A new way of living

WHEN it comes to the roof over our head, attitudes in the UK stand apart from our European neighbours. In a nutshell, aspiring to home ownership is the cultural norm here, with 62% of Brits wanting to get on the housing ladder, while our continental cousins seem content to rent – including in countries like Germany, where fewer than half dream of owning their own home.

But necessity could be driving a major attitudinal shift in the UK as, for many, the goal of home ownership feels further out of reach than it did just a few decades ago. The latest census in 2021 showed a sharp rise in the number of households renting – more than doubling since 2001, increasing from 1.9 million to five million in England and Wales. In fact, many are predicting that in the not-too-distant future, ‘generation rent’ will be more likely to rent than own in the UK. And the stats don’t disagree.

Vital statistics

1. Affordability

Over the last three decades, the average age of the first-time buyer has risen from 27 to 34. Back in the 1990s, the average house price was three times the average salary. Now, it’s more like 10 times the average.

This means affording your own property is simply not as realistic as it once was, and millennials are the first generation to be hit by the reality that a good salary may no longer be enough. It might take a life event, such as losing a loved one, for them to afford their first home. And for those without such lifelines, the reality is even bleaker.

2. The pandemic hangover

The 2021 census revealed that households owning their home had decreased by 1.8%, whereas renters had grown by 3%. Since then, Covid and the subsequent cost-of-living crisis have put an even greater strain on household budgets, while at the same time, house prices rose by 20% during the pandemic due to increased demand, the stamp duty holiday and by the UK’s historic home-ownership mentality, resulting in too few homes for too many home-hunters. the desire to move out of urban areas. All these factors have seen the housing market spiral out of reach for many, driving a rental boom.

Yet the private rental market is far from a comfortable alternative. With supply drastically outstripping demand here too, rental prices are rising fast, with the average rental price across the UK up almost 11% year on year in December 2022. In Greater London, the average rental was more than £2,000 a month in December. With a lack of private residences, as well as social housing, the rental market has become a hotbed of eye-watering prices and conditions, yet bidding wars are becoming the norm and properties are commonly snapped up before viewings have even taken place – a radical shift from just a few years ago.

3. Supply-demand imbalance means higher house prices

The government’s target of building 300,000 new homes a year by the mid-2020s is proving beyond reach so far, with the reality being closer to half that number. Factors like arduous, lengthy planning processes and lack of available land are compounded

Rising house prices have a knockon effect for landlords, too. Many are selling up due to the increase in mortgage rates, or to take advantage of the prices before the housing bubble bursts. And increasing regulatory costs and tax changes are making buyto-let properties more expensive for individual landlords to run, meaning less profit and fewer incentives for them to stay in the game. In fact, landlords are behind a quarter of homes for sale in London

With a lack of ability to buy a house, and a rental market that is only growing more and more unattainable, Brits are increasingly turning away from the aspiration to buy, and are starting to seek out alternative ways of living.

So perhaps it’s no wonder, then, that the build-to-rent (BTR) properties first introduced as part of the sustainability mission of the 2012 Olympics have experienced a major spike in recent years.

Rapidly growing market

BTR is a thriving market, growing more rapidly than any other housing sector. These buildings provide professionally managed, purpose-built rental housing, and appeal to investors, developers and residents alike, standing out with their state-of-the-art amenities, community-focused design and long-term returns.

BTR properties are a level up from the traditional housing renters are used to. Designed to offer a space in which to live, work and play all under one roof, they are designed to appeal to our evolving needs from one life stage to the next, and our need for convenience and, increasingly, a desire to be more social and healthy and to work from home. More often than not, they include communal gyms, shared workspaces, social activities and even concierge services.

Traditionally, BTR properties were designed for young professionals looking to emulate the social side of the university experience in their adulthood. The popular podcast WeCrashed recounts the rise and near fall of WeWork as it sought to create a home, work and social space that people would rarely feel the need to leave.

But the challenges of the UK housing market mean that BTR is no longer the domain of the young professional. Increasingly, more and more families are taking advantage, and there’s even been a boom for BTR properties aimed at people over 65, offering them access to a community on their doorstep.

For developers and investors, BTR provides incoming rent over a longterm period, as well as capital growth on the asset itself – a perfect pairing of short-term stability and long-term returns. And with the typical longer tenancy agreements, there is added security to the investment.

Keeping up with renters’ needs

There’s a different mindset for buyers versus renters when moving into a property. Buyers expect the process to be long and painful, with disappointments, but renters expect ease, good service and quick, painless fixes when things go wrong.

With the Renters (Reform) Bill recently announced, the legislation around renting is changing and improving for the benefit of the tenant.

With high tenancy expectations matched by renter-friendly legislation, BTR properties offer a promising proposition for investors, but only if developers ensure they do not fall short of the increasing standards of living required for renters to be able to participate in today’s digital society. To keep up with the needs of renters, developers should:

1. Build with flexibility in mind to accommodate everyone, ensuring spaces are fit for professionals, families and pensioners all under one roof;

2. Build communities beyond the front door by creating desirable shared spaces to live, work and play; and

3. Build in future-proof technology that offers the reliability and performance to meet the expectations of renters today, tomorrow and in 10 years’ time.

With almost half of UK workers working from home some or all of the time, BTR tenants will rely on the quality of the build to participate equally in the job market. With UK workers losing up to two working days to a poor connection – adding up to a loss of £598m to the economy – developers have an opportunity to build equal access to working-fromhome roles for their tenants. At the same time, they’d be future-proofing their builds against the expensive need to retrofit as the government targets for gigabit access come into sharper view, and the tenant-friendly legislation comes into effect.

Having an enhanced broadband connection enables BTR tenants to use digital management systems to book shared spaces, log issues or request cleaning, as well as to communicate with other residents.

There’s a business incentive for full fibre, too. Asset management in BTR properties becomes much simpler, more effective and more efficient when connected to a reliable network –each itemised asset becomes a data point, capable of informing greener and more cost-efficient use, saving up to 15% annually