Build to rent

Build to rent involves the construction of dwellings specifically for the rental market, rather than the more traditional route in the UK in which developers build dwellings which they then sell, either to householders or to landlords. Build to rent creates a longer-term business model in which income is generated over time from renting dwellings, rather than a one-off sale the profitability of which will depend on short-term market fluctuations.

The National Planning Policy Framework (NPPF) defines build to rent as: "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."

The National Planning Policy Framework was revised in response to the Levelling-up and Regeneration Bill: reforms to national planning policy consultation on 19 December 2023 and sets out the government’s planning policies for England and how these are expected to be applied. This revised Framework replaces the previous National Planning Policy Framework published in 2012, 2018, 2019, 2021 finally updated in September 2023, for further details follow this link National Planning Policy Framework updated 2023.

In January 2024 Savills published a summary report entitled The Future of Build to Rent Houses. An industry-funded piece of research that considered the future role of the single family housing market in meeting current and future rental demand and Government’s homebuilding targets. See The Future of Build to Rent Houses - summary report.

[edit] Background to the term

In January 2019, the British Property Federation (BPF) reported that the number of build-to-rent homes under construction in the UK had increased by 39% in the year between Q4 2017 and Q4 2018. This equates to 43,374 build-to-rent homes compared to 31,250 at the end of 2017. Ref https://www.bpf.org.uk/media-listing/press-releases/building-boom-uk-build-rent-housing

In September 2018 the UK government published Build to rent - Guidance on build to rent, with reference to affordable housing and Scheme management.

In September 2016, RICS reported that 86% of landlords had no plans to increase their rental portfolio and called on the government to do more to encourage, rather than dampen, investment in build to rent. For more information see: 86% of landlords have no plans to increase their rental portfolio.

In March 2016 The Urban Land Institute (ULI UK) launched the second edition of, Build to Rent: A Best Practice Guide. The first edition, launched in April 2014, set out the differentiating factors in the design, development and management of purpose-built residential accommodation. The new edition has updated sections on form and layout, sustainability, engineering and construction and fit-out specification as well as new chapters on the customer, cost and procurement and planning and viability.

In April 2015, an open letter to the next government was published by Better Renting for Britain, a campaign supported by the British Property Federation (BPF).

The campaign, by developers, pension funds and housing associations is intended to promote the delivery of housing for long-term rent, and proposes that the sector will work to deliver £30bn of new housing. This, they suggest is enough to build more than 150,000 homes, housing around 350,000 people. The £30bn figure was based on a survey conducted by property agents Savills of 33 institutions, property companies and Registered Social Landlords (RSL’s) to understand their ambitions in terms of investment into the UK rental market.

The letter warns that housing targets will go unmet without additional private sector funding and suggests that the build to rent sector could play a crucial role in solving the housing crisis, improving the quality of housing and financing more development.

It proposes creating an American-style rental market in which companies own large portfolios of homes, and tenants rent for years rather than months, with inflation-linked rents. Investors earn long-term income rather than speculating on house prices going up.

The letter states, “We want to create more professionally managed rented housing, purposefully designed and built with the long term occupier in mind….. America’s $27.5tr housing market includes a mature and thriving Multi-Family rental sector. Buildings are designed specifically for rental, and offer a range of unit type and size. Developments tend to be large, located in urban centres, usually offering several hundred apartments, rendering the associated infrastructure and amenities viable. The Multi-Family sector, as it’s called, also provides lower rise housing in suburban locations to cater for a wide range of consumers including families, with facilities chosen to support their long term occupation.”

The letter made five requests from the next government to unlock build to rent investment:

• Councils should identify how much rented housing they need and allocate land to it. It can ensure that housing is rented and not sold by agreeing covenants with developers.
• Idle public land should be used to generate income for councils by developing rental blocks.
• A modernised approach to affordable housing which recognises the wholly different funding structures relating to build to rent compared with housing for sale.
• The sector to continue operating as a free market, which is vital to securing investment.
• Work with us to promote best practice, better inform the public and help improve the perception of the entire rented sector.

Harry Downes, managing director of Fizzy Living, said, “Because we’re backed by long-term capital we can make a cast-iron commitment to not sell-off the homes we build. It means we can do so much more in offering hassle-free, high quality urban living that’s priced fairly and available for years, not months, offering a genuine alternative for Britain’s growing army of renters.”

Andrew Brentnall, Head of Funding & Development, Residential Capital Markets, at Savills, said, “Build to Rent could offer a large quantum of capital for additional homes across the UK which will further help to service the needs of an increasing number of renters in the locations that we need it most. Private renting has increased by 79% since 2003 and institutional investment is vital for its continued growth. If the considerable demand from new tenants is not met by new stock, rents will rise due to lack of supply. It is therefore very important to attract, and retain, new investment into the sector. Our forecast is that rental demand will rise by a further 1.2 million households by the end of 2019”.

[edit] Related articles on Designing Buildings

• Affordable housing.
• Affordable rented housing.
• Build to rent best practice guide.
• Help to buy.
• Housing associations.
• Intermediate housing.
• Interview with Melanie Leech, BPF.
• Real Estate Investment Trusts.
• Rent to buy.
• Section 106 agreements.
• Social rented housing.
• Types of development.