3 things we learned from Bisnow’s Single Family Rentals event
Whilst the need for more housing stock for rent has been rising progressively in the last decade, it is clear the last two years has hastened the recalibration of residents’ priorities. Due to the pandemic and increased working from home, a large majority have chosen to trade the long commute into the city for more spacious properties in the suburbs and access to the outdoors – resulting in a great win for single family housing for rent.
With year-on-year investment hitting record levels and demand for single family rentals accelerating, what does the future hold for this asset class and what does this mean for residents?
A recent event in London hosted by digital real estate publication Bisnow looked to explore these questions. Expert speakers from across the industry discussed some of the key customer centric ideas that are going to shape the future of suburban BTR.
Health & wellbeing at the heart of single family rentals
With a growing majority of people prioritising their health and wellbeing, members of the panel agreed that catering to this as vital – and many considered needs of the residents early as site identification and master planning.
It was evident that landscaping strategies were becoming more important across the board as well. Experts described how single-family rental schemes were now being designed around people first – rather than cars – and the way they are going to live in the future. Delivering more green spaces was becoming extremely important as well as providing the streetscape where people can meet, form communities and shape friendships easily.
Where the actual homes were concerned, sustainability and flexibility were viewed as key for promoting a positive emotional connection. The panelists saw an opportunity for homes to evolve with their inhabitants – i.e. from singles and young couples with children all the way to downsizers.
With many choosing to shop more sustainably and buy goods and services that are recyclable, operators also believed sustainable living was a key component to overall resident satisfaction. Coupled with a reduced carbon footprint and lower bills, these trends were perceived as crucial for keeping residents happy and occupational levels high.
A better quality SFR home
Research was quoted which indicated that the majority of people in the UK today refer to own their home rather than rent. Therefore, a part of the discussion during the event was focused on the difference between properties for sale and single family rentals.
SFRs can be differentiated – and be better than homes for open market sale, argued members of the panel. Usually what sets them apart is their higher quality and focus on longevity – which means the product is more robust and requires less retro fitting and ongoing maintenance.
For the investor (the institutional landlord) the real opportunity in single family housing is to take the long-term view. This means a focus on the lifecycle cost – rather than just the day 1 cost of a development. According to James Mulcare, targeting upfront improvements aimed at reducing the ongoing running costs (OpEx) of each scheme would increase the net operating income (NOI). This, in turn, would also have a positive impact on the residents. They would benefit from lower occupational costs with a better-quality home, which will improve their overall health and wellbeing and satisfaction with renting, encouraging residents to stay longer.
It was acknowledged that the above improvements are likely to attract a higher initial cost (CapEx) – through building with MMC, improved insulation, air source heat pumps, EV charging and PV panels with battery storage for example – but will ultimately make a big difference to the customer and may also attract stronger rental premiums.
A more affordable SFR home
Single family rentals are more affordable compared to city centre apartment rentals (multi family BTR) – believed the industry experts at the event.
Urban build-to-rent is targeted at young professionals, 25-34 years of age that value a wide range of amenities and desire a city lifestyle. Schemes of this type are taller, more expensive and complicated to construct, and are built on land that is sold at huge premiums. To add to this a lot of CapEx and OpEx is invested in providing a range of services – physical or digital –which impact on the rental premiums for these developments.
On the other hand, single family housing is built in the suburbs where land is more reasonably priced. Dwellings are generally up to three storeys high – whether houses or low-rise apartments, are less complex to deliver and could be constructed in phases to assist with market absorption rate.
Single family rental schemes are amenity light without compromising the level of customer available to residents. Design of the homes is also calibrated towards the target customer – 35-45+ years of age, with or without children and pets – which supports the overall affordability of this rental product.
All of the above result in more streamlined homes where rents are lower, homes are more accessible and therefore churn rates are reduced. It was pointed out that while in urban locations residents of BTR spend 40% of their income on rent, in suburban BTR setting this is markedly lower and comprises 25-30% of gross take home.
Godwin Developments is building a strong pipeline of SFR homes
Godwin Developments has a declared strategy for growth in the single family rental sector, particularly focused on the areas between Oxford and Cambridge, the Home Counties, Northamptonshire and Nottinghamshire. The business is currently developing an SFR scheme of 78 houses in Ely, Cambridgeshire, consisting of a mix of high quality two- and three-bedroom homes, and has a substantial pipeline of developments currently being brought forward.
With an expert in-house team, available funding and proven expertise in securing planning permission for similar schemes, the company is actively seeking land in the above regions.
For more details on Godwin’s BTR schemes across the country please email [email protected] or call 0203 780 0578.