Private Rented Sector: How Do We Move Forward?

Stephen Hole
Can the private rented sector (PRS) fill the gap created by unaffordable mortgages and a shrinking supply of social housing? The 2016 RESI Conference debated the issues.

Housing policy in recent years has been driven by two aims: to increase owner-occupation and provide a larger volume of affordable housing. The role of the private rented sector (PRS), however, was largely overlooked. This is now changing, with the policy spotlight more firmly on what the PRS can offer over the medium to long term.

The 10th anniversary RESI Conference, held in September in Newport, south east Wales, brought together policymakers and market players, to reveal how the government plans to deliver on its housing targets, and how the market will respond in these uncertain times. It was clear that PRS has significant institutional support at both government and local planning authority level. Key speakers included housing minister Gavin Barwell MP, London deputy mayor for housing James Murray, and former chancellor Nigel Lawson.

Gavin Barwell called for more homes of every type to be built, signalling a shift away from the Cameron-Osborne homeownership policy. He acknowledged the country's housing ambitions would never be achieved without a significant boost for institutional investment in PRS. The minister also challenged developers to build more quickly and to avoid landbanking, with potential fines being brought into play.

PRS operators suggested that they would benefit from being part of the design process, to avoid retrospective design and re-fit.

James Murray highlighted the need to broaden the base of supply, and acknowledged that we need to find a way of fitting affordable housing into PRS. Planning reform was another priority for Murray, as developers called for the system to be clearer, quicker and more consistent, with clearer guidance for councils on build to rent.

Developer response from subsequent speakers, and from the audience, indicated frustration with repeated changes in housing policy. The often complicated and long-winded planning approvals process, including the length of time to produce a Section 106 agreement, was another barrier. The request for either Section 106 or the Community Infrastructure Levy (CIL) payment, not both, was widely supported. Discussion also focused on the constraints associated with green belt policy. The overall message was too many parties involved and too much red tape.

The sensitive topic of integrated versus segregated affordable housing within the PRS model was debated, together with the financial challenge posed by affordable quotas. Murray requires every development to have 50 per cent affordable units, without downspecifying. Developers responded that they cannot be expected to pick up the tab.

Since the conference, the government has announced new money available for builders, in the form of a £2bn Accelerated Construction scheme...

PRS operators suggested that they would benefit from being part of the design process, to avoid retrospective design and re-fit. They also talked about the need to balance design with value, and the dilemmas of providing amenity spaces when maximising net to gross floor ratio is a key financial driver. They called for more community engagement when designing a product, stating that prospective tenants should be asked about their needs and wants, with regular feedback sessions, if successful communities are to be created. Interestingly, the operators cited staff training as a challenge: tenants want the friendliest staff, including concierges and cleaners.

Other themes from the RESI conference included the potential for modular construction to accelerate the build programme, thus providing homes more quickly, as it has done for student accommodation. Tom Bloxham, chairman of regeneration specialists Urban Splash, envisaged modular being 70 to 80 per cent of his business in the future, while Berkeley’s Tony Pidgley said modular would form 20 per cent of the group’s pipeline with immediate effect.

Since the conference, the government has announced new money available for builders, in the form of a £2bn Accelerated Construction scheme that will make publicly-owned brownfield land available for quick development. Chancellor Philip Hammond and communities secretary Sajid Javid said the new scheme, alongside the previously announced £3bn Home Builders Fund, will help fund the development of 25,500 homes by 2020.

The fund will encourage off-site construction, and will be accompanied by changes to planning rules to adopt a de facto presumption in favour of development on brownfield sites.

The fund will encourage off-site construction, and will be accompanied by changes to planning rules to adopt a de facto presumption in favour of development on brownfield sites.
The government will also extend permitted development rights to allow for the demolition of office blocks for residential development, which it hopes will provide an extra 4,000 homes by the end of 2021.

As one of the earliest delivery partners for the new PRS model, Faithful+Gould is well positioned to support clients in making informed decisions around planning, designing, funding, operating and maintaining assets, ultimately achieving best value. We understand the degree of variance among PRS products, compared to other forms of tenure, and we help our clients make sense of the associated variance in cost.

Our portfolio includes the UK's first forwardfunded North Acton scheme, providing 173 units in the London Borough of Ealing due for completion in early 2017. We are currently working with operators including Fizzy Living and developers including HUB Residential, on innovative schemes in Lewisham, Hillingdon, Wembley, Croydon and Greenwich, as well as exploring the model’s potential in other areas of London.

Written by