Author : Ian Barbar
Currently, the Built-To-Rent sector is experiencing a tsunami of tenants looking for homes with bills-included rents. Bills-included topped the search terms in the property sector a couple of months ago. Private and institutional landlords operating in the BTR sectors must consider this as an opportunity to explore ways to help tenants meet their needs.
Bills-included is a common strategy in the UK for student accommodation. In the general private-rented sector, the growth of tenants asking for the bills-included feature is a new and fascinating development.
The rising cost of living - the main driver of the trend
The fact that tenants are struggling to evade a steep rise in energy bills is clear from a few trends. Firstly, that they are reluctant to move to a new tenancy - as by staying put they are more likely to be able to negotiate a limited rent increase as opposed to potentially paying the new market rent. Put simply doing a deal may be cheaper than letting the landlord test the market or having to out bid others on an alternative property given the shortage of supply.
Secondly, the search for rental homes that offer all-inclusive rent options has increased exponentially.
Most renters exploring bills-included tenancies have genuine concerns about the skyrocketing cost of living, including the impending rise in energy bills. Given the energy price cap only lasts till March 2023 who knows what will happen next. Switching to a purpose build to rent property also comes with the guarantee of lower bills due to the energy efficiency of build to rent homes, A*** appliances, double or triple glazing and great thermal insulation. Having personally lived in a build to rent property at Angel Gardens in Manchester (which is Moda Living's flagship development), I can vouch for the fact that even when it was snowing outside the peoperty was still warm and comfortable without bothering to put the heating on - not something I expected in the UK. In such situations it is a win win for the Build to Rent developer to consider a 'bills-included rent' particularly if smart tech is introduced to prevent scenarios such as residents leaving heating full on then opening the windows! Or temperature limiters to prevent heating an apartment when the ambient temperature is at a reasonable level as is not unknown in the hotel industry.
Rents are consistently higher in the UK because of the shortage of rental properties and rising demand. The average monthly rent outside the capital witnessed a steep rise of 19 percent over the pre-pandemic period. A bills-included apartment may insulate tenants against the prospect of paying higher rents that strain their monthly budgets. Arguably right now renters increasingly prefer bills-included features to any other facility in a BTR home. The growth in enquiries for bills-included tenancies compared with last year stands over 36 percent.
Pros and cons of homes with all-inclusive rents
The most visible benefit of considering an all-bills included apartment is the residents ability to control their budget by streamlining and reducing the number of monthly bill payments they need to make. Further bills-included takes the 'variable' nature inherent with utilities away and acts as an energy/water industry hedge. Bills-included also gets rid of the pain of signing up to multiple utility providers. Bills-included totally removes the risk of late payment penalties and surcharges that may impact credit scores. Bills-included eliminates the risk of ransom out of contract rates being charged by utility companies.
From the landlord perspective, bills-included is an opportunity to factor in energy use, whilst buying bulk at a discount. It is an opportunity to omit some components and reduce construction costs. It is a super opportunity to promote and differentiate purpose built Build to Rent stock from a leaky victorian flat where a landlord simply could not risk including bills as with current energy pricing in some areas the cost of bills is about to match the rent!
The renter must check the rental contract
There are different levels of 'bills-included' so the rentee should check their rental contract thoroughly before signing on the dotted line. Few BTR properties include everything. So the question as to what is or is not included needs to consider council taxes, energy bills, water bills and internet consumption.
1 Convenience - An all-inclusive rent helps tenants reduce the hassles of managing several payments or hunting for different suppliers.
2 Certainty of expenditure - The bills-included rental home facilitates better budget control as there is no uncertainty about utility bill payments.
3 Immunity against rising energy bills - Most tenants consider it the most vital benefit of all-inclusive rents.
1 Excess payment - The bills-included rent package may result in the tenant paying for utilities that they do not consume for example if they are away a lot or simply use use less.
2 Losing control over expenditure - Tenants have no control over reducing utility expenses by optimizing consumption, as they must pay the fixed amount built into the rent.
3 No flexibility - An all-inclusive rent deprives the tenant of the freedom to switch service providers or install energy-efficient appliances to reduce bills.
The landlord's perspective
Providing the bills-included facility is the most attractive way to enhance the marketability of a property because it is the most sought-after feature among tenants right now.
Landlords with resources to manage utility bill payments, install energy-saving appliances, and optimize bills by switching suppliers should seriously consider offering an all-inclusive rent option. As the build to rent industry grows up and smart tech becomes more connected increasingly funding applications will require scrutiny of the investors operational track record. This means not only the traditional BMS 'building maintenance system' is required but also a BOS 'building operations system', the later gives the front desk controlles via addressable load of an array of zones, systems and components around the building all designednto reduce operational carbon and drive user behaviour.
Given time the build to rent industry will crack the age old view that if tenants are not responsible for paying their bills, they will simply behave recklessly with utilities. Given the insulating properties of quality build to rent stock built today vis-a-vie that of 50 or 100 years ago, (which due to the energy efficiency of the home reduces this risk anyway) those that still hold that view need to remember that unlike when they grew up from as young as the very first year in primary school energy saving is being engrained into our youth. Those still skeptic just need to count thr number of millenials and Gen Z walking around with their own personal water carriers or insulated coffee mugs compared to any other age group.
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