Developers, pension funds and housing associations have offered £30bn to the next government for new homes if they support a US-style rental revolution.
The amount is potentially enough to build more than 150,000 homes housing around 350,000 people, the backers claim. It would go some way to easing the pressure on the rental market, which is the fastest growing tenure in England as property prices rocket.
An open letter to the next government, backed by Hermes, Legal and General, Grosvenor and M3 Capital Partners together with the British Property Federation, states the ‘build-to-rent’ sector could play a crucial role in solving the housing crisis.
The letter, also backed by developers including British Land, Grosvenor, Essential Living, Fizzy Living and Grainger, stated an American-style rental market – where single companies own large portfolios of homes - could bolster standards offering better value and greater transparency.
It adds that the rents would be based on an offer of longer-term tenancies, inflation-linked rents and shared amenity spaces, which would be made possible because the investors are doing so to earn income rather than speculating on house prices going up.
Labour leader Ed Miliband has pledged in his election manifesto to extend default tenancies to three years and to limit rent rises to inflation, to be achieved through new laws affecting private landlords. Housebuilders had seen shares fall in the wake of the announcements.
“We need genuine acceptance that ‘build-to-rent’ differs from traditional house building,” the letter adds, referring to the fact that schemes built for rent are currently treated by planning policy in the same way as those built for sale.
The letter calls for the government to make councils set out the quantity of rental housing needed locally and then partner with developers to build some of it on public land. It also wants planning rules modernised to reflect the fact that building for rent is wholly different from building to sell.
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.”
Melanie Leech, chief executive of the British Property Federation, said: “Supporting the build-to-rent sector will help the next government meet the house building targets that all the main political parties have pledged to voters during this election.
“It will help reinvigorate our city centres and support local authorities that want to help retain their young people who need homes.
“And most importantly, for renters, it will revolutionise the sector, providing greater choice of tenure length, rent certainty and high levels of customer service.”
Andrew Brentnall, head of funding and development for 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 per cent 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 1.2m households by the end of 2019”.
Party pledges
The Conservatives have announced plans to build 200,000 starter homes for first-time buyers and extend the controversial Right to Buy scheme for up to 1.3m tenants of housing associations in England, along with the creation of a £1bn brownfield regeneration fund.
Labour also committed to building 200,000 homes a year by 2020 along with creating a ‘future homes fund’, using money saved in Help to Buy Isas to boost housing supply. For private renters, it will make three-year tenancies the norm and cap rent rises to inflation plus 1 per cent.
The Liberal Democrats aimed to build 300,000 homes a year, including in 10 new ‘garden cities’. They also promised new ‘rent to own’ homes where monthly payments steadily buy a stake in the property, along with a ‘help to rent’ tenancy deposit loan to help young people.
The Greens promised to give the Bank of England the powers it has requested to curb excesses in the housing market, which is currently under consultation. It would also scrap the government’s Help to Buy scheme and committed to building 500,000 new social rental homes.
Ukip said it would take steps to remove the barriers to brownfield builds to help build 1m homes on such sites by 2025, whilst also exempting them from stamp duty on first sale, up to the £250,000 threshold. Non-British nationals would be denied access to Right to Buy or Help to Buy.
emma.hughes@ft.com
