In an open letter to the future British government published in The Times today The Better Renting for Britain campaign said there is £30bn of private money poised to be invested into building new rental accommodation in the UK but politicians must commit to help the private rented sector grow.
The group of property developers, pension funds and housing associations backed by the British Property Federation outlined five steps that the government should take to support investment in new rental accommodation.
1. Councils should identify how much rented housing they need and allocate land to it. Councils can ensure that housing is rented and not sold by agreeing covenants with developers.
2. Idle public land should be used to generate income for councils by developing rental blocks.
3. Government should modernise the approach to affordable housing, recognising the wholly different funding structures relating to build to rent compared with housing for sale.
4. The sector should continue operating as a free market, which is vital to securing investment.
5. Government should work with the Better Renting for Britain campaign group to promote best practice, better inform the public and help improve the perception of the entire rented sector.
The letter said: “We want to create more professionally managed rented housing, purposefully designed and built with the long-term occupier in mind.”
Melanie Leech, chief executive of the British Property Federation, said: “Supporting the build to rent sector will help the next government meet the housebuilding targets that all the main political parties have pledged to voters during this election.
“It will help reinvigorate our city centres and support local authorities that want to help retain their young people who need homes. And most importantly for renters it will revolutionise the sector providing greater choice of tenure length, rent certainty and high levels of customer service.”
In the letter the group acknowledged that buy-to-let investors had “played a crucial and commendable role” in supporting Britain’s housing market over the past 20 years.
But added: “Build to rent is different: groups of properties will be built specifically for long-term rent and owned by a single entity focused on the business of renting.”
Rental schemes generate profits over a long period while traditional housing is sold off netting the developer a capital receipt rather than a drip-feed of income.
This affects the cost of development taxes – known as section 106 payments – which can be levied before the whole scheme becomes unviable.
The offer of longer-term tenancies, inflation linked rents and shared amenity spaces would be made possible because the investors would support projects to earn income – rather than speculating on house prices going up, the letter explained.
Harry Downes, managing director of Fizzy Living and a member of the group, said: “Because we’re backed by long-term capital we can make a cast-iron commitment to not sell off the homes we build.
“It means we can do so much more in offering hassle-free, high quality urban living that’s priced fairly and available for years, not months, offering a genuine alternative for Britain’s growing army of renters.”
Nick Jopling, another member and executive director for property at residential landlord Grainger, said: “Not only do we need to build many more homes, but we need to make sure renters get a better deal. As a business that’s been around since 1912 we want to see a rental market that provides long term options as well as good value for money and customer service.”
Jopling added that by supporting build to rent the future British government could “encourage companies like ourselves” – Britain’s third largest residential landlord - to help increase housing supply and improve standards of living in the rental market.
The £30bn pledge is based on a survey conducted by property agents Savills on how much investors are poised to inject. 50% of this investment money originates in the UK, 10% is European and the remaining 40% involves global investors. Around 70% of the £30bn is institutional money while 17% is UK registered social landlords.
