Could Build-to-Rent transform suburbia?
As if the property industry hasn’t got enough confusing acronyms, here’s another one: SBTR. This stands for Suburban Build to Rent and it could signal a new direction for the phenomenally successful BTR sector.
One of the biggest players in the market, Legal & General Capital, has just announced the launch of its Suburban Build to Rent business, which will see the development of “large scale ‘single family’ rental communities in suburban locations across the UK” according to a report in Landlord Today. By partnering with housebuilders, the company plans to release 1,000 homes for rent each year from 2024.
It’s a bold ambition. But judging by the success of the sector to-date, Legal & General’s new offer – a mix of houses and low density apartments incorporating home offices and more outdoor space - is likely to prove popular. It will also open up the BTR model to a whole new demographic – and that is clearly the point. To-date the shiny new BTR blocks popping up in urban centres across the country have proved popular with young professionals. Singletons and childless couples are in the majority. However, moving into provision of low rise developments with a large proportion of traditional housing will bring more families into the rental mix.
Other BTR providers have their eyes on this market too. Fizzy Living and Sigma Capital are just two of the big names starting to deliver houses for rent. We can see plenty of plus points here. Not least the undoubted appeal of community-based, well-managed developments operated by big-name landlords with strong corporate and social responsibility to both residents and shareholders. We anticipate better off renters will be willing to pay a premium for knowing that the sector is well regulated, fully compliant with all health and safety legislation and that there is a procedure in place for them to raise problems or complaints. Government too will likely favour this move for BTR providers to muscle-in on the territory of buy-to-let landlords. After all, the diverse, largely amateur BTL sector is much harder to regulate and monitor.
There is little doubt that there will always be a place in the PRS for the small landlord, particularly where they can offer decent homes at the cheaper end of the market. After all, not everyone wants to live in a new build cookie cutter development – nor can everyone afford to.
However, the clear intention of BTR providers to expand their offer could have a long term negative impact on the traditional rental market. The sector is already under the cosh and on top of reductions in tax allowances and additional regulation is now facing a potential increase in Capital Gains Tax. Add to this the fact that almost 50% of UK landlords use their BTL investment to finance their retirement, and the consequences of a shrinking pool of potential tenants could potentially be very serious indeed.
Author : Maryanne Bowring