London is becoming a city of renters. In 2017, 48 per cent of householders were renting – 21 per cent of these householders lived in some form of affordable housing and 27 per cent rented privately. And private renting is predicted to experience significant growth, forming just under 40 per cent of householders in the capital by 2025.
What lies beneath these statistics is a profound change in how Londoners live, as well as a clear guide to the types of homes the city needs to build for the future. But it is a change that politicians and decision makers are only just starting to get to grips with.
The need to build more housing in London, particularly affordable housing, is clear. Our research shows that if London is going to meet its housebuilding target of 65,000 homes a year it will need to find a whopping £8.6 billion of additional investment per annum. The Mayor has secured a record £4.8 billion of affordable housing funding from government to start building 116,000 homes by March 2020. Delivery will in large part be done by London’s housing associations, with a small but important role played by boroughs via direct delivery. Volume housebuilders continue to build but are constrained, as the Letwin Review highlighted, by the speed at which they can sell homes.
To help hit housing targets and to respond to the changing nature of housing tenure in London there needs to be a fundamental shift in the mix of homes we build. What the capital needs, but largely lacks at present, is the construction of high-quality, professionally managed, purpose-built homes for private rent – build to rent (BTR).
In London and across the UK, BTR is starting to gain traction. According to the British Property Federation, London now has close to 15,000 BTR homes with a further 19,000 under construction and 38,000 at various stages of planning. This growth is being supported by changes in public policy by both central and London government. The planning system and housing policy are now starting to reflect the fact that BTR is different from for-sale housing and requires a bespoke set of policies to support its growth.
To help promote a better understanding of BTR, London First, alongside London Councils and planning consultancy Turley, have just published our second edition of Everything You Need To Know About Build To Rent in London. The report acts as a short but comprehensive guide on BTR in London, highlighting why the sector is worth finding out about.
BTR has much to offer: it can increase the overall supply and accelerate the construction of new homes as it forms its own distinct housing market; support greater choice for renters, including through the provision of affordable housing; deliver a better quality rental option that is professionally managed; and, crucially, provide the public sector with an opportunity through joint ventures to generate a long-term income stream to invest in local priorities.
London’s private rented sector is currently dominated by small scale amateur landlords, and effective property management and security of tenure is far from a given for too many Londoners. This means that further regulation of the sector is always on the table. Should this come to pass – and there are arguments both for and against a range of interventions – careful thought must be given as to how the role of the BTR sector, as a distinct part of the general private rented sector, can be sustained and indeed enhanced.
The breadth of who lives in a BTR home continues to expand. While the sector holds appeal for the mobile professionals that London needs to remain globally competitive, it also offers homes for essential workers running key services. It is also not exclusively the domain of younger people, with families and older people also living in BTR homes. London’s challenge is to use BTR to help it deliver the city’s changing households needs. This will only be done if we fully understand how the sector operates and unleash its full potential.