Rent

The White Paper provides the clearest support yet for Build-to-Rent (BTR) development. A consultation paper on Planning and Affordable Housing for Build to Rent has been published alongside the White Paper.

Key measures include proposals to embed BTR within the NPPF as a type of home that authorities should be seeking to promote; recognising that it can make a meaningful contribution to affordable housing; and promoting “family-friendly” tenancies of 3-years or longer.

The consultation paper recognises the challenges faced by developers and authorities in negotiating the planning system with what remains a relatively untested investment model. The barriers identified reflect our experience in promoting these schemes through the planning system, foremost of which is a clear definition of what BTR actually is; how it differs from other residential products; how it should be handled accordingly by planning authorities; and how the authorities can retain control over the tenure following the grant of planning permission. The consultation paper seeks to resolve these questions.

The Government appears to be promoting a high-level guidance approach to BTR, which rejects the introduction of a specific Use Class in favour of a more general definition, and promoting “clawback” mechanisms in lieu of minimum 15-year covenants.

The proposed definition of BTR comprises: 100% rented tenures; delivered within a single site; offering tenancies of 3-years or longer; and professionally managed stock in single ownership and management. These criteria do get to the nub of BTR as compared to mixed tenure developments. The requirement to offer 3-year or longer tenancies is though likely to draw attention from developers and operators; whilst securing longer tenancies often forms a critical component of BTR operators’ business models, the 3-year stipulation may prove overly restrictive.

The ability to deliver affordable housing via Affordable Private Rented accommodation forming part of BTR schemes should be welcomed by developers and authorities alike. This brings clarity to a topic of ongoing debate, particularly around whether BTR developments should be subject to affordable housing policy and how viability should be assessed. It remains to be seen how scheme viability would affect the Government’s proposal of 20% of units to be let at 20% below local market value in perpetuity, particularly in regional markets.

The consultation also notes that space standards will be reviewed in reference to BTR scheme. Again, this is a key point of negotiation between developers and authorities and developers would be well-advised to respond to the consultation with a strong case as to why smaller accommodation can be justified where extensive high-quality amenity space is provided within the development.

Clawback mechanisms provide a dynamic and transparent mechanism to ensure that appropriate planning obligations are secured, whilst not imposing overly restrictive constraints on developers. Their application to BTR developments should be embraced by planning authorities eager to ensure that they are not caught short when balancing securing housing delivery and making decisions on what remains something of an unknown entity.

In summary, specific recognition of BTR and its specific characteristics should be viewed as a positive step for the public and private sector. Engagement in the consultation by key players will be essential to ensure the resulting policy framework is appropriate to support this emerging residential delivery model.

Naill alcock

Niall Alcock - Assistant Director,  Deloitte Real Estate

Niall is an experienced town planner and chartered surveyor.  Based in Deloitte’s Manchester office, Niall focusses on residential and commercial-led urban regeneration schemes in the UK’s city regions.   Niall is experienced in preparing complex planning applications and EIAs; negotiating S106 agreements; and advising on community and stakeholder engagement strategies.  He has secured planning permission for a number of the first wave of Build-to-Rent schemes currently progressing in the Manchester Regional Centre.

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