For many years, debates around housing supply have suggested that a model needs to be worked up that leverages investment into building new long-term, professionally managed privately rented accommodation, as is much more normal in other countries around the world.
Generation Rent has always argued that new supply will only help a small percentage of lucky renters, and that the priority should be to support legislative reform that would improve things for the over two million London renters in existing stock.
Furthermore, the build-to-rent schemes we have seen in London to date have been high-value, aimed at the top of the market, and not accessible to most private tenants.
Last week the discussion moved on with the Mayor of London’s new supplementary planning guidance, which, amongst other things, produced the first definition of build-to-rent and set out the principles on which new developments of this sort would be taken forward in London.
Coming as it did with the new funding guidance for affordable housing, it has allowed us to understand better how the London Living Rent as an affordable tenure would work within these developments, and what is in it for private tenants.
The answer is less than we hoped for, but perhaps as much as we should expect. While we may want build-to-rent to be a driver of new, affordable and secure privately rented homes in the capital, it should more properly be seen as a means of leveraging a faster kind of supply (as homes are let out immediately) that will be suitable for some specific (higher-income) tenants.
So what of its social outcomes? The fact that build-to-rent developments will not be subject to the same 35% viability minimum as for-sale sites should already ring alarm bells that this isn’t going to drive up the building of much affordable stock.
The economics of build-to-rent are cited as the reason for this, but in practice we would expect developers to negotiate down the proportion of affordable housing on each site, given the returns they can make through high-value, market rent apartments and the lack of precedent in the city.
Compounding this is the ‘affordable’ homes they will need to offer. The guidance says that the affordable housing offer can be ‘discounted market rent’, ‘preferably’ the London Living Rent. The fact that the LLR isn’t mandated is problematic and you would expect homes to be built that cost much more to live in, given the difference between LLR levels of a third of local wages, and, say, 80% of the market.
Beyond affordability, it is positive that tenants look likely to be more secure than in a typical PRS home. The guidance states that ‘Longer tenancies (three years or more) should be available to all tenants’, and that they should include break clauses to allow renters to exit with a month’s notice as necessary. CPI-linked rent increases would also be part of these contracts.
To confuse matters, though, the affordable housing prospectus this week also announced that London Living Rent homes would ultimately be a homeownership model, with each unit having to be sold into shared ownership after ten years, although this won’t apply on Build-to-Rent developments, only where LLR is built through other sites.
Having London Living Rent units with quite different tenancy models is confusing anyway, but raises the wider question of who these homes are really for, and what their long-term purpose is. The cost of homeownership in London is such that many tenants just need a secure, affordable home that won’t push them towards an unsuitable mortgage, and will allow them to stay somewhere long-term.
Where tenants don’t qualify for social housing, the London Living Rent should fit that bill for many renters. But none of these tenures are built with the long-term in mind. The new definition of Build-to-Rent states that homes on these developments must be rented for at least fifteen years.
It seems far from inconceivable that a developer would invest in a Build-to-Rent project, avoiding the more stringent affordability constraints put on sites for majority-sale, then rent out those homes at high rents for the time required, before finally cashing in and selling the units.
The guidance states that the affordable proportion in such a development would need to be retained, but given the uncertainty about what levels of affordable housing will be achieved, and at what rent levels, is this really the best use of planning powers?
The Mayor has repeatedly stated that it’s not just the numbers of homes we build that are important, but the types of homes. In other words, not all supply is good supply. This seems irrefutably true if, in the context of the city’s affordability crisis, precious land and resources are to be used for expensive, temporarily-rented private flats.
Ultimately it seems build-to-rent will work for some people, but not for most of ‘generation rent’, who will still be left wondering whether any politician understands what is needed to support them in the coming decades.