As the membership organisation for the UK Build to Rent sector, UKAA (the UK Apartment Association) delivers a wide range of regular events and engagement activities. Recognising the importance of single family rental (SFR), the UKAA recently commenced a new dialogue between SFR investors and operators and housebuilders around the opportunities and challenges of building for the SFR sector. The goal was to grow connections and engagement between those building homes for rent and those investing in and professionally managing them.
The UKAA represents the interests of those investing in, developing and operating purpose-built rental homes, whether single-family homes or multi-family apartments.
The invitation-only UKAA roundtable event held in London on 25th July 2023 was attended by 20+ senior leaders, including housebuilders and single family rental investors and operators. It was the first of several such events and delivered valuable networking opportunities and insightful learnings.
Professionally managed rental homes
One key foundational point raised was the importance of not identifying Build to Rent (BTR) and SFR as mutually exclusive asset classes. Both are institutionally backed, professionally managed rental homes with community building, customer care, sustainability and social value at their heart.
An interesting discussion took place which brought to light a present lack of mutual understanding between housebuilders and investors in BTR. The disconnect seemed to be between housebuilders’ head office commitment towards partnering with investors and the regional nature of such deals. A single partnership contract nationally for investors was called for as a way to address this disconnect and provide a smoother route forward for all parties.
A need for certainty also played into this. This need works both ways: investors need to have certainty of delivery programmes to a clear timetable, while housebuilders need to know that investors will commit to a deal and then stick to it. It was noted that these needs were not fully aligned with the housebuilder delivery model – something which requires further consideration.
Attendees held a robust discussion about risk and how to share it, considering how a risk model could be introduced. The general consensus was that there is a need to build a stronger understanding and long-term commitment to partnerships, with the goal of embedding SFR into future schemes and making it a long-term mature and sustainable market. This would encompass a shift away from short-term opportunity and short-term thinking.
Such a shift, along with stronger partnerships going forward, would help to allay concerns around housebuilders’ priorities changing as market conditions move. The key concern here was that, while there is a strong desire by housebuilders to engage with investors at present (when demand for private sales is down and Help to Buy has ended), there is a danger that once the private sale market picks up, builders will revert to that tenure.
Crucial to these stronger partnerships and a cornerstone of the UKAA is education – on both sides. That means housebuilders developing a greater understanding of the design, specification and financial requirements of investors. It also means investors appreciating the reality of housebuilder models.
Discussion was also held around the education and engagement of local authorities. Local authorities are a key stakeholder in meeting the UK’s housing needs; they can help unlock land for regeneration, with Build to Rent serving as a catalyst and anchor tenant. There is a role for both investors and housebuilders to play in maximising the potential of such opportunities.
UKAA will take forward the work of this inaugural roundtable to further advance work around building for the single family rental sector. The first step will be discussion with the Home Builders Federation (HBF) on creating an education programme for HBF members on the vocabulary and business needs of BTR.
The HBF also offered to support this area of work by bringing more housebuilders to speak to investor groups to enhance engagement and understanding on both sides. This will focus on builders who already have partnership divisions that were set up for working with housing associations and local authorities, to leverage existing structures and knowledge.
UKAA will arrange further roundtables to build on this work between housebuilders and BTR/SFR investors and operators. These sessions will look in detail at key issues including partnership working, risk sharing, specification for long-term rental management, financial modelling and working with location authorities. All with the goal of enhancing long-term collaborative working across the UK housebuilding and rental sector.
UKAA CEO Brendan Geraghty commented:
“We recognise the growth in single family rental, driven by demand and investor support. To deliver such homes to be professionally managed in the long term requires high quality homes that meet the needs of the operator and investor. We will continue to work to bring investors and operators together with house builders to build stronger understanding and partnerships”.
Image credit: Sigma Capital & Simple Life Homes