Until recently, the only builders of rental homes for low income tenants were the council, and social landlords.
Previously, those who found themselves ineligible for social housing were reliant on private landlords: low-level buy-to-let investors with accumulated property portfolios, and those simply renting out their former homes. What’s more, for those forced into private rentals with ‘amateur’ landlords, there has long been a real problem of the landlords simply failing to maintain the property, leading to unacceptable living standards for the poorest in the community.
But now, private investors are seeking to bring movement, and higher quality accommodation, to rentals for those at the bottom end of the ladder.
Not For Sale
On a small suburban estate in Salford, private investors have constructed red brick family homes, very much in keeping with thousands that families in the UK buy each year. The only difference with these ones is that they are not for sale. The investors behind them are keeping these houses for the long term.
Taking their example from the thriving rental markets in both the US and Germany, investors are now taking action on the potential of buy-to-let developments as a large scale source of steady income.
A Growing Rental Market
Considering the state of the market at present, these investors seem to have tuned into a space where demand is high. Families, as we know, are finding it increasingly difficult to buy homes in the current climate of rising house prices and a dearth of wage increases.
With mortgages less accessible, and house prices laughably out of reach for many (they’ve risen 7% a year since 1980), the number of owner occupiers in the UK has dropped from 71% in 2003 to just 63% at present.
Whilst critics are warning that renters will remain poorer in the long run, without the asset of a property of their own, this is, nonetheless, an opportunity that has benefits for both parties. Investors are recognising the potential for good rental yields, whilst families in need of decent rental accommodation get their wish.
They may not do better in the long run, without that property asset behind them, but renters living for the ‘now’ find themselves with more disposable income than their owner-occupier peers. With better options open to them, renters will surely enjoy better quality of life, and with that disposable income, benefits to the wider local economy may also be noticeable.
The Rental Market Developers
One of the principal investor companies currently operating in this area is Sigma Capital, who have an impressive range of backers behind them. The creation of large, rental estates, where monthly rent also covers tenants’ utility bills and some maintenance (such as a grass cut twice a month), is part of a move to professionalise the rental business.
Countryside Properties works with Sigma as a listed housebuilder, and has so far created over 600 homes of this type, with a further 550 expected for 2017. They are targeting northern cities, such as Salford on the outskirts of the city of Manchester, where local authorities are keen to open doors to new house builds on the large banks of land they own.
The majority of these homes by Sigma are set alongside other houses by Countryside Properties that are available for sale, with all being built to the same design. So there is no distinguishing between the blocks of sale versus rental properties.
Along with all the other benefits of this little housing revolution, another plus is that these new builds will relieve pressure on council house waiting lists. Oldham, for example, currently has over 11,000 people on its list, and only 3,300 of these are eligible for public housing.
But these new developments signal a light at the end of the tunnel. The number of properties emerging (from planning to completion) has more than doubled in the last six months. According to British Property Federation figures, from 21,400 to 57,000. About 30,000 are in London.
Sigma has announced plans to construct a whopping 10,000 rented homes over the next five years, which will leave them with a £1bn portfolio.
It’s not just Sigma leading the market, however. Quintain, a London based developer, has plans for 7,000 rental homes in one single development near Wembley Arena.
Stonegate Developments in Newcastle are building 162 apartments for this purpose, whilst Placefirst, another developer, is in the process of refurbing hundreds of dilapidated homes.
Then, of course, there’s us.
When we started out, back in 2012, it was with the traditional buy to let model, from which we have evolved. We are now proud to be champions of the use of crowdfunding monies to create badly needed new homes, whilst providing excellent returns for investors.
On the investor side, too, we are levelling the playing field, allowing those for whom the idea of a property investment portfolio was once out of reach, to enter the game. Our consistent, predictable returns through simple, transparent investments are suitable for all levels of investor.
Currently, we have over 100 properties being built over 7 developments in the North West, with about 180 more on the cards as we negotiate deals on buying the land. It is a philosophy of creating a more egalitarian property market, where investors can get excellent rates of return, whatever the level at which they operate, whilst tenants in buy-to-let properties get an outstanding home that they can afford.
The work of The House Crowd represents part of the same matrix of philanthropic capitalism behind the work of developers like Sigma and others mentioned in this post. We are working to similar aims: a better future property market for everyone involved. And, particularly for us, with the aim of seeing our beloved Manchester, and its surrounding areas, reach its considerable potential.