This summer has been quite a rollercoaster. Initially it was all about negotiations for Brexit but Theresa May’s snap general election caused quite a stir. With the political landscape shifting somewhat, there too is a new housing minister in Alok Sharma MP. Replacing Gavin Barwell, Sharma is the UK’s 15th housing minister in the last 20 years. He arrives in post when it’s widely acknowledged that England is in the depths of a housing crisis.
Sharma will now be looking to implement the housing policy outlined in The Housing White Paper that was published earlier this year. In it, the government spells out the enormous challenge England faces of building 250,000 new homes a year to meet housing demand. Such figures were last achieved back in the 70s.
In a break from recent policy focusing on property ownership, the Housing White Paper acknowledges the importance of the private rental sector and build to rent to help solve the housing crisis. It proposes changing the National Planning Framework to enable councils to promote build to rent, the provision of more affordable rental properties and longer term, family friendly rental agreements.
The government has been consulting with interested parties on the proposals, which although a welcome step in the right direction there are many issues to resolve. In the case of the planning system, currently it is geared up for properties for sale. For example, section 106 agreements, where developers contribute to local communities, are tailored to the large one-off receipts of developments for properties for sale rather than the future income streams of build to rent developments over a long period of time. As they currently stand, most section 106 contributions would make build to rent unviable. What the industry is seeking is another way to spread the costs of local contributions tailored to the build to rent business model.
The other issue to resolve is the provision affordable rental accommodation, defined at 80% of market rent. Getting the balance right as to the proportion of discount market rental properties will be crucial to the viability of build to rent schemes. Then there is the issue of longer tenancies. Providing long-term tenancies for families does offer the benefit of more secure rental streams with less churn. However, there is strong demand from younger renters, who often shift jobs, for flexible shorter rental tenancies. Allowing build to rent providers some flexibility will be important as the type of tenancy agreements on offer need to match local markets.
Although Alok Sharma has a lot on his plate in delivering the objectives of The White Paper, his focus should look at how build to rent can contribute more to solving England’s housing crisis. In the US and in many Continental European countries, purpose-built private rental properties make a far greater contribution to the housing landscape. Boosting supply of such homes, combined with policies to support economies of scale will help not only in the provision of homes but also keep rents at a more manageable and stable level.
It is also noted the short life expectancy of housing ministers. It surely would help if housing ministers be allowed more time to tackle their complex brief. Currently, the housing minister is not even a member of the Cabinet, suggesting housing is not quite the priority that the government proports it to be. This is likely to change as housing becomes more of a voter issue. We are only scratching the surface when it comes to build to rent – more needs to be done to encourage this important sector and the Housing Minister should be leading this conversation and be on the front foot.
Steven Room - Head of Residential Development