Build to rent is 'next big thing', says UK's biggest landlord

Developers are to be encouraged to build new housing estates where all the properties will be for rent, not sale.

The idea, currently being explored by the Government, could mean the introduction of a separate planning class for new-build residential property that will be rented out, and would mark a fundamental shift in the structure of the UK housing market.

Institutions and property companies would own, and trade, these ‘build to rent’ developments.

Asset management company Schroders believes that this buying and selling activity between profit-chasing corporates would mean that property prices in this particular sector would be highly competitive – possibly resulting either in more competitive rents on ‘build to rent’ estates or in a higher specification of facilities.

The idea has been floated after research by Grainger, the country’s largest listed residential landlord, highlighted the huge shift in public opinion over home ownership versus renting.

Grainger chief executive Andrew Cunningham says build to rent will be the ‘next big thing’.

More than two-thirds (67%) of those questioned by Grainger believe long-term renting will become increasingly common in this country, as it is on the continent.

Over half (54%) believe that in 15 years’ time, more people will rent than own their homes.

Grainger itself predicts that the average age of the first-time buyer will be in the early 40s, putting increased pressure on the private rented sector.

‘Build to rent’ schemes would almost certainly be aimed at younger professionals and possibly retirees stepping away from home ownership, and incorporate social and sporting facilities such as pools and gyms.

Another possibility would be that landlords like Grainger build on land offered by local authorities, rent out the homes at affordable rents, and at the end of an agreed period, sell the property on.

Currently, 90% of landlords in the private rented sector – which houses 3.6m households – are private individuals, but with demand for accommodation continuing to rise, there has been increasing pressure for bringing corporates into the sector.

The Government is taking the issue seriously, looking at how to encourage Real Estate Investment Trusts (REITs) in the residential sector.

The Communities and Local Government department has also this week launched a new consultation reviewing the barriers to institutional investment in private rented housing. Led by Sir Adrian Montague, it is due to report in June.