What is Build to Rent?
Build to Rent, as the name suggests, is the term used for developments that are built specifically for renting. Build to Rent developments are funded and managed by one investor, rather than sold individually to buy to let landlords as has traditionally been the case in the UK. These developments are popular in the US and across Europe, and provide the amenities that modern tenants desire – including onsite gyms, parking facilities and retail outlets – creating integrated communities and providing a lifestyle not always associated with the private rented sector.
There are currently 117,893 Build to Rent units either completed or planned across the UK (Source: BPF), an increase of 30% since last year. Of these, 3,365 are in Scotland, split between Edinburgh, Glasgow, Aberdeen, Dundee and Fort William.
What does this mean for Edinburgh landlords?
The population in Edinburgh is projected to grow by 25% in the next 20 years, an unprecedented growth, which, coupled with the fact that tenants are renting for longer as a result of being priced out of the sales market, is driving a demand for quality rental stock in the city. Build to Rent could potentially begin to bridge this gap.
However, there is concern amongst some traditional buy to let landlords that Build to Rent developments will detract from the future rentability of their property. We don’t believe that Build to Rent poses a threat to the Edinburgh private rented sector, these are some of the reasons why:
Traditional properties are not in direct competition with Build to Let developments.
There is currently a housing shortage in Edinburgh and, even if the proposed Build to Rent developments proceed, there is a long way to go before supply catches up with demand. It is true that Build to Let properties may be higher spec and will be brand new, which will appeal to some tenants, however, traditional style Edinburgh properties – with their traditional features and spacious rooms – will still be an attractive prospect for tenants.
As is mentioned above, Build to Let developments aim to create a sense of community, which is attractive to some tenants, but not so to others. Similar to choosing the style of property, the desire to live within a community is very much down to personal preference. It is likely that the community orientated Build to Rent developments will attract a different type of tenant, for example those who are relocating to Edinburgh and don’t know the city, whereas tenants who have been renting in Edinburgh for a while will already have their own established networks.
Tenants are increasingly looking for houses to rent.
When discussing the Build to Rent sector, thoughts are often of large scale developments of flats, however, there is a growing demand for affordable private rented houses both in Edinburgh and across the UK. This demand is largely driven by the fact that tenants are renting for longer and are raising families in rented accommodation. Despite this, only 10% of the Build to Rent properties currently planned or under construction in the UK are houses, maintaining the demand for houses in the existing Edinburgh rental market.
Build to Rent could increase the standard of Edinburgh lettings properties.
Far from detracting from the lettings industry in Edinburgh, it is likely that Build to Rent will provide a (much needed) boost to the quality of existing rental stock. Faced with options including brand new, high spec flats tenants will be in a position to be pickier about the properties that they choose to rent. This will encourage landlords to improve the standard of their existing properties by keeping on top of redecoration and upgrading furnishings, kitchens and bathrooms as required.
The introduction of the Private Residential Tenancy (PRT) is already encouraging landlords to maintain high quality properties by not including a minimum term for tenancies. Read more about the PRT and what it means for Edinburgh landlords here.
Build to Rent has the potential to regenerate whole areas.
Build to Rent are large scale developments, tending to be built on unused gap sites. By creating a community with both residential and commercial units, Build to Rent will add value to whole areas, not just the developed site. Landlords with quality properties in streets close to a new development will most likely experience a surge in popularity for their property as tenants wish to benefit from new local amenities without moving into the development itself.
Build to Rent in Scotland is still very much in its infancy, and it will be interesting to see how things play out once plans really get underway. Edinburgh landlords should not be unduly concerned about Build to Rent developments, they should instead focus on providing quality homes for Edinburgh tenants.