Tag Archives: build to rent

Putting the brakes on rent rises: will London adopt rent controls?

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Earlier this year, Mayor of London Sadiq Khan revealed that he plans to include the introduction of rent controls on private rented residential properties in the capital as one of his manifesto promises in the 2020 mayoral election:

“The housing crisis is now having such an effect on a generation of Londoners that the arguments in favour of rent stabilisation and control are becoming overwhelming.”

Research published in 2018, found that for the third consecutive year London was the most expensive city in Europe for renting accommodation. The Mayor is concerned about rent increases, particularly by unscrupulous buy-to-let landlords. He now seems set to call on the government to grant him new powers on rent stabilisation.

The case against controls

Opponents of rent restrictions believe that landlords finding their rental income reduced would be unable to maintain properties, leading to poorer housing standards. Some might choose to sell their properties rather than put up with controls on their income, adding to London’s already acute shortage of accommodation to rent.

There is also concern that rent controls could strangle London’s fledgling build to rent (BTR) market. Across the UK, the number of BTR homes has soared – a 30% increase was reported in 2018 – and growth has been particularly strong in London. But some fear that rent controls could scare investors away from BTR, resulting in a fall in properties available to rent.

German lessons

Concern about rising rents is by no means confined to London, and if the capital does adopt rent controls, it will be following an international trend towards putting the brakes on rent rises in the private sector.

Germany introduced legislation in 2015 specifying that landlords taking on new tenants could only raise rents by up to 10% above the local average for similar properties. One of the first cities to use the new powers was Berlin, where rapidly rising population numbers have been putting greater strains on the city’s housing market. Hamburg and Munich were among the more than 300 cities that followed Berlin’s example.

Overall, the impact of Germany’s rent controls has not been as positive as intended. A study by the German Institute for Economic Research found that, while the rent controls had worked in areas affected by the most dramatic rent rises, such as parts of Berlin, in other areas it had not had the same effect. In contrast to the UK, more than 50% of Germans rent their homes, but rent controls have benefitted only a tiny proportion of that number.

The reasons for the failure of rent controls in Germany were set out by The Economist, which reported that landlords have used loopholes to circumvent the controls for newly renovated properties and accommodation being rented out for the first time. In addition, there are no sanctions against landlords who flout the rules. But the article also pointed out the law’s “fatal flaw”:

Landlords are not obliged to disclose a property’s previous rental price; rather, the renters must ask for it before agreeing a new price and signing a contract. In practice, this means that many renters wary of jeopardising their chances of striking a deal end up keeping mum. And a landlord can then add a few euros to the price above that permitted by the brake.

Across the water

In Ireland, rent controls were introduced at the start of 2017, limiting annual rent rises to 2%, but so far the measures have not proved successful. In the first quarter of 2019, rent prices in Dublin rose by 7%.

The reasons mirror the situation in Germany, with a large number of exemptions to the controls,  landlords charging much higher rents for new rental properties, and no sanctions for offending landlords.

The Scottish approach

In 2016, the Scottish Parliament passed regulations intended to strengthen the rights of people renting private accommodation. Among the provisions was a measure enabling local authorities to apply to Scottish ministers for permission to cap rent increases in designated areas. If local councils can prove that rents are rising too much in these “rent pressure zones” (RPZs), a maximum limit will be set on how much rents are allowed to increase for existing tenants each year in that area.

As of yet, no RPZs have been designated in Scotland. Some opponents of the measure have pointed to the difficulties local authorities face in making RPZs work, while others have branded them a failure, and called for them to replaced by nationwide rent controls.

Final thoughts

It remains to be seen whether Sadiq Khan does include rent controls in his election manifesto. If he does, and if he goes on to be re-elected, he will then have to persuade the UK government to grant him the necessary powers. After that, the question is whether London can make a success of rent controls where others have stumbled.

You may also find the following blog posts on the private rental sector of interest:

Build to rent: opening up opportunities for supply in the private rented sector

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Anyone with any experience of the private rented sector (PRS) will tell you that it is a complex entity. Disjointed, difficult to regulate and control, but for many, an essential part of the housing market.

Despite the many criticisms often levelled at the private rented sector, demand is high – so high that in many areas it is outstripping supply. If you consider that the market in Scotland alone has grown by over a third since 1999 that will give you an idea of the scale of growth across the whole of the UK.

It has been suggested that this rise in demand for PRS properties has been driven in part by falling numbers of accessible social housing, and increasing numbers of people forced to rent in the private sector as they are unable to afford a deposit for a mortgage. The irony in many instances is that this group – largely segmented in customer profiles as “young professionals”, usually graduates with a reasonable wage – would probably be able to afford repayments on a mortgage but whether for the convenience and flexibility of renting, or lack of ability to save for a deposit (which in many areas of the UK are painfully high) they live in private rent housing.

The growth in the build-to-rent market

One of the emerging markets within the PRS, which has been popular for a few years now in cities in the USA, is the build to rent market and it is being heralded as (part of) the solution to the supply-demand challenge in the UK’s PRS.

Build to rent in principle involves an investor – usually a large multinational like Legal and General or Shell – putting up the money to build a complex, usually of self-contained studio, one or two-bedroom flats (although increasingly the model is being applied to suburban “family” homes too). There is usually also a communal space, where people living in the complex can come to meet one another, or perhaps work if they are able to work flexibly from home. There is also usually a shared kitchen area, as well as facilities like gyms, and even cinemas. These commercial landlords provide attrractive, and based on current models, high-end accommodation which often most suits the needs of the “young professional” market.

A solution to a social as well as a housing conundrum

Those who support the build to rent model within the PRS highlight that it has wider benefits than simply providing more accommodation in an increasingly stretched market. They also stress the benefits of the social aspect it can provide to residents, as well as facilities which enable flexible working and spaces which promote healthy living such as onsite gyms.

However, others criticise the projects on a number of fronts. Some are concerned that the projects could encourage gentrification of an area. With rents often being as much as a small mortgage, they are, critics argue, aimed at a market who are choosing to rent, either while they save for a house, or because the flexibility of renting suits their lifestyle, allowing them to be closer to jobs for example. They stress that those who are already being exploited by the PRS will see little to no benefit from these developments, which could potentially price them out of existing areas.

Supporters counter this by saying that these developments are aimed at a specific area of the market, and that actually introducing more mid-market renting accommodation may free up cheaper accommodation for lower income renters. Critics also question the benefit to the wider housing market, suggesting that while it looks good on the surface, in practice, build to rent is not going to solve the housing crisis.

How do we make it appealing to local authorities?

In Scotland, certainly, build to rent is in its infancy, with no specific build to rent projects in operation currently, although there are a number of planning applications in process, and some retrofitted buildings, previously derelict and remodelled to fit the build to rent spec. Meanwhile, there are a number of projects in the pipeline in England, where the model has already taken off in a number of locations, including London and Manchester.

However, it appears that in many instances, local authorities are cautious, and even at times reluctant to support build to rent projects, in part because of uncertainty about the schemes. In addition, a lack of support for the model, particularly among traditional planners is making them reluctant to bring build to rent projects forward. It is up to those within the sector to persuade sceptical local authorities that build to rent can work in a number of different settings, and does not just suit a young professional market in an inner city (although that is its current demographic target).

The future of build to rent

The housing sector is reliant on all areas of it functioning properly, and this includes the private rented sector. While build to rent is not being proclaimed as a panacea for the housing crisis in the UK, it can for many be a useful option within the PRS. How it will be utilised, and the potential impact on the PRS in the UK remains to be seen.

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Housing models for the future

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Housing is one of the challenges of our time. The task for architects and designers is to create affordable, robust housing that can accommodate the needs of a rapidly growing, but also ageing population. And it’s not as easy as simply building. The demands and expectations on house builders to also be community builders and the architects of mental and physical wellbeing through design have led architects and designers to consider alternative ways to house us in the future. This includes innovative use of materials and construction methods, addressing the issue of financing through co-operative living models and using bespoke design to create lifetime homes which can be adapted to accommodate the changing needs of our population.

Large-scale development

One of the big challenges for urban areas is large-scale development strategies for designing and delivering housing to meet need. For developers and planners going forward there are a number of factors to consider: the type of investment introduced to an area; how the schemes fit with a wider development plan for the city; and the importance of engaging the community in any plans to develop or regenerate an area.

“Placemaking”, not just house building is central to large scale development discussions, emphasising to planners, architects and developers the fact that they are not just building houses, but creating communities. As a result, designers and developers should be mindful of their important role in community building, to build the right sort of homes in the right places, at affordable prices and with a legacy in mind. They should, create high quality, long lasting units, which will stand the test of time but that also can be easily adapted to accommodate people’s changing needs.

Alternative construction and design

Innovative models and options for future builds have been discussed for a number of years but they are becoming an increasingly mainstream way to build affordable housing that meets the current need, particularly of students and young professionals, and of older populations looking to downsize or move into assisted care accommodation.

Offsite manufacture or modular homes – Offsite manufacture of timber framed houses is becoming increasingly common, with the constituent pieces of the house manufactured off site, then transported to the site and constructed on a concrete block where foundations and services such as plumbing have already been created. Offsite housing can either be open panel, which requires the finishing such as bathroom and kitchen installation to be done on site, or closed panel which provide the entire section complete with decoration and flooring (this is becoming a common way to build cheap, efficient student housing).

Custom build – Custom build projects are similar to self-build in that they give clients flexibility to select their own design and layout, However, custom build provides slightly more structure and certainty which can make it easier when considering elements like financing and planning applications. In essence, customers select the spec of their house in the same way they might make custom modifications to a car.

Build to rent – This model has been adapted from the United States, where build to rent is popular. The model is based on self-contained flats, with central and shared amenities, entrance and communal space. Designed to attract graduates and young professionals, these are being increasingly designed using a “user first” approach. Developers identify the sort of person they want to live in the development, identify what sort of things they might look for in a development, including floor type, furniture, layout, amenities, gadgets, and then build the development around that.

Dementia friendly – Building homes that are safe and affordable, but allow for independence in old age, is one of the major demands on house builders currently. Housing stock is seen as not suitable for current need, but building bespoke sites for people with illnesses like dementia has been seen as a bit of a niche previously. Virtual Reality (VR) is being used by some architects and developers to try to help them understand the needs and requirements of people with dementia and how they can build homes suitable for them to be able to live as independent and full lives as possible. Building dementia friendly homes not only means making them accessible and open plan, but also adapting the layout, adding signage where appropriate and if possible locating the homes within a wider community development. Dementia villages like those seen in Amsterdam are being used as the model for this.

Co-housing

Co- housing offers an alternative to communities in Scotland, and while lessons can be learned from elsewhere in Europe, where co- housing models have been successful, there are also pockets of good and emerging practice in the UK too. More traditional examples include Berlin, where almost 1 in 10 new homes follow the Baugruppe model, and Amsterdam (centraal wonen) where some of the oldest co-housing projects originate. In Denmark, 8% of households use co-housing models.

Co-housing provides the opportunity for groups of people to come together and form a community which is created and run by its residents. Each household has a self-contained, private home as well as shared community space. Residents come together to manage their community, share activities, and regularly eat together. A “Self-build Cooperative Group” is a joint venture between several private households who plan and build their own house together. Usually they are supported by an architect. Often co- housing groups are able to realise high-quality living space at prices below local market rates, although it is not really considered suitable for large-scale development within the current UK market.

Opportunities for a new way forward

Practitioners are often challenged to push the boundaries of design and building in their field. Looking to new models for future building design provides an opportunity to think creatively about alternative uses of materials and space and to consider options for construction, funding and investment in the built environment that challenge the norm. Learning lessons and exchanging ideas from elsewhere, architects and planners have the opportunity to come together to consider how the built environment in Scotland can help to create places – not just buildings – and how this can contribute positively to the wider wellbeing and happiness of people living in Scotland in the future.

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