How are planners dealing with build-to-rent?

The build-to-rent sector has shown incredible growth in recent years. Jim Dunton looks at how planning authorities are coping with its rise.

Rentals: build to rent has grown strongly in recent years
Rentals: build to rent has grown strongly in recent years

So-called "build-to-rent" development, in which housing schemes are constructed solely for the purpose of large-scale private sector rental, has accelerated rapidly, new figures show.

According to industry body the British Property Federation (BPF), more than 31,600 build-to-rent homes across the UK now have planning permission, a figure that has almost trebled in less than a year [see chart].

London accounts for half of the present total, but the BPF said growth in the regions has been strongest, up almost fourfold over the same 11-month period, in comparison to the doubling seen in the capital. While national planning policy makes only scant reference to build-to-rent, and even then principally in relation to its viability, recent pronouncements by ministers may indicate a shift in thinking from a previous focus on supporting home ownership.

Last month, housing and planning minister Gavin Barwell said in a speech that the country’s housing ambitions "will never be achieved" without a "good, thriving private rented sector".

Some local authorities are a step ahead of the government. The Greater London Authority (GLA) introduced supplementary planning guidance (SPG) in March that promoted build-to-rent to meet housing need in the capital. Meanwhile, councils in the capital and elsewhere have also taken steps to underscore their openness to the sector.

According to research by consultancy Nexus Planning, around 15 per cent of London’s 32 boroughs have described the private rented sector as an "important element" of their housing stock, while 24 per cent take a positive view of the sector. The GLA’s SPG says build to rent has "the potential to accelerate delivery and not compete with nearby for sale developments" and calls for "positive support" for the sector at a local level.

However, returns from build to let investment typically come over the longer term and schemes are widely accepted to have a lower viability for affordable housing contributions. The GLA guidance seeks to deal with this by explaining how councils can use covenants to ensure private sector rental developments are subjected to "clawback" of waived affordable housing obligations if they are sold within a stipulated timescale. The guidance suggests 15 years as a minimum period and promotes the provision of units for discounted market rent as the preferred way of delivering affordable housing contributions.

The London Borough of Wandsworth’s adopted local plan has a policy that actively seeks to promote build-to-rent, particularly for schemes targeted at meeting the needs of borough residents and local workers on low to middle incomes. Assistant director of housing strategy and development Chris Jones says the policy was driven by a recognition among elected members that the sector has a valuable role in the borough’s housing mix in relation to price and the stability of longer tenancy agreements. "We revised our strategic housing market assessment in 2012 and observed a high level of use of the private rented sector," he says. Having the build-to-rent policy in place allowed for a "better dialogue" with developers assessing the viability of delivering different housing models in the borough, Jones says.

While Wandsworth has no target for the number of homes it wants to see delivered by build-to-rent, four recently consented schemes ranging in size from 19 to 190 units illustrate the potential. Birmingham City Council (see panel) has also taken steps to encourage build-to-rent development. The authority has set up its own company to deliver private-rented schemes on appropriate councilowned sites seen as "challenging" for developers. It has agreed a build-to-rent policy as one of the main modifications to its currently paused local plan. Ian MacLeod, the council’s assistant director for planning and regeneration, says the growth of interest in build-to-rent followed the groundwork for the authority’s local plan. The policy has been developed in conjunction with the development sector during the examination process, he explains.

Amanda Balson, director of the London planning team at Nexus, says that while the GLA build-torent policy could be seen as a benchmark for the capital, some boroughs in London are reluctant to view build-to-rent development as a different entity to market sale properties in viability terms. Because of its lower viability level, councils would secure less affordable housing provision from build-to-rent through section 106 agreements, she says.

The Nexus study found that there is still work to be done by local authorities in promoting buildto- rent. What should the government do to encourage more councils to embrace the sector? Ian Fletcher, policy director for real estate at the BPF, says it could introduce a specific "planning in principle" policy for the build-to-rent sector for schemes that meet prescribed conditions. Fletcher says his experience is that councils planning officers are more positive about build-to-rent than elected members. The latter, he says, have a more negative perception of the private rented sector, "understandably shaped by problems in their postbags".

Andrew Bickerdike, associate director at consultant Turley, says current national guidance does not compel authorities to consider need for different "typologies" of residential accommodation. "It is at a local authority’s discretion whether they plan for and embrace build-to-rent opportunities," he says. "A number of authorities, including Manchester, Liverpool and Birmingham, have grasped the opportunity presented by the emergence of the build-torent sector to drive growth and regeneration and in particular to facilitate the delivery of large masterplanned sites."

WHICH COUNCILS ARE SUPPORTING BUILD TO RENT?

LONDON BOROUGH OF WANDSWORTH

The Wandsworth Local Plan Core Strategy, adopted in March, recognises that the private rented sector is playing "an increasingly important role" in meeting housing need in the borough, and has "further potential" to meet the needs of low to middle income households. The plan says the proportion of Wandsworth residents living in private rented sector accommodation increased from 25 per cent in 2001 to 33 per cent in 2011. Increasing the proportion of private rented housing could stop the sector from "overheating", reducing rents and the demand for affordable housing in the process, it says. Policy IS5 supports the development of private rented sector housing schemes "offering a mixture of private and intermediate rented housing aimed at working households". Developers willing to enter into legal agreements securing new build-to-rent properties for local needs or low to middle income households can expect any impacts on market value to be taken into account in viability assessments.

BIRMINGHAM CITY COUNCIL

The 2013 Housing Growth Plan for Birmingham contains a policy which encourages the growth of the private rented sector in the city, and a strategy of making sites available specifically for it. An agreed modification to the currently-on-hold Birmingham Development Plan inserts a statement supporting the private rented sector as making an important contribution to housing supply and meeting the needs of a mobile workforce, "where multiple units are developed and held in single ownership for long-term rental". Significantly, it recognises the different "lifetime development economics" of build-to-rent and accepts the council "will have regard to its particular characteristics" when assessing the acceptability and viability of schemes.

MANCHESTER CITY COUNCIL

One of the six principles of Manchester City Council’s 2013 Residential Growth Prospectus was "developing a quality private rented sector". The document emphasised that good-quality rental accommodation makes an important contribution to the city’s housing stock and was utilised by more than half of all economically active households in the city centre and fringe. Manchester also takes a site-specific approach to promoting build-to-rent. Its St Johns Strategic Regeneration Framework, covering the five-hectare former Granada Studios site, has identified potential for 300 to 400 build-torent properties as part of a 3,000-home mixed-use development.


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