Planning matters

The Build to Rent sector is booming. But is the boom reflected in local plan policy across London?

Research by the British Property Federation earlier this year found that the Build to Rent (BtR) sector pipeline grew by 8% in 2021, and showed construction in regional cities in the UK outpacing London. There has been notable investment activity driving investment levels in BtR upwards in the last two years, with various acquisitions and deals listed in this article and many pension funds diversifying into the BtR market.

But where BtR will be focused is informed by planning policy; perhaps the most important public policy issue that impacts the location and implementation of BtR.

The birth of BtR within the UK can be traced to 2012 as part of the legacy of the Olympic Games in London with the conversion of the East Village into rental properties. As BtR has evolved, so too has national and strategic planning policy which seeks to control – and mostly support – this specific housing product. The National Planning Policy Framework (NPPF), associated Planning Practice Guidance (PPG) and the London Plan have all released BtR-specific commentary to clarify the nuances and requirements of what is still a relatively new sector with differing planning requirements.

The NPPF (2021) definition sets out that BtR is: “Purpose built housing that is typically 100% rented out. It can form part of a wider multi-tenure development comprising either flats or houses, but should be on the same site and/or contiguous with the main development. Schemes will usually offer longer tenancy agreements of three years or more, and will typically be professionally managed stock in single ownership and management control.”

Meanwhile, the London Plan (2021) qualifies the criteria BtR schemes in London must meet (Policy H11): all units being self-contained and let separately with longer tenancies available to all tenants; being held under a 15 year+ covenant with a clawback mechanism to ensure the covenant is not broken; having unified ownership and unified management with an on-site presence.

The Plan explicitly requests that boroughs “take a positive approach to the Build to Rent sector to enable it to better contribute to the delivery of new homes”.

But how is this strategic support reflected at the local level by London Boroughs?

We have undertaken research to understand how the 32 London boroughs are responding to the growth of the sector and the strategic obligation to support the asset class in their local planning policy.

 

As with many policies issues across London, the picture is mixed:

• There are six authorities with explicit policies that support BtR in adopted Local Plans, where developments adhere to other plan policies and controls.
  
  
• Six authorities have draft policies supportive of BtR.
  
  
• Six authorities reference support of BtR in their supporting text and five authorities reference general support of high quality PRS schemes though without explicit reference to BtR.
  
  
• Only LB Islington’s draft Local Plan policy is expressly against BtR development in the Borough, stating the ‘PRS development model does not have a tole in meeting identified housing need in Islington.’
  
  
• 11 authorities do not make reference to BtR in the Local Plans at all.

Our research shows that there are more boroughs with a supportive approach to BtR than not and, as a general rule, it appears the central boroughs are more supportive to BtR or have a policy position, generally aligned with the London Plan.

Moving forward, we expect the position shown in our map to change as Local Plans are reviewed and are required to demonstrate conformity with the London Plan. However, as planning policy often seeks to counter a sector’s proportionate growth in the property market (think London student housing), there may also be an increase in the number of authorities who seek to limit BtR as a response to the increase in the number of schemes.

What is clear is that BtR is a sector which will continue to mature and evolve over time. How planning policy responds and adapts to this will be key to the future direction of the sector.

The map below demonstrates an overview of our findings[1] - hover over each borough to find out more.

For further details of this borough-level research and our experience and intel in the BtR sector, please do get in touch.