On Tuesday 23rd May 2023, the UKAA NW BTR Committee held a webinar focused on Single Family Housing (SFH) BTR. With over 280 people registered for the webinar, this was set to be UKAA’s most subscribed online event of all time, demonstrating the focus on SFH opportunities within the BTR industry over the last few years.
Vicky Hurcomb, UKAA NW BTR Committee Member and Marketing Director at Sigma Capital Group, led the discussion. She was joined by Giovanni Pilla, a fellow Committee Member and Associate Director at CBR;, Graeme Mill, Head of Design at Place First ; William Skuse, Associate Director at Packaged Living; Luke Lightfoot, Director of Asset Management at Sigma; and Georgia Kirby-Watt, Head of Grainger Trust at Grainger, each bringing a different strand of expertise to the panel discussion.
The SFH Opportunity
When discussing where the supply is coming from right now, everyone agreed that it has to be through good working partnerships with housebuilders – the ideal scenario is to then reap the benefits of working together time and time again to create a streamlined process. Luke, Graeme, William and Giovanni agreed that there are currently a lot of opportunities to take existing stock from housebuilders that are unable to sell due to the current climate. Luke confirmed that for Sigma, this is a great opportunity to deploy capital and generate further income quickly, providing that specification can be influenced and there are at least 20 homes minimum on any given development. Greame, on behalf of Place First, agreed but felt that typically a lot of these opportunities create a ’pepper-potted’ BTR community and limitations on specification meant a lot of these deals are not feasible or in line with business goals, making them harder to manage in the long term.
The ESG challenge
Another challenge that Graeme addressed was the ESG implications for retrofitting legacy housing, with the desire to achieve EPC B or A energy ratings at the forefront of that. Whilst investors were less willing only a short while ago, ESG is now at the forefront of their plans and there is more of a focus on sustainability. Georgia added that recently it feels that some of the more basic sustainability factors are becoming the standard expectation, as opposed to a ‘nice to have’, with William agreeing that ESG needs to be at the forefront of the fund. Luke mentioned that often ESG is dictated by planning and to influence the housebuilder, particularly on a development where the BTR provider hasn’t been involved from the outset, can be a struggle.
ESG – the resident view
“So do we feel then that rents are being inflated to cover an array of new ESG initiatives to contribute to the added costs, and are we finding that renters are willing to pay because they perceive the value to them within these benefits?” Vicky asked. Graeme started by outlining that for SFH, energy usage in particular is harder to achieve, not only due to GDPR and the physical ability to collect data but also because things like all-in bills are difficult to offer for SFH. He also talked of how it is hard to assign a rental uplift against potential savings residents will have, as it will differ so much by household, so education on using new tech is what Place First is focussed on. Vicky also recalled that Sigma’s latest market research report to renters across the UK, proved that renters appeared keen on ESG initiatives if the outcome is to save them money, however, if they felt that something might impact their rent (particularly given the cost of living crisis), they were immediately put off.
Differences between SFH and BTR
One of the most obvious differences between SFH BTR and flatted BTR is how amenities can be delivered. Giovanni mentioned that similar to influencing ESG on-site, often amenities are hard to get over the line, particularly at later stages, which would require re-submitting planning, increased costs, incurring delays etc. The key themes were that SFH developments should be selected based on the number of amenities already in existence within the local area, allowing residents the freedom to choose which amenities they might want to use and pay extra for (avoiding inflated rents). Also, it is more common now for SFH BTR to feature on a large regeneration, mixed tenure development, where externally leased and managed commercial space is part of the development, allowing for shops, cafes, and local hubs to be available on residents’ doorsteps.
Managing at scale
Managing a portfolio of over 5,000 houses across the UK, Luke has had ample experience with managing SFH at scale. One of the key objectives for him is to obtain a somewhat cookie-cutter approach to the specification, management and customer experience. For example, achieving the same white goods and working with manufacturers at scale, makes a very large portfolio easier to manage. By being able to rectify problems reactively provides the customer with a better, faster experience, not to mention a better gross to net due to economies of scale and being able to achieve better schedules of rates. Place First is similar, however, Graeme highlighted that the feel of a development or the product offered might be individual to the location based on local demand, for example, Place First is building bungalows on one of their developments due to the insights of the local market needs.
Finally, Georgia and Vicky turned to the community and customer experience side of SFH BTR and both highlighted the important role tech plays in SFH in bringing communities together and making everyday life easy via the likes of mobile apps and community forums where residents can communicate together and connect. Both Sigma and Grainger recognise that the BTR landlord’s role is to offer a platform for a community to develop, so whilst Sigma will conduct roadshow events for all residents, Vicky talked of how at scale with around 65 developments, creating unique events for each development wouldn’t be feasible. This is where your residents come in – by identifying those that are happy to step up within their communities, you can support and suggest but put the responsibility back in the residents’ hands to build their community. This is also important to ensure that community building is authentic and avoids feeling like ‘forced fun’.
Georgia closed by explaining that the customer experience is not too dissimilar to that of the rest of the BTR sector, other than no concierge and less on-site presence, which is why having dedicated teams to build rapport and a human touch to SFH BTR is so important. Efforts must be put into getting those key customer-facing members of staff on-site to meet, greet and get to know residents. Vicky also highlighted the important role the brand plays in SFH BTR – you need your brand to be the white label for all communications, feeding into a seamless customer journey, but you also need your brand to underpin and communicate your values, meaning that anyone, no matter what location they are in, knows what you stand for and what to expect from you as their BTR landlord. It’s part of what makes BTR residents feel they belong to something bigger. Without a UK wide brand for SFH (or no brand at all for that matter), arguably, the customer journey would feel no different than renting from a single professional landlord and therefore once stabilised, your portfolio quickly loses its BTR status and becomes standard PRS.