"Build-to-rent scheme less viable in smaller towns and cities"
![Institutionalisation of rental market will not drastically impact smaller landlords, expert claims](https://cdn-res.keymedia.com/cdn-cgi/image/w=1000,h=600,f=auto/https://cdn-res.keymedia.com/cms/images/us/077/0311_638161086858327245.png)
Roxana Mohammadian-Molina, chief strategy officer at Blend Network, has suggested that an apparent move towards institutionalisation of the private rental market will likely not significantly impact smaller landlords.
Mohammadian-Molina (pictured left) said, however, that build-to-rent student accommodation was an entirely different story.
“Here, I believe, smaller private landlords will be negatively impacted as they are unable to compete with institutional landlords who have access to more resources and economies of scale than small landlords,” she said.
Government policy in recent years has seemingly favoured of institutionalisation of the private rental market, with increasing backing given to build-to-rent residential schemes.
However, these residential schemes have so far focused on large urban areas with a sizeable, young professional population, such as London, Birmingham, and Manchester, where the proportion of accommodation owned by smaller private landlords has historically been smaller.
More resources and economies of scale, Mohammadian-Molina said, also meant that institutional landlords were able to offer better amenities in the rental properties - something that smaller landlords were unable to compete with.
Overall, Mohammadian-Molina said the impact of a more institutionalised private rented market on the market could be mixed.
“On the one hand, a more institutionalised rental market may lead to higher quality housing stock, which is very much needed,” she said.
However, conversely, Mohammadian-Molina accepted that rental properties provided by institutional landlords tended to come at a higher cost for tenants, and many were simply not able to afford them, especially in the current economy.
Mohammadian-Molina concluded that the current market conditions, rising interest rates and tight credit for SME property developers, planning issues, planning delays and planning reforms, as well as the high cost of land, had created a ‘perfect storm’ for the private rental market which would continue to see rents increase this year.
Meanwhile, Rob Gill, managing director of Altura Mortgage Finance, suggested the trend of large lenders moving into the rental business was certainly a significant development, and he believed this move had the potential to impact small private landlords in several ways.
“Firstly, small private landlords may face increased competition from large lenders who are able to offer better amenities and lower rents due to their larger portfolios and resources, which may result in smaller landlords struggling to attract tenants and maintain occupancy levels,” said Gill (pictured right).
Secondly, Gill said large lenders might have greater bargaining power when it came to property management and maintenance services, potentially resulting in lower costs for their rental properties.
He believed this could put further pressure on small private landlords, who may not have the same level of bargaining power.
Overall, while the entrance of large lenders into the rental market might present challenges for small private landlords, Gill said it could also have a positive impact on the market as a whole.
“The increased competition could result in more affordable rental rates for consumers, as well as encourage larger investment in new housing developments and affordable housing options,” he added.
Gill believed it was likely that the rental market would continue to be influenced by a range of factors, including economic conditions, government policies and regulations, as well as shifts in consumer demand.
“One thing that is clear is that the rental market is likely to remain a key area of focus for both large lenders and small private landlords, as well as consumers who are seeking affordable and high-quality rental accommodation,” Gill said.
As such, Gill thought it was important for all market participants to stay informed and adaptable in order to thrive in this evolving landscape.
What impact do you excepted larger lenders moving into the rental space to have on the market? Let us know in the comment section below.