The recognition of the Build to Rent (BTR) sector in the Government’s recently revised National Planning Policy Framework (NPPF) speaks volumes about its coming of age. Forecasting that 10,000 homes could be provided through BTR per annum, the Government has effectively declared it as the necessary solution to the UK’s housing crisis.
With 117,893 BTR units complete, under construction or in planning across the UK, BTR has the potential to accelerate housebuilding three-fold, delivering high quality and well managed homes in sustainable communities.
Completed BTR units have risen by 45% in the past year alone and further growth is predicted as investors including Legal & General Investment Management, M&G Investments and Oxford Properties enter the market.
The sector is increasingly accommodating families, with the 35-44 age range now 29% of the market. Consequently a growing proportion (currently 17%) of units are houses, rather than apartments. Simultaneously the sector is expanding geographically, with 62% of BTR units now under construction in the regions.
But with BTR having evolved to the point at which it is heralded as a solution to the seemingly intractable housing crisis, the PRS sector is inevitably facing greater scrutiny and regulation.
Carter Jonas’ Residential Lettings Team welcomes improvements as fundamental to progress, but as we face a substantial raft of legislation we are also cautious: too many restrictions could stifle the still nascent market and curb its potential to deliver.
One of the most recent developments set to impact on the sector is:
- The Tenants Fees Bill which we are expecting in 2019 to deliver 'a fairer, more competitive, and more affordable lettings market’. The Bill will ban all letting and agents’ fees charged to tenants by agents and landlords in England and follows the Draft Tenant Fees Bill which was published in November and scrutinised in committee in February. The Government has confirmed that a number of the initial draft proposals have been incorporated into the Bill including provisions to prevent landlords or their agents from holding deposits of more than one week’s rent and security deposits of more than six weeks’ rent. The Bill also sets out the proposed requirements on landlords and agents to return a holding deposit to a tenant.
Other key measures set out in the Bill include:
o Capping the amount charged to a change of tenancy at £50 unless it can be demonstrated that greater costs were incurred
o Fines of £5,000 for an initial breach of the ban with a criminal offence where a person has been fined or convicted of the same offence within the last five years. Financial penalties of up to £30,000 can be issued as an alternative to prosecution.
o Trading Standards will enforce the ban and tenants will be able to recover unlawfully charged fees via the First-tier Tribunal
o A lead enforcement authority in the lettings sector will be appointed
o Local authorities will be able to ring-fence any money raised for future local housing enforcement
Alongside rent or deposits, agents and landlords will only be able to charge tenants for are:
o A change or early termination of a tenancy when requested by the tenant
o Utilities, communication services and Council Tax
o Any payments arising from a default by the tenant such as replacing a lost key
The Bill had its first reading in the House of Commons on 2 May. The date of the second reading is yet to be announced, however subject to Parliamentary timetables the new measures will be introduced in law next year.
Other potential policy changes are:
• A proposal by Government to appoint an independent regulator, nationally recognised qualification and code of practice for letting and managing agents.
• The possible introduction of an ombudsman for the private housing market.
• The requirement that local authorities actively plan for ‘family-friendly’ BTR units thorough the Local Plan system, announced in the recent draft NPPF.
• Proposals in the Draft London Plan that BTR schemes are fast-tracked through planning if they provide purpose-built student accommodation and a minimum of 35% affordable housing.
• An imminent Social Housing Green Paper, which, it is believed, will make additional requirements of the BTR industry to provide affordable housing.
Needless to say, some of these initiatives have sparked concerns, not least the viability of the rental sector to funding affordable housing.
And the PRS sector is now seeing calls for further reform from charities and think tanks including: The Joseph Rowntree Foundation, The Resolution Foundation as well as The British Property Federation. A number of these proposed initiatives include tax incentives for landlords with the aim of making rental properties more affordable for the younger generation, as well as increasing the quality of available properties. Additionally, new measures have been proposed to safeguard affordable housing in BTR schemes alongside a tightening up of the development rules.
With potential change coming from all angles, the private rental market is at a decisive position. Landlords will no doubt recognise the need for regulation as BTR becomes increasingly mainstream but legally-binding reforms must be carefully considered, such that regulation does not stifle the market and with it the potential to address housing need. We encourage landlords – with the assistance of Clearer View – to keep abreast of these changes and where possible to contribute to Government consultations on future change.