Planning matters

In the first two blog posts in this series I set out the benefits of and barriers to Build to Rent developments. This last post will explore ideas on how we can support the sector to a greater degree in order to maximise its impact and cement its role as a key contributor to solving the housing crisis.

In a recent letter to Housing and Planning Minister Brandon Lewis, The Better Renting Campaign has suggested three priority areas which could further help to support the sector:

1. A set proportion of sizable public land sites suitable for more than 100 units, be designed for long term BTR, with a presumption in favour of planning
2. Not to levy the stamp duty surcharge for second homes on professional BTR investors, as promised by the Chancellor in December 2015, to help make these developments more viable and attractive to investors.
3. Provide recognition of Discounted Market Rent (DMR) as a form of affordable housing for BTR schemes.

I agree that the release of some public sector land for BTR housing would significantly help the sector and reduce the competition with build-to–sell housing. I advocate the use of BTR quotas in Local Plans, if based on an objectively assessed need and resulting housing requirement, or as part of a brief for the development of public sector land. All of these measures would help to ensure that BTR housing is reflected in land prices and as such, would help to reduce the viability gap.

An exemption in relation to the stamp duty surcharge would help the sector and encourage investment and ultimately housing delivery. However, with investment in the sector reaching £50 billion over the next five years it is no surprise that the Chancellor wants some of this value to be captured, to help fill Government coffers. Whilst the stamp duty surcharge will no doubt impact on viability, it is generally considered that this in itself will not undermine growth in the sector. This was explained by Philip Nell, Fund Director of Vista UK Real Estate Fund, the residential property fund established by Hermes Investment Management and Countryside plc:

The call for greater recognition that DMR should qualify as ‘affordable housing’ for BTR developments is critical, as providing traditional social rented accommodation within BTR developments, managed by a Registered Provider, is not a realistic proposition. The BTR model works because the developer is responsible for the management of the entire building: a proportion of units being managed by another organisation is not seen as an acceptable proposition. On the BTR schemes that I am currently involved with, there is acceptance that DMR is a means to ensure that a BTR scheme can offer an ‘affordable housing’ contribution. This is an approach which has been applied on a number of schemes across London, for example M&G/HUB Residential in Ealing, Dolphin Living’s scheme in Westminster and Essential Living’s scheme in Swiss Cottage - it appears already to be the accepted approach in London.

Whilst DMR housing will not necessarily provide homes for those residents on a Council’s or social housing provider’s waiting lists, the discount offered will make those units more affordable for those on lower incomes. In some schemes across London, innovative approaches are being taken forward where the discount is linked with income, creating ‘Living Rents’. It is important that the BTR sector is encouraged to explore such models, in the interests of helping to house those on lower incomes and thereby help to retain the capital’s workforce.

There is clearly a range of mechanisms which could help overcome the viability issues faced by BTR developers – some which can be done today, some which need greater government support. With the sector set to triple in size by 2020 and the industry knocking on the Government’s door with suggestions of how to unlock its potential, there seems to be a real prospect that BTR could help to ease the housing crisis – but to what degree? Only time will tell but the future is looking very promising indeed for the BTR sector.