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ARLA Propertymark respond to Build to Rent consultation

Thursday 25 May 2017

The Government consultation on changes to planning policy to promote the uptake of Build to Rent properties has now closed.

The consultation document sets out the case for Build to Rent and in it the Government quote research from the British Property Federation which shows that 200,000 new homes could be created by the Build to Rent sector, which could also add 2,000 new Affordable Private Rent homes per annum. They also draw from the American market where the number of Build to Rent properties has increased substantially over the past 30 years. 

The Government claims that Build to Rent can boost housing supply by using additional institutional investment [for example - pension funds, insurers and even charities] and that Build to Rent properties can be built faster because they can be absorbed by the market more quickly, and are more likely to use modern methods of construction for speed.

Build to rent developers are also more likely to use areas of land that are less attractive to traditional housebuilders, such as town-centre sites, which can also help with regenerating tired and forgotten urban areas.

They go on to explain that Build to Rent properties are purpose built and professionally managed on a scale that allows a higher level of services and amenities which can bring additional benefits to renters. For example the development may have an on-site maintenance team, a concierge who'll take in the mail and communal areas for socialising. 

Investors also have more of an incentive to maintain the building and the wider public realm as they need to attract and retain customers by offering a good service, as they rely on a steady income-driven model rather than capital gains.  

What exactly is Build to Rent?

In the 41-page document they summarise the definition of Build to Rent as being: 

  • tenure – Build to Rent buildings will typically be 100 per cent rented out, albeit they may form part of a wider multi-tenure development;

  • typology – schemes can be either flats or houses, but will have to be on the same site and/or contiguous;

  • tenancy length – schemes will as a norm offer longer tenancy agreements of three years or more (to those tenants who want a longer tenancy);

  • management and ownership – schemes will typically be professionally managed stock in single ownership and management control;

  • Affordable Private Rent – this will be the normal vehicle for providing the affordable homes element in schemes (as opposed to other forms negotiated through S106).

The Government are also encouraging an alternative approach to affordable housing for Build to Rent called Affordable Private Rent (sometimes referred to as Discounted Market Rent).

Affordable Private Rent parameters will be set as:

• a minimum of 20 per cent of the homes to be discounted;

• the discount to be set at a minimum of 20 per cent relative to the local market;

• an offer of longer tenancies of three years or more;

• the discount to apply indefinitely (subject to a “claw-back” arrangement if Affordable
Private Rent homes are withdrawn).

ARLA Propertymark response

Part of the challenge that lies ahead if Build to Rent is to be successful and help a growing population of renters will be finding appropriate sites for development. We also need to create a stable and predictable political and financial environment that is appealing for institutional investors. 

At the moment, there is a landscape of continual legislative change which acts as a barrier to long-term investment as it creates uncertainty. 

In our response to the Government's consultation Planning and Affordable Housing for Build to Rent we argue that the parameters should appear within Planning Practice Guidance so as to give flexibility depending on individual circumstances rather than arbitrary figures. 

We agree with the Government that eligibility and criteria for Affordable Private Rent should be decided between the developer and the local authority as they are best placed to understand local housing needs and demographics. 

We'd like to see the Government revise the National Planning Policy Framework to explicitly refer to Build to Rent as a form of housing which planning authorities should consider.

Pressure should also be put on local authorities to free up land for rented housing and allow build to rent schemes to go ahead. 

We argue that it's clear that the most successful Build to Rent Schemes have been in urban areas which have good transport links within walking distance. We expect that for similar reasons Affordable Private Rent through Build to Rent will flourish in areas with good employment opportunities and lower land values. 

The Government's proposal of a minimum three-year tenancy period for Build to Rent is sensible as it will encourage security of tenure and provide a stable home for families etc. We believe that tenants should be able to give a month's notice after having lived in the property for a minimum of six months, but that this term should increase, so that the longer the tenant has lived there, the more notice they have to give the landlord (for example up to three months). This is important so that Build to Rents are not seen as restrictive and allow for renters to be able to relocate easily should their circumstances change, or should they need to change jobs etc. 

Covenant vs Claw-back

The Government say that they have considered whether a minimum convenant period should be set, whereby Build to Rent properties must remain in the Private Rented Sector for set period of time. However, they consider that investors might be put off by this as they still need an exit route, particularly where the market from Build to Rent is not yet proven. Instead they favour a claw-back clause, where a contribution would have to be made by the developer towards affordable housing in the area, should they remove the properties from the market. 

We agree with the Governments claw-back scheme, and think that the amount of claw-back should be agree upon between the local authority and the applicant.