COVID-19: How Is Build To Rent Coping With the Pandemic?
While most industries falter during the COVID-19 pandemic, Build To Rent developments are rising to the challenge with better amenity offerings and customer experience.
With over 400,000 Coronavirus cases and over 40,000 deaths, the COVID-19 pandemic continues to be a major threat for UK citizens1. So far, the Coronavirus outbreak has caused the nation’s GDP to fall by 20.4% in the second quarter of the year. Like other sectors and businesses, Build To Rent developments have also been confronted with a fresh set of challenges due to the pandemic2.
Read on as we discuss the impact of COVID-19 on Build To Rent and how these developments are faring.
- Key Initiatives Taken by the UK Government
- Market Report for Build To Rent During COVID-19
- The Growing Appeal of Build To Rent Developments for Tenants
- Challenges Confronting Build To Rent Schemes During COVID-19
Before we talk about Build To Rent, let’s review some of the latest measures adopted by the UK government to offset the economic impact of the pandemic. The UK government is likely to borrow between £263 to £391bn during FY 2020 and 2021 to bear the costs of the pandemic. These funds will be used in a variety of ways including3 4:
- Providing financial support of worth £190bn to public services, businesses and individuals.
- Introducing and maintaining a Job Retention Scheme, which started as a nationwide furlough then changed into a wage subsidy programme.
- Lowering taxes for workers and businesses that have suffered during the pandemic.
With respect to the Private Rented Sector (including Build To Rent), the government has taken multiple steps to provide support to landlords and tenants. These include:
- Housing Benefit and Universal Credit has been increased – the local housing allowance will now be sufficient for covering at least 30% of market rents in the private sector.
- Landlords have been banned from carrying out evictions till the end of September 2020.
- Landlords are required to issue a minimum notice period of 6 months for seeking possession of a property.
Click here to learn more about how the traditional Private Rented Sector is coping with the pandemic.
As per Savills5, the Build To Rent sector has remained relatively stable amid the pandemic. Construction of new developments was paused during April and May and most operators focused on facilitating tenants and ensuring their well-being during the lockdown.
Build To Rent companies have also opted for digital platforms to serve tenants better and prospective tenants have been able to take advantage of virtual viewings before renting a property.
With construction resuming in the second quarter, we can expect a large influx of new homes to become available by the end of the year. Here are some key highlights regarding new Build To Rent developments in the UK:
- 48,000 new homes have been completed
- 34,000 homes are currently under construction. Among these, 11,000 properties are expected to be completed by the end of 2020. Over 5,000 of these homes will be in London, while the remaining will be distributed evenly in other regions.
- Construction has remained particularly stable in London, with other regions facing a small 11% decline, which indicates a high demand for Build To Rent properties in the rental sector.
12 new Build To Rent schemes have been initiated in the second quarter of 2020. Some of the biggest schemes include:
|Scheme||Location||Number of homes|
|Stratford Office Village||Newham||158|
|211 Broad Street||Birmingham||264|
Source: Savills, British Property Federation, Molior
Besides, Court Collaboration also plans to develop a scheme valued at £125m in Deritend, Birmingham. They are looking to erect a 28-storey tower housing 454 multifamily apartments. Another Build To Rent scheme by Taylor Grange will deliver a 35-storey tower comprising of 440 rental apartments in Birmingham6.
Unlike the traditional Private Rented Sector that is struggling to accommodate tenants amid the pandemic, Build To Rent developments have weathered the storm fairly well. Rent collections for Build To Rent schemes have also remained relatively high with Grainger reporting a rent collection of 95%, while Apache Capital and Moda Living collecting rent from 98% of tenants7.
Some of the biggest benefits of renting a Build To Rent home during the pandemic include:
Improved Customer Support and Management
Companies such as Grainger have taken a number of initiatives to accommodate their customers8:
- Offering excellent customer service based on improved outreach and communication
- Ensuring all critical repairs and maintenance work is carried out promptly
- Providing an in-house team of experts that can guide tenants and help them access government support measures for managing rental payments
- Offering rent deferral repayment plans for tenants that require more assistance
- Developing initiatives that support the mental health and well-being of their customers
Availability of No Deposit and Zero Deposit Schemes
Many Build To Rent developments are willing to rent a home without asking for a security deposit. They also accommodate tenants looking to opt for Zero Deposit schemes. This is a significant advantage for tenants looking to rent a new home and worried about the upfront costs of renting.
Given the financial uncertainties associated with the pandemic, saving up money that would otherwise be expended toward deposit payments is a huge plus.
Click here to learn more about the costs of renting and how you can reduce them.
Easier to Find Pet-friendly Rentals
According to a survey carried out by the UK government, only 7% of private landlords offer pet-friendly homes. In comparison, many Build To Rent developments are willing to accommodate pet owners9. Here are some Build To Rent schemes in the UK that were launched earlier this year that offer pet-friendly properties for tenants:
- Allegro by Savills/LaSalle: 603 pet-friendly apartments for rent in Birmingham.
- Angel Gardens by Moda Living: 466 pet-friendly apartments for rent in Manchester
- Clippers Quary by Grainger: 614 pet-friendly homes for rent in Greater Manchester
These Build To Rent developments also offer other incentives such as zero service charges, no deposits and access to specialist pet services that offer dog grooming and dog walking.
While the Build To Rent sector has managed to overcome a significant number of challenges posed by the Coronavirus pandemic, there are still some problems that they must prepare for. These include:
Emphasis on Social Distancing
Build To Rent schemes offer a number of amenities including access to a private gym, large dining areas, lounges with large-screen TVs etc. With social distancing critical to controlling the pandemic, these spaces have been closed as per government guidelines.
At present, the government has permitted leisure facilities such as gyms, libraries, social clubs, and community centers to reopen as long as they operate in a COVID-compliant manner10 11. This is good news for schemes providing such amenities for social engagement. However, it remains to be seen whether tenants will be willing to take advantage of them.
Rising Demand for Work Spaces
If the pandemic continues, amenities that form key part of Build To Rent may come into question. Consequently, Build To Rent developers are reconsidering what they want to offer to tenants. With work from home becoming the new normal, many schemes are looking to offer flexible office spaces and strong digital connectivity to support remote workers. Of course, this will require Build To Rent companies to re-evaluate their existing plans for new properties. For developments that have been completed, landlords might have to redesign and modify existing spaces to provide their tenants with an office space.
Lowering Rental Prices
The average rent of Build To Rent properties is 9.3% higher than the rent charged for homes in the traditional Private Rented Sector12. Given how affordability has become a major concern during the pandemic, the higher rental price may worry prospective tenants that are looking for frugality. Of course, these costs are well accounted for thanks to the amenities and benefits that Build To Rent properties offer. However, Build To Rent developers may have to consider lowering the average rental price to appeal to a wider customer segment.
With construction halting and social distancing limiting access to the amenities that serve as an integral part of their living experience, Build To Rent developments have dealt with their fair share of challenges during the pandemic. However, when it comes to providing support to tenants and facilitating them, these schemes have undoubtedly emerged triumphant.
Due to their tenant-focused approach, the appeal of Build To Rent homes has only grown stronger and we can expect this class of rental properties to gain even more popularity in the future.
Do you want to rent a Build To Rent property? Visit www.buildtorent.io and explore a wide range of Build To Rent homes that can serve as an ideal fit for you and your family!
- UK government, GDP first quarterly estimate, UK: April to June 2020↩
- BBC, Coronavirus: Public spending on crisis soars to £190bn↩
- BBC, Job Support Scheme: How is furlough changing?↩
- Savills, UK Build to Rent Market Update Q2 2020↩
- CBRE, United Kingdom Residential Investment Marketview Q2 2020↩
- Blackstock, What will build-to-rent look like after COVID-19?↩
- Grainger, Half year results↩
- Property Investor Today, Pawfect news: fresh wave of pet-friendly rentals coming↩
- UK government, COVID-19: Guidance for managing playgrounds and outdoor gyms↩
- UK government, COVID-19: Guidance for the safe use of community facilities↩
- JLL, Build To Rent performance↩