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Build-to-Rent and the Private Rental Sector

With demand for housing outstripping supply, the UK is at the centre of a housing shortage caused by a lack of affordable built-for-sale housing stock. It’s estimated that 300,000 properties are needed per year, more than double the 125,000 the UK currently builds.

20% of households live in the private rented sector, and in the next 15 to 20 years it’s widely believed that more people will rent than own homes.

As the number of people renting increases, the face of the private rented sector has begun to change. Traditionally dominated by private landlords and buy-to-let properties, a new market led by investors and developers has reared its head, dubbed Build-to-Rent.

Build-to-Rent is an all-encompassing term referring to new housing developments purpose built for the rental market. The number of these developments has rapidly increased over the last few years, with output increasing by 49% in 2017/2018. Currently its estimated there are around 4000 built for rent units, with that number predicted to rise to 10,000+ over the next 2 years.

Usually found in urban regeneration areas with strong employment figures, and good local and national transport links. Build-to-Rent developments fill a unique place in the market, providing high-quality accommodation for young professionals. 25-35-year olds are the key demographic, being the most likely to seek comfortable, affordable properties with a secure length of tenure.

Minimum 3-year tenancies are one of the main attractions for tenants, although shorter tenancies can be negotiated. To enjoy a great quality of life, tenants benefit from state-of-the-art-technology, a concierge service, launderettes, cafes, gyms, and communal roof terraces. Creating a community improves tenants experience and, entices them to stay longer, with knowing one other person increasing the chances of tenancy renewal by 75% and knowing 2 or more people by 90%.

The government and local authorities hold a positive view towards and are keen to encourage Build-to-Rent developments. As a show of commitment, the government established a Build-to-Rent taskforce that introduced a £10 billion housing debt guarantee, specifically for purpose-built rental homes.

More than a passing trend, Build-to-Rent developments are here to stay, as products meet and surpass the expectations of both tenants and investors. Tenants get to be part of diverse and sustainable communities. Whilst, investors gain a stable, high-quality asset capable of providing long-term returns.

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