Industry experts forecast that, within 20 years, more people will rent in the UK than own their homes. The UK government is increasingly looking at the Private Rented Sector (PRS) to provide greater numbers of new build housing.
Step back to 1918 and over 75% of householders in England and Wales rented their homes. The mid 20th century onwards saw that trend reversed, notably from the 1980s through to the early 2000s. Homeownership in the UK reached its peak between 2001 and 2003, but since then the landscape has shifted again. With a shortage of housing to buy, high prices, changes in demographics and new lifestyle choices, the number of rental properties will need to continue to grow. How and where?
Buy-to-let and Build to Rent
The rental property market in Britain has been supported by the Buy-to-let sector for several decades. Here, investors purchase properties to rent them out to tenants, rather than live in them. The number of Buy-to-let property investments has increased steadily since around the mid 1990s, in large part as a result of the introduction of the Assured Shorthold Tenancy in England and Wales (Short Assured Tenancy in Scotland). This change, part of the Housing Act, provided prospective landlords and lenders with the confidence that tenants would reside in a property for a set period only. Consequently, the industry saw the rise of Buy-to-let mortgages. The Council of Mortgage Lenders calculates that lenders have advanced more than £1.7 million Buy-to-let loans since 1999, when the organisation first started monitoring the market. “Buy-to-let mortgage balances outstanding grew to more than £200 billion at its peak, equivalent to the gross domestic product of Hong Kong,” notes the trade body. Recent regulatory and fiscal proposals on Buy-to-let and the Private Rented Sector have introduced some uncertainty into the market, which may prove detrimental to addressing the housing shortage problem. That point, however, is still being debated, especially with the sheer demand for good rental properties remaining strong.
Build to Rent, in contrast, is a relatively new housing trend. “Build to Rent homes are designed and built specifically for renting,” explains the British Property Federation (BPF). They tend to be blocks of flats for the mainstream market, often developed on brownfield sites, offering a range of on-site amenities and longer tenancies than traditionally has been the case. Utilities and services are all integrated, with property management delivered by highly professional agents, such as Gateway. A good example is East Village, Stratford, a residential regeneration on the site of London 2012’s Athletes Village, adding 3,000 rental homes to the capital. There, a three-year tenancy has been proving popular with residents. Wembley Park is another scheme. It will be the UK’s largest Build to Rent development, with plans for 5,000 privately rented homes. The capital is not unique. Manchester and Salford also lead the way, and Build to Rent developments are planned for other UK cities, including Birmingham, Leeds and Liverpool. The UK government has made loans available to developers to support this sector since 2013, with plans to inject further funds. This is welcomed.
Given the country’s housing shortage, the rise in the number of renters and an increasing need for a range of tenures, policymakers should support old and new initiatives that introduce more housing, while protecting the green belt.
Rental property stat
PwC estimates that almost 60% of 20 to 39 year olds in England will rent their homes by 2025.