You may not have heard of Build to Rent (BTR) because it’s a new part of the lettings sector, however, it’s growing fast. So, what is build to rent?
A build to rent development consists of clusters of at least 50 homes (usually apartments) designed and purpose-built to let to private tenants.
Blocks of BTR apartments are typically funded by financial institutions who see them as a long-term investment – they earn rent from tenants over many years as the return on their investment.
BTR blocks may well have a ‘brand name’ and be of a higher standard than most other privately-let properties, which tend to be converted houses that are owned and managed by individual landlords.
As of January 2020, there are 40,200 BTR apartments across the UK, with just over 35,000 under construction and 75,500 others planned – that sounds a lot but there are five million households privately renting, so BTR remains a very small part of the rental sector…for the moment.
How is Build to Rent Different?
Firstly, Build to Rent blocks usually have better facilities than you find in individual apartments.
For example, a BTR scheme at Wembley Park in north London has ultra-fast broadband and access to an on-site gym included in the rent. Some others have concierge services to handle bookings for tenants or to take in deliveries and messages.
A few have high-end communal services like a media room, lounge area or even a swimming pool, and most will allow tenants to keep well-behaved pets.
Secondly, BTR has a reputation for being well-managed.
While an individual landlord or letting agent looking after one property may be very good – or very bad – BTR schemes have management teams on-site, meaning issues should be resolved quickly. The standard tenancy duration is three to five years rather than the six months elsewhere in the private sector, allowing renters greater opportunities to plan.
BTR schemes have all-inclusive rents; any increases over the three years will be set out in writing at the start of the tenancy, with a formula explaining how the increase is calculated.
This contrasts with individual landlords who may increase rent frequently with little need for explanation, and who may add premiums for tenants with pets.
Who is Your Landlord Under Build to Rent?
The blocks are usually built using money from international institutions, who appoint experienced lettings agents or customized build to rent companies to run the properties: these represent your landlord and, importantly, are on-site to handle complaints or emergencies.
They are also likely to be in a recognised redress scheme too, such as The Property Ombudsman or Property Redress Service, meaning you can have independent assessments of any complaint that cannot be resolved directly with the landlord’s representatives.
In other countries, especially the US – where Build to Rent is well-established and very popular – there are ‘brands’ who trade on having the same facilities, services and even decor in their own blocks across the country.
Some of the top BTR companies beginning to emerge in the UK include Greystar (an American company), Get Living, Fizzy Living, and Grainger – the latter just about to construct BTR apartments at some Transport for London tube and bus hubs.
The theory is that someone who rents a flat from a brand when they are young may be loyal and rent from the same brand when they get older or move to a new location.
Do Tenants Pay More for Build to Rent Homes?
Yes, they do – those extra facilities and on-site managers must be paid for.
A report by property consultancy JLL in 2018 found that the average rent on a Build to Rent property was between 8.4 and 9.3 per cent more than the rent on a similar-sized ‘traditional’ rental flat or house in the same area.
Other studies have found that BTR homes are most commonly rented by young professionals on above-average salaries – so this sector is not necessarily an answer to the overall problem of many homes, for sale or rent, being unaffordable to many.
Is Build to Rent the Future for Renting?
The government says it wants many more Build to Rent developments for three reasons.
1. Firstly, they are usually high quality in their own right;
2. Secondly, they help drive up the standards of older individual rental properties nearby which have to compete for tenants.
3. Third, the higher standards and communal facilities of Build to Rent developments will be more suitable to older renters – and this demographic is likely to grow.
The Centre for Housing Policy at York University estimates that by 2040 up to one-third of 60-year-olds will rent privately. This is in addition to around 40 per cent of under 35s who will rent privately.
Are you looking into the build to rent properties? If you need any further help or guidance for renting a BTR – or any private property – you can find all of Phil Spencer’s renting advice in one convenient place.