The coming of age for build to rent
The Housing White Paper signals a clear reframing of the housing crisis, now defined by the cost of renting as well as the cost of buying. This could prove to be a watershed moment in the development of the institutionally-funded build to rent sector. Where might this go?
There is a commonly shared view that the build to rent sector is the big winner from the White Paper. Whilst simple in form, the specific provisions signal underlying changes in the Government’s appreciation of this sector, its role and potential, and perhaps even that it views the sector as a major plank in responding to the housing crisis. The absence of bold changes in respect of others areas of the White Paper, such as the Green Belt, would appear to support this.
The Government is adopting a pragmatic position; the rental sector is growing and will continue to do so. We need to work with that trend and not against it. Not least, there are significant institutional financial resources vying to enter the sector. In contrast, our current private rental sector is a relative cottage industry providing a lack of quality, choice and value for money. It epitomises our broken housing market, fundamentally constraining the economic competiveness of our towns and cities.
Yet the consumer market for high-quality rental property has grown significantly with a recent BPF/Barclays report suggesting that the number of tenants in private rented properties has doubled since 2004. It is no longer the domain of low-income households but, by choice or lack of alternative, middle and high-income groups, who increasingly rely on the sector. It is against this backdrop that the concept of building to rent has emerged as an attractive market for institutional investors in this country.
The build to rent sector is a marriage of opportunity and need. The White Paper reflects this. It recognises that we must see the housing market as a whole, target delivery stimulants at each sector and that all sectors need to be repaired. Starting with the recognition that we need to build more homes, it is perhaps stating the obvious that releasing the potential of a sector which has yet to come of age represents a potential quick win – a sector that can exist alongside and complement the build for sale sector without competing for finance, sites and resources.
Unlocking this potential is the focus.
NPPF amendments: a vehicle for delivery
The proposal to broaden the definition of affordable housing to include ‘affordable private rent’ is certainly welcome and will address a key constraint to delivery which has emerged over recent years. This is a natural and logical tweak to the planning framework removing a potential barrier to delivery.
This sits alongside a proposal to amend the National Planning Policy Framework (NPPF) to refer to build to rent (with an associated broad definition) as a form of housing that local planning authorities should consider. It is easy to dismiss this as an equivalent ‘ironing out’ amendment but its implications are potentially significant. This change presents a huge opportunity which the industry must now grasp.
The National Planning Policy Framework amendment will require local authorities to engage properly in the concept of build to rent in the development of Local Plans – a common concern is that local authorities do not properly understand the sector. This will compel local authorities to develop that understanding and to recognise the role and potential of build to rent in their local housing market. Ultimately local authorities should develop Local Plans which are able to facilitate the growth of the sector to properly reflect need and demand.
Of course Local Plan preparation is a collaborative process. It is down to the industry, developers and investors to engage in Local Plan processes to ensure this amendment to the NPPF has the desired effect on the ground and that local authorities, through the development of their Local Plans, implement this new requirement. The sector must follow the lead of the wider house-building industry which has been effective in ensuring local authorities do not forget their duty in planning for the full and objectively assessed need for new housing through Local Plans.
The proposed amendment to the Framework gives the industry the tools it needs to ensure the build to rent sector, as a distinct driver of the housing market, is given due consideration and weight in the development of Local Plans. In turn, it will ensure the local authorities put in place a firm and supportive policy platform to facilitate development. The NPPF is merely the vehicle however, and how influential this amendment ultimately is will be down to the industry. The industry now has a duty to make the most of this helpful policy hook and ensure maximum visibility of the build to rent sector, potentially working alongside the Homes Builders Federation and other housing developers.
As with other areas of the White Paper, the devil will be in the detail. At this stage the specific amendment to the Framework is not confirmed. However, if this change is to have its desired effect, we will need to see more than a passing reference to build to rent development within the Framework. Instead a clear statement, requiring consideration of the need for Build to Rent development as a fundamental part of the Strategic Housing Market Assessment process is essential.
16 March 2017