James Topping of Advantage Home Construction Insurance discusses how the private rented sector is set to change the face of the industry and what the future holds for the market

Renting is changing. It’s been a much-discussed topic for some time now, but in 2018, we’re starting to feel the tangible effects of “Generation Rent” – an entire age group of young people who simply cannot escape serial renting.

The biggest change has been the emergence of the private rental sector and the build-to-let market, as developers are figuring out new ways in which they can cater to Generation Rent.

Advantage Home Construction Insurance (AHCI) offers structural defects insurance to new build properties and has vast experience in the property sector, with its founders being developers themselves.

Statistics from 2016-17 showed that the private rental sector accounted for 20% of households in England – in other words, 4.7m properties. Growth began to accelerate around 2006-07 and is showing no sign of abating. In fact, it is predicted that the sector will grow a further 24% by 2021, meaning that one in four people will be renters rather than owners.

Build-to-rent (BTR) developments were borne from the rise of PRS, and while they share similarities, it’s important to differentiate between the two. PRS can be thought of as the “umbrella term” for privately owned properties that are brought to the market as a rented product – from single dwellings owned by landlords to tower blocks that are professionally managed.

BTR sits within this category, but refers specifically to large-scale schemes that are constructed with the sole purpose of renting out. Whereas with PRS, units can be sold off to private landlords who then rent them out, developers retain ownership of BTR schemes and act as “landlords” (supported by an appointed managing agent).

With such a large proportion of people renting, it’s imperative that developers design schemes in which tenants are safe, comfortable and happy. For this reason, build-to-let developments especially are designed with renters in mind. They often feature concierges, bicycle storage and communal areas with pool tables, fully stocked bars and coffee machines.

Gone are the days of mouldy shower curtains, broken furniture and impossible-to-reach landlords. In build-to-rent, renters are king as developers seek to eschew the traditional “transactional” nature of a landlord-tenant experience and replace it with a relationship-first dynamic – where occupiers are treated more like customers.

This theme of relationships is prevalent, as many schemes have dedicated community managers – concierges-cum-friends who organise events for tenants and ensure they’re happy and well looked after. Events can span anything from morning yoga to wellness workshops and tenant barbecues, in an aim to foster a sense of togetherness and encourage interaction.

There’s no doubt that the growth of BTR is a marked change from renting as we’ve known it previously. The housing boom and unrelenting aspiration of generations previously to own their own property meant that renting was the “poor relation”, if you will – the slightly grubbier, less attractive alternative that people rushed to get out of. Now, with first-time buyers becoming ever more few and far between, a shake-up in renting was not only inevitable, but completely necessary.

What, then, does the future hold for this still-relatively-new concept? Many say that PRS and BTR are the key to alleviating – or ending altogether – Britain’s housing crisis.

How so?

The build-to-rent market can supply housing a lot more quickly, as the sales element is completely removed from proceedings. Additionally, they’re generally constructed a lot faster, and bring jobs and integrated communities to their locations – as well as improved amenities for tenants.

In February 2017, the government released a white paper entitled Fixing our broken housing market. It highlighted their commitment to the build to rent sector as not only a way of improving housing supply but, crucially, also as a means to improve choice, quality, security and diversity in the PRS market.

There has also been a push by policymakers to encourage investment in the private rented sector. As part of this initiative, the government last year set up the PRS Taskforce – a group of property industry experts who will aim to bring developers, local authorities, housing associations and key decision-makers together to ensure institutional investment is a going concern in the UK.

According to the Taskforce, there’s a pool of more than £10bn that institutions would like to invest into PRS. This would mean that more than 50,000 units would be brought to the market – on top of the 117,893 homes that either already exist or are under construction.

While this may sound like a magic cure-all, it’s important to realise and understand the pitfalls of build-to-let and the private rental sector. Local authorities and their associated planning bodies don’t necessarily have the experience or knowledge of the sector that they do of the build-to-sell model. They are also notoriously inflexible with regards to planning regulations – a key benefit of BTR is its flexibility and adaptability, and renters will have markedly different requirements to owner-occupiers. It’s important that BTR can cater for those requirements in order for the model to be successful.

In addition to this, many BTR/PRS schemes are large and require sizeable financing. Because the sector is still somewhat new, lenders are currently attaching greater risk weightings and stricter covenants to their loans for developments. Understandably, this in turn leaves developers in a difficult position as they may be required to hold more cash on their balance sheet – although the government has introduced schemes to help relieve this issue, such as the PRS Debt Guarantee Scheme and the Homes England Build to Rent Funding Scheme. Naturally, as the market grows and develops, lenders will adapt and so hopefully this will disappear.

As Generation Rent grows up, they’ll need more space and a different type of amenity as they start to grow their families. Will the sector grow with them, and begin to offer state-of-the-art baby changing facilities and pram storage – or will it continue to cater mostly to the 20 and 30-somethings it does now?

At Advantage, we offer structural defects insurance to all types of new build properties – with access to AA-rated insurers – and we’ve been overwhelmed by the sheer scale of the PRS and its impact on the industry. As with any new product, there will be teething problems and there are obstacles to overcome, but it will be fascinating to see how the UK adapts to this new way of renting.

Why not get in touch today on 0203 6349010 or visit the website to see how they can help you?



AHCI Limited

Tel: 0203 634 9010



Please note: this is a commercial profile.


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