Generation Rent’s crisis: Is Build-to-Rent a better solution than social housing?

Arthur looks at reasons why the booming Build-to-Rent system could be the answer to Generations Rent’s crisis.

The poor supply of new homes and rising house prices have been affecting a specific demographic segment, also known as Generation Rent: those under 35 years old in full employment stuck in overpriced housing, priced out of homeownership, and earning too much to qualify for social housing.

In recent years the shortage of housing supply has been thrown into the spotlight thanks to the combination of a recent price boom and stagnant real wages. According to figures by Nationwide, the annual rate of house price growth ha increased to 2.5% in October 2017, pushing homeownership further out of reach of young Londoners looking to buy their first property.

To tackle the issue of the housing supply shortage, Theresa May has announced a £2 billion investment top-up package that will take the total for the Government’s social homes programme to £9.1 billion until 2021 and at the same time encouraging property sales through the “Help to Buy scheme” extension.

Many young renters value amenities, convenience and environment not typically found in social housing; they would probably be considered inelegible for housing benefits due to their income. At the same time they are not ready to commit to risky mortgages, high fees and lengthy approval processes to purchase a house.

It seems like build-to-rent offers great opportunities for property investors: in fact, the demand for more affordable private rental properties is expected to increase alongside the development of new build-to-rent units. Recent forecast by PwC property consultants expect to see 60% of Londoners living in rented accommodation by 2025.

New purpose-built homes are typically flats, developed with the aim of appealing to long term renters instead of buyers. A typical example would be the former 2012 Olympics athletes accommodation in Stratford, London, now converted to a build-to-rent style complex.

A report by Savills shows that these developments are now exceeding 50,000 units in London, offering a combination of quality, flexibility and convenience, filling a gap in the market for many young professionals.