of lettings agents and asset managers.
This briefing note looks at the challenges that build to rent poses for housing providers. It is based on a six month project conducted by the Resolution Foundation and Social Finance to develop a financing model for institutional investment in a build to rent portfolio of 778 rental units nationwide aimed at middle income households. The portfolio is made up of 16 unique developments in London, the North West, South West, Midlands and Scotland put forward by the project’s six housing partners: the Dolphin Square Foundation; Derwent Living; GreenSquare Group; Great Places: Home Group; and Plus Dane. The housing partners have been closely involved in the development of the modelling and have provided extensive information on development and management costs and expected rents for each development. A report outlining the project’s full findings, including expected investor returns, will be published in September 2013.