John Rodger: Build to rent can help ease housing crisis

John Rodger: Build to rent can help ease housing crisis

John Rodger

John Rodger, part­ner and prop­erty spe­cial­ist at ac­coun­tants Chiene + Tait, discusses how the built to rent sector can help ease the UK’s housing crisis.

A range of global firms, including Scotlandfounded institutional investor Abrdn, have been ramping up their level of investment into the UK’S build to rent (BTR) sector. With home ownership becoming increasingly unaffordable and a lack of high quality private rental housing available on the market, the BTR sector offers investors strong returns compared with other, more volatile sectors. It could also deliver tangible benefits for consumers and make renting a more attractive long-term option as in many parts of Europe.

With Scottish house prices rising by more than 20% between March 2020 and November 2021, like it or not, renting remains a reality for many. The growth in BTR investment can, however, support that demographic.

BTR developments are typically based in central locations with good local amenities and transport links, with easy access to workplaces and core services. This focus on location and quality housing provision, which helps ensure high occupancy levels, makes it an appealing investment offering strong return for financial institutions. While this doesn’t help aspiring homeowners get on to the property ladder, it has real potential to improve both the quality and quantity of housing available on the private market.

The growth of the BTR sector combined with proposed Scottish Government legislation to introduce stronger rights for tenants has the potential to Europeanise the housing market and improve the position of who those who rent private residential property.

IN Germany, where home ownership is significantly lower than in the UK, long-term private rented accommodation makes up more than half the nation’s property stock. Unlike the assured shorthold agreements commonly used in the UK, Germans enjoy protections with their property tenancies, where the required noticed period increases with the length of residency and eviction is only possible if tenants are in breach of contractual obligations, such as significant rent arrears or damage to the property. Rents on German properties are also capped in line with rates on existing local dwellings when they are re-let, preventing significant rent increases from occurring.

German landlords must also invest in modernising their premises, required to spend at least one-third of what a new building would cost to bring their properties up to the standard of a newly built home. This approach typically creates a more positive dynamic between landlords and tenants, who are more likely to pay their rents reliably, respect their property and contribute to their local community.

While home ownership may remain the ultimate ambition of many UK consumers, the growth in BTR sector investment can benefit growing numbers while they wait to get a foothold on the property ladder.

Combined with proposed Scottish Government policy to safeguard the rights of tenants, the BTR sector has the potential to revolutionise the rental property market here benefitting tenants while delivering strong returns for investors. It will create higher quality housing stock, a more professional approach to property management, more certainty for both tenants and landlords, and the regeneration of many communities which would benefit from a long-term relationship with their residents.

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