How the London mayor plans to bolster build-to-rent

The draft affordable housing supplementary planning guidance (SPG) published by the Greater London Authority last month contains a new deal to encourage those looking to develop homes specifically for the private rented sector, writes Joey Gardiner.

Build to Rent: Barking scheme approved in April
Build to Rent: Barking scheme approved in April

The draft guidance would allow Build to Rent developers to sidestep the 35 per cent affordable housing expected from private sale schemes.

Their contribution would be limited to what they can afford under a viability-test tailored to Build to Rent schemes. The approach of the SPG is similar to that in the existing housing SPG, published in March this year. However, the new draft is more detailed and prescriptive, containing a much clearer definition of schemes which would benefit from the Build to Rent carve-out, and making clear that Build to Rent schemes can dispense their affordable housing obligations entirely through discounted market rental housing. To qualify, schemes would have to be at least 50 units in size, be held under a rental covenant for at least 15 years, operate under unified management, and be let individually on tenancies of three years or more.

This carve-out comes in the context of an assumption of greater affordable housing contributions on "for sale" schemes. Ian Fletcher, director of policy at the British Property Federation, said: "This has added importance because of the context of the 35 per cent contributions expected elsewhere."

The signs are the draft guidance is already being taken seriously. Brendan Hodges, senior associate planner at property consultancy Daniel Watney, said: "Local authorities have been telling us to delay schemes waiting for this guidance because they didn’t know how to deal with them." Iain Gilbey, head of planning at law firm Pinsent Masons, said: "There’s been a policy vacuum in this space. The boroughs will seize this – we’ve already had London boroughs asking clients of ours to respond to the SPG."

Developers certainly feel the guidance will help the viability of Build to Rent schemes, which offer lower immediate returns than schemes for sale. Scott Hammond, managing director of Build to Rent developer Essential Living, said the guidance was "highly positive", and that the ability to provide discounted market rent instead of regulated affordable housing had, on its Creekside Wharf scheme in Greenwich, increased the amount deliverable from 20 per cent to 25 per cent.

However, some feel the draft SPG sets a high bar to entry. The BPF’s Fletcher said: "If the mayor had tried this codification a year ago it might have been too early, but now it feels like the sector is confident enough to handle it."

However, Pinsent Masons’ Gilbey said the 50-home minimum size, the 15-year rental covenant and the unified ownership and management required could all see "perfectly respectable" Build to Rent schemes "unduly penalised." He said: "They want to give developers a nudge, but there may be some schemes which can’t meet all this which may be held back."

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