Banish the image of seedy bedsits – the new private rented sector is focusing on innovation, design, sustainability and keeping its tenants satisfied
What is it that makes today’s build to rent homes so different, so appealing? The embryonic sector has become the new darling of UK housing, attracting attention from government, investors, developers and the media. That might surprise some, as only about 8,000 homes have been completed, but another 30,000 are estimated to be in the pipeline, all being delivered in the firm belief that – barring deterrents such as the Chancellor’s surprise tax grab in the recent Budget – the private rented sector is firmly on the up.
The figures supporting that belief have been well rehearsed. With housebuilding totals continuing to substantially trail demand for homes, property consultant Savills has forecast that 1.2 million more households will need to be accommodated in private rented property by 2020. Up to now, private rented homes have largely come from individual buy to let investors, but build to rent operators have a very different market offer. For renters who can afford to make the choice – generally young professionals – an institution-led, private rental sector with purpose-built developments managed by professional operators offers the promise of escaping a landlord class whose image remains on a par with Rigsby, the seedy landlord of shabby bedsits in the 1970s sitcom Rising Damp.
Early players in the build to rent market, such as Essential Living, Fizzy Living and Grainger, have been joined by blue chips such as Legal & General (L&G), which has entered the sector with big ambitions and a £600 million fund. According to the 2015 report Build to rent – Funding Britain’s rental revolution, by the British Property Federation and law firm Addleshaw Goddard, UK institutions have now committed more than £10 billion to the sector.
The development pipeline alone makes it appealing to those in construction and architecture, but there are other attractions too. New build to rent clients are eager to differentiate themselves from private rented sector Rigsbys and to define their brands through their buildings as well as their service. Although some of them buy buildings off plan from mainstream developers, their business model bears little relation to that of the housebuilding industry, and their product is very different, focusing on factors such as innovation, design, and sustainability.
The science of design
Russell Pedley, director of architect Assael, says what is so different about working with build to rent players is their business model: ‘What’s changing for us from a design point of view is the client focus, which is on net operating income rather than capital value.’ That brings a longer term perspective to every aspect of a development, from materials specification to placemaking, and changes the economics of sustainability and life cycle analysis.
Design matters, as testified by the 180 pages of the latest edition of the Urban Land Institute UK publication Build to rent: A best practice guide. It is becoming commonplace for build to rent players to research and interrogate the composition of their schemes. Such an intense focus does not create a restrictive working environment for architects, says Pedley. ‘For us it’s more rewarding to be focusing on the product and the place, and to be working for the operator. We’ve found it motivating.’
New mid-market developer Hub has 1,200 units in the London pipeline – a mix of market sale and private rental homes – designed by names that are not closely associated with mainstream housebuilding, including Newground Architects, MaccreanorLavington, shedkm and Studio Egret West. The architects were carefully chosen, says Hub development director Steve Sanham. ‘We are not looking for standard solutions. We want to work collaboratively with our architects.’
Hub has 152 private rented sector (PRS) homes due to come on stream at its Rehearsal Rooms development, in North Acton, later this year and 189 PRS units alongside 54 for sale completing next year at the Material Store in Hayes, which is part of the Old Vinyl Factory site. The latter will include three-bedroom, triplex apartments with a bedroom on each floor, an innovation designed to appeal to three flat-sharers.
Essential Living’s Creekside Wharf development, in Greenwich, south-east London, features 60 two- and three-bedroom apartments that are designed to be family friendly. The scheme incorporates a creche and play space, while apartments have features such as corner living space, oversized balconies and nurseries designed to minimise noise disturbance. ‘The design was very much driven by focus groups organised by the clients,’ explains Rory O’Hagan, director of Assael, the project architect. One ingredient influenced by those focus groups is the balconies, which will be clad in perforated sheet to prevent children from losing or throwing away toys or other objects.
Such examples are a long way from the two-bedroom, two-bathroom apartment that has been the staple PRS product. That model stemmed from its broad appeal, from two sharers needing to pool funds to a number of family variations. But the evolution of the build to rent sector creates scope for product innovation, says Kitson Keen, head of market rent strategy at Peabody, an affordable housing provider that sees private rental as part of its overall regeneration activity. ‘It’s important to understand the local market,’ he says. ‘You have to look at what is already there locally – in terms of units – and at the ability of the local market to absorb new units, as well as at the local amenities.’
Fizzy works to keep rents affordable because build to rent success depends on keeping customers happy and in their homes
Home or hotel?
Build to rent players compare their homes not to the housebuilders’ standard fare but to hotels, with their star rated services, welcoming receptions and host of amenities. ‘By designing buildings to be rented as a whole where a customer’s home begins at the door of the building – not the flat – we can make renting an aspirational choice rather than housing of last resort,’ says Andrew Teacher, spokesman for Essential Living.
In the US, build to rent developments – known as multi-family housing – are being equipped with amenities such as climbing walls, pet grooming areas and office space. Westrock operations and strategy director Dominic Martin explains: ‘In the US, agents describe an amenities arms race, to highlight the competition over the amenities being provided. Yet a misconception has grown up around this; in fact, the critical element in US rental developments has always been service. A private rented building can be considered like a long-stay hotel – it’s the operational aspect that is key. We’ve recognised that; it’s why we’ve recently appointed LIV as our property manager.’
Westrock is developing five PRS schemes, all created from office to residential conversions and located outside London, the first being in Exeter. These developments boast such features as a gym, keyless access and a residents’ lounge. Provision of amenities comes down to simple business economics, says Martin. ‘What you put into a development depends on the size/quantum of units of the scheme – generally, the bigger the development, the more you can put into it, because there are more residents to share the fixed running costs. For instance, the Pan Peninsula scheme, in Canary Wharf, has a gym, pool, 24-hour concierge and rooftop bar, but that’s because it’s a large development. That often gets forgotten when people compare US rental developments to UK ones – UK schemes are generally smaller, at the moment, in scale.’
Fizzy Living has a manager – always known as Bob – on hand in every building, as well as space where tenants can socialise both face-to-face and via Facebook. ‘Our flats are well located and our customers are generally in their early 30s so they don’t need an on-site pool or have the money for luxuries,’ says Harry Downes, Fizzy Living’s managing director. The firm, which is backed by affordable housing provider Thames Valley Housing and a sovereign wealth fund, has 250 units in occupation and around 1,000 more under contract. These include Fizzy Lewisham, a PRP-designed development in Lewisham Gateway, south-east London, acquired from Muse Developments. Fizzy works to keep rents affordable – an average of 20% of income and no more than 30% – because build to rent success ultimately depends on keeping customers happy and in their homes. ‘If a tenant doesn’t like what we’re doing they’ll pack their bags and leave,’ Downes says.
To keep its customers happy, Hub’s the Rehearsal Rooms has community function rooms and rooftop allotments. Essential Living has added a communal roof garden to its Vantage Point scheme in Islington, which is a revamp of the 1970s Archway Tower office block, designed by GRID Architects. ‘So even if you’re renting a smaller apartment, you still get to enjoy the view and host parties for groups of friends,’ says Essential Living’s Teacher.
The business rationale of build to rent rules out sumptuous penthouse roof terraces for the lucky few, says Kitson Keen of Peabody. ‘It’s a matter of dribbling the benefit through to all residents and is a really good way of adding value for the customer. You don’t hog the benefit for one person; instead you share it out for everyone to enjoy.’
Doing more differently
The sector could prompt further innovation, notably with its interest in offsite manufacture of housing. Build to rent developers gain no commercial benefit from phased delivery of schemes, and so they aim to get developments built and let quickly. L&G is establishing a 550,000ft2 factory near Leeds (due to be up and running in June) that will be producing cross-laminated timber modules for housing. Assael Architecture is looking at prototyping in cross-laminated timber at its two L&G projects in London, at Walthamstow and Hackney.