While I was at the Landlord Investment Show last week I managed to catch the build to rent (BTR) panel debate. This post is a summary of the things presented and discussed there. It turned out to be more of a presentation for build to rent than a debate though. I also watched and wrote about the expert property panel which was a lot more varied and interesting.
Update: since I wrote this, Property Tribes have published a video of the discussion – scroll down to the bottom if you’d rather watch that instead of reading.
What makes Build-to-Rent (BTR) different?
Longer and more tenant focussed tenancy agreements. They’re typically trying to do 5 year tenancies and only tenant can terminate (without fault) after 6 months.
The annual rent increase is defined in advance, generally 2 – 5% and often based on RPI.
No fees to tenants – no setup fees and no renewal/extension fees.
They’re exploring not taking deposits. Experience is showing that no fees and no deposit is a big selling point for tenants.
In 18 months, it’s predicted that no institutional developer will take deposits on their properties.
Generally BTR properties allow pets – they believe that pet owners typically have more structure in their lives and pets can also help to build a community.
Developments are trying to facilitate a community, helping neighbours to interact.
Lots of extra, on-site facilities are being included – gym, concierge, on-site maintenance, etc. Often using technology to help facilitate contact and access to make it easier for tenants.
Many developments are offering more choices for tenants. For example, allowing them to paint walls, move within developments (if circumstances change) and select between furnished, part furnished or unfurnished.
Including Internet access (via WiFi) is a particularly popular benefit, mostly because it avoids lead time in connections. Although it also helps with the perception of value for money.
Build to rent apartments typically achieve rents slightly higher than the rest of the market. Perhaps 9% to 20%. [That’s a lot – not sure I heard it correctly!]
Vanessa pointed out that build to rent is focused mainly on apartments, hence generally town centre and for smaller families. Vanessa suggests that house based landlords have nothing to fear from build to rent. There are occasional build to rent schemes doing family homes but very few. Build to rent probably needs a time span of 10-15 years to gain traction.
The panel pointed out that the last decade has seen a lot of re-urbanisation.
The main speaking started with build to rent six years ago. They expect build to rent to be providing 80,000 to 90,000 units by 2021.
There’s a surprisingly large mix of tenants renting build to rent units – including older renters who may have sold their family home and are wanting to live in town again with more of a community.
What happens if tenants can’t pay?
Build to rent schemes are very keen on supporting their tenants when they can, they will find the time to speak to individual tenants if needed and have the flexibility to make changes, eg moving tenants to a smaller apartment.
Does built-to-rent damage the market for others?
Current experiences are that build to rent developments actually increase general rental demand in an area, including for other properties. The extra people and facilities also help to improve (and cause others to improve) the area.
There’s also a forum discussion about this build to rent debate on the Property Tribes site. That discussion includes some interesting points from a recent build-to-rent survey, eg “The survey also found that over a third of tenants across all groups are becoming increasingly aware of Build to Rent initiatives, and that 53% of all tenants said they were interested in them”.