The £8bn investment promised for private housebuilding and build-to-rent homes demonstrates the importance of the emerging sector.
Much of the Budget yesterday focused on “the challenge of the housing market”, with a number of measures set out to help boost the market while improving the lives of both buyers and renters.
The build-to-rent sector got a special mention, as chancellor Phillip Hammond revealed that the government is planning to invest “£8bn of new financial guarantees to support private housebuilding and the purpose-built private rented sector”.
He vowed to build “high-quality, high-density homes in city centres and around transport hubs”, adding: “We will ensure that councils in high demand areas permit more homes for local first-time buyers and affordable renters.”
Buy or build
While there have been reports of a possible decline in buy-to-let over recent months due to increased regulations and restrictions being enforced, it seems build-to-rent is on the opposite trajectory.
According to statistics from the British Property Federation, there are currently an estimated 95,918 units across the UK either completed, under construction or waiting for planning permission – and that number is set to grow with the latest backing from the government.
Build-to-rent homes are designed and built specifically for renters, so are never owned by the person who lives in them or a private landlord. Instead they tend to be owned by developers or institutional investors.
Because of the nature of build-to-rent homes, they are often more appealing to tenants – they are newly built with all the facilities a renter might need, and often offer longer-term tenancies and more security, as well as the guarantee of being professionally managed. With an increasing number of people joining Generation Rent, demand for such housing is likely to be high.
As such, they can be an attractive investment option for those looking to avoid the traditional buy-to-let route. Research from Knight Frank before the Budget predicted that institutional investment in the sector will grow by 180% over the next six years, and 790,000 more households in this sector will enter the market by 2021.