A group of major built to rent investors has written to housing and planning secretary Brandon Lewis with three key proposals to encourage housebuilding, by supporting the development of the sector.
Their open letter, backed by the Better Renting Campaign, has been signed by eleven companies active in the sector. Among the signatories is Andrew Stanford, currently residential fund manager at LaSalle Investment Management, but previously head of the government’s private rented sector taskforce.
The group has suggested ringfencing sites for private rented development, and clarifying the concept of Discounted Market Rent. It has also reminded the minister of the promise made by the chancellor in 2015, that a stamp duty surcharge planned for second homes will not be levied on professional build to rent investors.
This latest move builds on the formation of the Better Renting Campaign in May last year, when around 40 signatories cam together, with the support of the British Property Federation. At that stage, the group’s arrival was welcomed by Lewis.
The first proposal involves planning policy directly. The group wants a proportion of sizeable public land sites, large enough for at least 100 homes each, to be designated for long term rental home building, “with a presumption in favour of planning consent”. It has also suggested that local plans include a minimum number of market rental homes.
A second suggestion is that the concept of Discounted Market Rent is given greater official recognition. “DMR has already been accepted in boroughs such as Brent, Ealing and Greenwich but a clear nationwide policy here would accelerate the planning process and signal to investors the Government’s support for this sector,” says the campaign group. “Above all, it would mean more affordable housing.”
The group is also keen there should be no change in government policy around stamp duty surcharges, introduced on sales in the buy to let market. Say the investors: “As an emerging sector with so much potential to deliver the investment we need to build homes, it is significantly damaging to impose this additional 3% levy on long-term Build to Rent investors. This damaging tax change could result in many thousands of homes not being built.”
Stanford commented: “The clear political imperative around encouraging massive global investment into British infrastructure and business is something everyone supports. Right now, there is a once in a generation opportunity to harness a large portion of potential investment and direct it at housing built solely for rent. Ministers should consider the long term benefits of proactively supporting Build to Rent to deliver homes right now and for the next generation.”
Among the signatories to the letter was Martin Bellinger, chief operating officer at Essential Living, who commented: “Until we face up to the fact that promoting home ownership at all costs will lead us nowhere, Britain will not overcome its housing shortage. The housing minister has been very supportive of Build to Rent, but what’s crucial is that the prime minister and chancellor recognise the contribution this could make to helping them keep their promises on building a million homes by 2020.”
Helen Gordon, chief executive at Grainger added: “We are looking to invest hundreds of millions of pounds into new rental homes, designed specifically for the renting, which we will directly manage for many years to come. It is important that the government does all it can to allow us and companies like us to build more homes.”
Chris Taylor, head of private markets at Hermes Investment Management, said:
“Experience from the US, Germany and Holland demonstrates the potential capacity for a vibrant Build to Rent market here in the UK which could easily reach £75 billion, given government support. Crucially, this investment will typically be long term institutional programmes committed to providing institutional quality and professionally maintained, purpose built rental blocks. Designating sites as suitable for Build to Rent in local plans, as well as identifying public land sites, will greatly assist new supply.”
LPA Perspective: The big guns in the build to rent market are getting their act together, and arguing as one. This well-reasoned proposal has the potential to help them improve the pace of delivery, as well as providing a solution to help deliver discounted private rental homes. The open letter format enables each of the points to be argued, and to be delivered calmly in a manner that will support them being taken seriously.
The idea of reserving larger sites specifically for rental housing is economically sensible, as purpose built rental blocks need to be large in scale to be efficient. The provision would also stop the investors having to compete with the build for sale developers such as Berkeley, when bidding for sites; they often complain that the housebuilders can outbid them.
The need for a greater clarity over what “affordable housing” really means is also clearly there. The letter is not trying to invent a new standard, but rather to take on an idea that several London boroughs are already running with. And, at a time when housing associations are rumbling about further cutting back on their affordable home building, here is a sensible, apparently workable way round.
When working for government, Stanford appeared to be taking serious soundings from across the sector, and from around the country. Since his move into the PRS supply chain, he probably has a more rounded view of the challenges the sector faces as it tries to grow faster. Always a very reasoned individual, his signature surely signals that the proposals put forward have been carefully considered. Let’s hope that Lewis listens.