The Build to Rent Sector - What's Next? Five Key Takeaways

The Housing & Build-to-rent Conference held on 7 July 2021, sponsored by Howard Kennedy and moderated by Kate Woodgate, brought together industry experts to reflect on the changing nature of the sector. Below, I consider some of the key takeaways from the conference.

Attendees discussed a number of key themes affecting the built-to-rent ("BTR") sector, these included:

1. The resilience of the BTR market;
2. Meanwhile Housing;
3. Modern methods of construction;
4. PropTech; and
5. Future proof developments.

Resilience of the BTR market

Despite an otherwise uncertain economic environment, the BTR sector has proven to be remarkably resilient. Strong rent collections and stable occupancy rates have clearly incentivised investors – in the third quarter of 2020, a record £1.84 billion was invested in UK BTR.

Attending the conference, Vonder who offer high-quality and well-managed homes in urban locations, observed that BTR developments are particularly popular with young professionals who seek premium City accommodation. On the other hand, Legal & General, who also attended the conference, identified a growing demand for suburban BTR and mid-range products.

As more people turn to renting as a choice rather than necessity and as the BTR project pipeline continues to grow, the future of the sector looks promising indeed.

Meanwhile Housing

Estimates have put the number of new homes needed in England at up to 345,000 per year – yet in 2019/2020, the total housing stock in England increased by only 244,000[1]. Although commentators agree there is no "silver bullet" that will end the housing crisis, Meanwhile Housing has been identified as a tool which may help alleviate the housing shortage. So, what is Meanwhile Housing? 

Meanwhile Housing refers to temporary developments erected on vacant land and occupied on a leasehold basis for several years. The land is used as a housing development before it is requested back by the public authority or developer. Meanwhile Housing is a cost-effective option to house those on the waiting list for affordable accommodation or to offer temporary rental apartments for young professionals, students and those looking to downsize.

Attending the conference, Meanwhile Housing provider Modomo described how their developments look to unlock unused land and create a vibrant community over the course of their tenure – which is typically 10 to 15 years. Since many of their projects also utilise modular construction techniques, the buildings are easily relocated when the site becomes unavailable. This has also been referred to as "lift and shift" housing.

Modern Methods of Construction 

Modern methods of construction ("MMC") is an umbrella term used to describe emerging construction techniques which predominantly involve mass production and off-site construction. MMC techniques promise to address some of the key issues facing the UK housing market, I look at some of these below.

According to the UK Green Building Council around 10% of the country's carbon dioxide emissions are directly related to construction activity – which rises to 45% when taking into account the whole of the built environment sector. MMC has the potential to positively disrupt the construction sector, helping the industry to transition from inefficient project-based construction to sustainable product-based construction.

As previously discussed, there is a chronic housing shortage in some parts of the UK and there is a growing need to construct more affordable homes and in vastly greater quantities. MMC techniques which utilise a standardised production-line could improve the speed, scale and quality of housing delivery.

Despite the advantages, there are also numerous barriers to the widespread adoption of MMC[2]. As an emerging technology perhaps the most significant barrier is the uncertainty associated with MMC. Uncertainty in relation to a buildings' lifespan and repair needs are particular concerns for banks and insurers. 

PropTech

In an ever-more saturated rental market, PropTech solutions can no longer remain a nice-to-have for BTR developments. The BTR sector has become increasingly service-led and renters are beginning to focus on how they live, not just where they live. But what is PropTech?

PropTech is an amalgamation of real estate and technology; it seeks to make buying, selling, renting, managing, and using properties easier. Smart Building technologies are among the most disruptive innovations and utilise a range of existing technologies that work to make buildings “smarter”. Examples include:

1. "predictive maintenance" which uses sensors to identify equipment faults before they occur.
2. "The Internet of Things" which can be used to control domestic appliances and utilities remotely.
3. "Digital Twin" a virtual model of a physical asset which provides remote access to systems previously only accessible in person.

Future Proof Developments

As well as cutting-edge technology, there is an increasing focus on developments which foster social wellbeing and buildings which complement local communities. The provision of amenities and facilities has always been a distinguishing factor of the BTR sector but the importance of these features took centre stage during the pandemic. Amenities such as communal spaces and co-working areas have proved critical for many residents and demand for schemes offering such spaces has increased. For BTR developments, flexibility is now paramount, and buildings must be capable of accommodating all aspects of people’s lives.

Summary

The above takeaways illustrate that while BTR faces numerous social and economic challenges, the sector is very adaptable. The BTR sector is helping to address the UK's growing housing shortage and by adopting emerging technologies, is also helping to reduce the UK's carbon footprint and change the way we live. As attitudes towards renting continues to evolve throughout the UK, it will be interesting to see how the sector performs moving forward.

[1] https://commonslibrary.parliament.uk/research-briefings/cbp-7671/

[2] according to RICS only 8% of homes built in the UK rely on MMC.