General Policy and Planning

Public policy benefits of BTR

The primary way that housing has been delivered in the UK over recent decades is to deliver homes for sale and then in some areas some provision of affordable housing is required. Building market rented homes has not been common for several decades.

Demand for good quality market rented homes is high in many areas and with a need and political aspirations to deliver far more new homes BTR offers many benefits, some of which are:

Additionality – The BTR sector is attracting new sources of capital and new contractors into house building, diversifying the housing supply base and adding to existing sources of supply.

Accelerating delivery – Investors in the BTR sector invest for income. The quicker a development is therefore complete and operational the quicker that income flows. BtR also does not suffer from sales-absorption rates.

You can find out more how BTR accelerates delivery via an IPF publication – Mind the Gap.

You can find out more about sales absorption rates from the final report of the Letwin Review.

Cashflow – Depending on the point in the economic cycle this can be an advantage to developers, with a single buyer, who is prepared to buy or commission to buy, whole blocks.

Counter-cyclical –Most economic downturns also tend to lead to a downturn in house building. BtR is immune to factors like mortgage availability and therefore tends to be counter-cyclical.

Modern Methods of Construction (MMC) – The sector is well positioned to make best use of MMC. The desire for quick BtR delivery makes MMC attractive. Snagging problems will lead to unsatisfied residents and problems for operators. The consistent quality delivered by MMC is also therefore important to BTR providers. For MMC providers, BtR can offer volume and relatively simple specifications. More information can be found here.

Partnerships – BtR lends itself well to public/private partnerships.It is very much an urban housing product and as a co-investor using public land, public bodies can share in income, rather than a one-off capital receipt.

Placemaking – BtR investors are seeking to invest for the long-term. It is therefore important to them that the place they invest into is maintained, refreshed and continues therefore to be an attractive place to live.

Tenure-blind – BtR operators want to be able to manage blocks efficiently. There is therefore a positive disincentive to segregating different income groups. Affordable and market housing are mixed, with affordable tenants getting the same unit specifications and access to services. 

For more on the public policy benefits of BtR see this publication co-produced by Savills and the London School of Economics for the BPF.

Planning policy and BtR

The most important public policy issue that affects BtR is planning policy. As the sector has evolved, planning policy at local, regional and national level has also evolved to reflect the sector is different from building for sale.

In areas where affordable housing contributions are required, the sector is therefore often treated differently from other forms of housing development, with a blend of units offering market rent and discounted market rent (also known as Affordable Private Rent). This approach allows the ownership of the affordable units to remain with the private sector owner, and therefore the development to be managed seamlessly and tenure-blind. To ensure that this different treatment is not used to escape other forms of affordable housing requirement, local councils will usually either take a covenant, requiring the development to remain as rental for a minimum number of years, and/or put in place clawback arrangements, should the units be sold outside the Build-to-Rent sector.

The broad basis of this policy is set out in the National Planning Policy Framework (NPPF). It is where for planning purposes BtR and Affordable Private Rent are defined.  The NPPF also explains that local councils should assess need for BtR and proactively plan for it.

How local authorities plan for BtR, and the more detailed considerations they should consider on specific developments, are set out in National Policy Practice Guidance (NPPG).

For local council officers or members coming to BtR for the first time, there is a good introductory guide produced by London First, London Councils and Turley. This is focused on London but has some good introductory material on the sector generally.

The ULI provides a detailed guide to the sector, which is for purchase.

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