The housing crisis is a hot topic not just in the property industry but across society as a whole. A report from the House of Lords Economic Affairs Committee said that the UK government needed to boost its homebuilding target by 50% to create 300,000 new homes each year to tackle the housing crisis.
But while we all agree more homes are needed, what form they should take is less clear.
Market dynamics in particular locations will dictate what is appropriate, but we also need to consider more fundamental shifts in demand. As people live longer, a range of options tailored to older people becomes increasingly important, as does allowing family homes to be freed up.
With more people living alone, options that suit single people’s lifestyles and budgets are vital and as the millennial generation chooses a more transient lifestyle and prioritises experience over ownership, high-quality homes for private rental are also key.
Figures from the English Housing Survey last year found that almost half of 25- to 34-year-olds live in the private rented sector, up from less than a quarter in 2006. The proportion of families living in rented accommodation has also grown. Knight Frank estimates that by 2021, nearly one in four households in England will be renting.
A major contributing factor to the increase in renting is the difficulty of getting on to the property ladder. The Office for National Statistics said in April that the house-price-to-earnings ratio in the UK had hit 7.77, the highest in the official time series going back to 2002. Meanwhile, rising student debt and a preference for living in urban locations make buying a first property even more of a financial struggle.
However, it would be wrong to assume renting has become popular purely because of the difficulty of buying. Knight Frank’s research found that 21% of renters rent to be able to live in a better area; 8% do not want the responsibility of owning a home; 6% need flexibility for work; 6% are downsizers; and 5% do not want to be stuck in one location.
For too long, renting has been seen as a last resort. But renting has moved on and is no longer the murky world of damp-ridden HMOs that many in the baby-boomer generation may have experienced in their 20s.
For many younger people – some of whom will have been used to living in modern purpose-built student accommodation during their time at university – living in a build-to-rent (BTR) property, with a strong amenity offer and a focus on service, is a natural next step that fits their requirements.
“For many younger people living in a BTR property is a natural next step that fits their requirements [after university]”
The millennial generation, after all, is less focused on the long term. Traditional mortgage lenders have not yet adequately recognised the rise in freelancing and the gig economy and the ability to move anywhere around the world at short notice is worth more to many young professionals than the prospect of home ownership.
BTR shifts the focus for the homebuilding industry, which has traditionally concentrated on short-term capital values rather than long-term stable income. Developers need to adapt and recognise that real estate is increasingly about service as much as product: more than ever before, we need to understand the customer and their changing priorities.
Successful BTR schemes will combine a single-operator management structure with high-quality, sustainable, flexible building design to attract and retain tenants while offering them lease lengths to suit varying circumstances.
Source: Property Week