Building to Rent (BTR or, sometimes, B2R) has been in use for some time but in the grand perspective, the concept is an unproven concept. If you’re not directly involved in the development of property You may have seen the term mentioned in the media and have wondered what exactly is Build to Rent? And how it operate?
If so concerns about BTR, we’ll help in this article. In this post, we’ll review the basics before diving into issues like the advantages of BTR as well as the policy on affordable housing and whether BTR property will become part of the market for sale in the near future.
Before we go on to those, let’s begin with the word in itself…
What exactly is Build to Rent?
As you might think, Build to rent is pretty straightforward: it’s a development designed to be making it appealing to renters an alternative to the long-term goal of home ownership.
Build to Rent might be getting attention However, it’s been in existence for quite some time. It was first introduced in 2012 and, more popularly, it was one of the elements of the program connected to the 2012 Olympic Games and the transformation of the Stratford’s East Village from athlete’s accommodation to private rental properties, BTR is nothing new. Numerous other major developments followed, and thousands of housing units have been constructed and many have been supported by the Government as well as it’s Home Building Fund.
Growth in rental rates in the UK
Why build to Rent? If you take a look at the trends in housing will give you a solution to this question, particularly when you look at the housing market within the city. Rents are rising.
There are many reasons for this There are a variety of reasons, and you’ll find different reasons why this is the case based on the person you ask…and every one of them will have at least an aspect of truth. From a shift in attitudes towards renting to the lack of affordable homes for sale or the higher quality of the lettings offered to temporary workforces, every argument for the increased number of rental properties are valid.
Whatever the reason it’s true that it’s happening, and developers are eager to build homes specifically designed to satisfy the ever-growing demand.
What is the difference between the Build for Rent projects differ?
Naturally, to attract a particular segment of the market (i.e. those who prefer to rent, rather than purchase) developers are developing BTR sites that will suit potential renters’ needs.
Naturally, the houses themselves have to be up to date with contemporary standards of living, and many actually surpass expectations If you’re able and willing to pay for the rental they charge, however BTR developments in various locations are going a more than just making stunning homes.
Developers are making, or at the very least trying to build mini communities in their developments through amenities like communal areas in which people can gather and interact.
These features include the obvious and less obvious range of lounges, gyms and games rooms, as well as eating spaces. In reality some BTR developments are in fact more close to hotels than houses. Tenants even get their own personal concierge!
What are the benefits of Build-to-Rent?
In addition to the attractive features discussed above There are many other advantages connected with BTR…and not only for tenants. Local communities, too, are able to benefit from BTR in a variety of ways.
Consider an example of the Ferry Lane site in Walthamstow as an example. The development of Legal & General has regenerated an extremely neglected part of E17 and has brought more than 2,000 square meters of commercial and community space, which is sure to boost and boost the economy of the region. This isn’t just about money, this regeneration project added 200 trees, as well as various landscaping and environmentally sustainable landscaping areas too.
Of of course, there are those who oppose such massive developments right on their doorsteps and there are some who, without a doubt declare that this is not the best solution to the housing shortage within the city. However, to state that these developments are without merit is simply absurd.
Homeowners deserve better-quality houses and long-term stability is a welcome benefit for those who are fed up of being in constant fear of being kicked out for no reason or fault of their own. The biggest issue with the Build to Rent model, however, is the cost. Everything discussed above is available at cost and the cost is usually higher than what a majority of people can afford.
Do developers have the right to offer affordable housing?
In short, yes , they are. The guidelines from the government state to all BTR developments must contain at least 20% of the area allocated to affordable housing, however, this could be contestable by local authorities should they want to set an alternative percentage. They are not in a position to make this change on an arbitrary basis, however according to the guidance that any justification to reduce the number of affordable homes has to be substantiated by the local plans.
Affordable housing ishowever an ambiguous term. In reference to the guidance of the Government regarding this issue low-cost private rental is thought to be the equivalent of a “20 percent discount from the market rent” and could be the amount that developers decide to decide to.
The rental fee must be in line with “the guidelines of the International Valuations Standard Committee as accepted by the Royal Institute of Chartered Surveyors” A discounted rate of 20% on expensive rental costs will be far away for many, especially key workers such as teachers and nurses.
Can properties built to rent be purchased and sold in the near future?
It’s a bit of a gray space at the moment, since these types of properties are fairly new, and the minimum time stipulated as a limitation to this in the Section 106 legal agreement (usually 15 years ) is the minimum period specified by the Affordable Housing and Viability Supplementary Planning Guidance) has yet to be ratified.
If there will be a massive sale from these buildings in the near future it is a matter of time. But, if they continue to generate regular rental income to the developers behind the development this is unlikely…but it’s not completely beyond the realm of possibility.
The most effective thing to do is point you to the guideline in the guidance itself, which is as the following:
The Build to Rent schemes will generally, in the sense of definition remain in the rental industry in the management of common owners and managers for the duration of. All affordable homes for private rent comprised in the scheme, as per the section 106 agreement that are specifically provided as a benefit to the community in perpetuity. The disposal of a build-to-rent schemeor selling of homes in the scheme to different tenures, shouldn’t cause the removal from the housing affordable contributions of the neighborhood.
The situation could arise when developers have to sell all or a part of a build-to-rent scheme to owner occupancy and to multiple landlords the conversion of affordable private rent units into an alternative tenure. The section 106 must take into consideration these scenarios and, specifically provide a way to recuperate (‘clawback’) the value of the affordable housing program which is removed when affordable homes for rent are converted to a different tenure.
It is also recommended to give consideration to a covenant period that allows for the retention of private rental homes during that time and possible compensation mechanisms in the case that market rent properties are sold prior to the end of the agreed upon covenant time.
The planning authorities must be aware that builders who rent their homes have the flexibility needed to adapt to changing market conditions. Exit clauses could hinder development. However, the disposal of houses from an investment in a build-to-rent project will not lead to the elimination of affordable housing, if no an alternative plan being put in place.
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