Proposals for the Build to Rent sector in London are unrealistic and could severely restrict students’ access to purpose built student accommodation sector, putting more pressure on existing housing, it is claimed.
The British Property Federation (BPF) is calling on the Mayor of London Sadiq Khan to revise the Draft London Plan’s proposals for both the Build to Rent and purpose-built student accommodation sectors.
It says that while backing for these sectors from the Mayor is welcomed, Khan has at the same time asking both Build to Rent and Build for Sale developments to provide the same minimum of 35% affordable housing. Meeting this threshold will fast track a development through planning.
However, the BPF argues that Build for Sale should have different criteria as it is delivered on a very different financial model, where developers typically benefit from revenue earned from sales throughout the construction phases of the development.
Although the BPF agrees with the requirement for affordable housing, Build to Rent developers must complete construction of the entire development before having tenants move in and pay rent. As a result Build to Rent cannot compete with Build for Sale on land acquisition and pricing.
The BPF believes that the two sectors should be treated differently and points out that while the Draft London Plan recognises that difference, it then contradicts itself by asking for the same threshold.
It also explains that the Build to Rent sector wants to cater for a range of Londoners and their needs and currently this has typically meant setting rents at different price points and within the sector’s affordable provision, this includes varying discounts from 20% to %, delivered in a tenure blind manner.
The BPF says that if the Mayor sets an unrealistic threshold, the sector will be squeezed and end up delivering less of a range of discounts, thus not catering for all of Londoners.
It also argues that, for the same reasons, given the sector’s ability to deliver new homes is not linked to the rate of sale, Build to Rent can deliver more homes, more quickly. It is growing rapidly outside of London and at a time when the Mayor has committed to an ambitious target of 65,000 new homes each year, there is a danger that more Build to Rent investment will be attracted out of the capital.
When it comes to student accommodation, the BPF says that Mayor’s Plan is ‘living in the past’. London has insufficient purpose built student housing in comparison with its student numbers, which puts significant pressure on the capital’s residential housing stock.
The Draft London Plan stipulates that the sector must link with a Higher Education institution on all new developments but the BPF says this will limit access to purpose built accommodation for students attending smaller institutions.
The number of smaller institutions is growing, with universities from around the world wanting to establish London campuses. They rarely have housing of their own and they lack the financial resources and expertise to invest the significant time required to partner with developers in respect of a specific purpose built student housing development.
The Mayor’s proposals also apply a 35% threshold approach to affordable student accommodation, again without any evidence that this is achievable.
‘Although we are supportive of the Mayor and believe his Plan is excellent in many respects and goes much further than any before, we have growing concerns that on some key aspects there is little evidence to support its policy aspirations,’ said Ian Fletcher, BPF director of real estate policy.
‘We would prefer to work with the Mayor to set a realistic threshold for Build to Rent, which was the intent up until November of last year, and base it on evidence from the existing Build to Rent developments across London,’ he explained.
‘Build to Rent has the potential to contribute significantly to London’s housing shortfall and through proactive policy making, successive Mayors have made London a magnet for that investment, particularly in London’s outer boroughs. Setting the wrong threshold may be good politics, but it is not good policy making,’ he added.
‘The Mayor’s proposals also disincentivise investment into the student accommodation sector at a time when we should be doing all we can to support the growth of the higher education sector in London and its associated accommodation needs,’ he concluded.