Who Lives in Build to Rent?
The British Property Federation, the UK Apartment Association and London First have launched a report entitled “Who Lives In Build To Rent?”, which provides an insight into the demographics of people living in BTR developments in London based on an analysis of ten large BTR schemes. A key aim of the report is to highlight the advantages of, and to address some of the common misconceptions held about, BTR. The panel noted that a widely held view is that BTR is aimed at higher earners, given the various amenities and facilities offered by a BTR scheme. However, the data analysed for the report shows that the residents of BTR schemes cover a wide range of socio-economic backgrounds and that, broadly, the rental levels in the BTR sector are comparable to those in the private lettings sector. The panel was hopeful that the report would help to highlight to local planning authorities the potential of BTR to assist with policy priorities such as delivery of affordable rental solutions and increased housing supply. From a debt finance perspective, the lack of data from the nascent BTR market has meant that traditional lenders may have, in the past, been hesitant to commit to this sector. BTR schemes initially attracted lenders with higher risk strategies or those focussed on longer term investments, such as pension funds. Unlike a traditional development, there is no large scale sale of units following completion of a BTR development and therefore no bullet repayment of the debt facility at the point of practical completion. Stakeholders in a BTR asset are therefore more reliant on a long term income stream, rather than focussing on short term capital appreciation and return from a sale or refinancing. However, now that the BTR market is becoming more established, more data is available to lenders and evidence from the market suggests that BTR is becoming a more attractive proposition for lenders. BTR is supported by long term fundamentals which will not change, such as a shortage of housing and a need for rental property, and provides a consistent rental stream.