Planning Policy for Build to Rent

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Planning Policy for Build to Rent

Published 10 October 2019

In the last 20 years the amount of people living in the private rented sector has more than doubled. This has created a demand for good quality rented accommodation and the introduction of Build to Rent “BTR” schemes across the UK.

What are BTR schemes?

BTR schemes are developments designed specifically to provide 100% rental accommodation. There are now 140,090 BTR units either completed or planned across the UK. The BTR model is intended to increase housing supply, provide choice of housing for different tenants, professional management, promote long term investment and support regeneration.

The East Village is perhaps the highest profile BTR scheme in the UK. Converted from the London 2012 Athletes’ Village, it currently provides 2,818 homes, with a further 524 units recently built. The development provides a mixture of units with a significant proportion falling into the “affordable” category. Tenants are typically offered a standard Assured Shorthold Tenancy written for three years with rents rising by CPI at the end of each of the first two years, with a tenant’s break option at any point after the first six months with two months’ notice. This offers both some certainty of rent for three years and flexibility to move on.

National Planning Policy Guidance “NPPG” for BTR

The NPPG provides that affordable housing on BTR should include a proportion for “affordable private rent”. NPPG provides that affordable private rent should be a minimum of 20% less than the private market rent (including service charges) for the same or equivalent property. NPPG recommends that at least 20% of any BTR scheme should be affordable private rent homes, which should be maintained for the benefit of the community in perpetuity.

Typically any consent for a BTR scheme will also include a claw back mechanism which is designed to recoup the value of the affordable housing provision that is withdrawn if the homes are converted to another tenure and or sold before the expiration of an agreed period.

Conflicting Local Policy Considerations

Interestingly, as a national guide the NPPG may be at odds with the requirements of local Councils who may have their own criteria for affordable housing for BTR schemes and the location of sites for these schemes. London currently accounts for more than 60,000 of the UK’s BTR units. The Mayor of London’s New London Plan which is yet to be adopted proposes a new mechanism for BTR schemes which is vastly different from NPPG and provides for a flat rate 35% affordable housing criteria with three different classes of “affordable rent”.

BTR schemes in London under the new plan may obtain consent in a couple of ways, one of which is a “fast track route” whereby the developer must provide 30% of units at a London Living Rent. London Living Rent is a type of affordable housing for middle-income Londoners. These homes will be allocated by local Councils and have lower rents, to enable middle income Londoners to save for their first home. A typical 2-bedroom London Living Rent home is around £1,000 a month. That is two-thirds of the median market rent. To be eligible for a London Living Rent home, you must: be renting in London, have a maximum household income of £60,000 and be unable to currently buy a home (including through shared ownership) in your local area.

What’s on the horizon?

The juxtaposition between NPPG and emerging local policies will be interesting to watch, particularly if more restrictive local affordable rent criteria is enforced. Undoubtedly, the rise in demand for private rented properties for millennials in city centre locations will result in a continued increase of BTR schemes across the UK.

Authors

Christopher Stanwell

Christopher Stanwell

London - Walbrook

+44 (0)20 7894 6269

Ben Sasson

Ben Sasson

London - Walbrook

+44(0)20 7894 6696

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