No investor wants to be associated with being a bad actor within the residential sector. However, investment into responsible long-term rental can present the opportunity to create many more positive outcomes for stakeholders – residents, operational partners, Local Authorities and the local community.
1. Evictions – the institutional private rented sector has historically had very low eviction rates. Landlords value the assets from income and are therefore incentivised to retain renters. Institutional Funds are well capitalised and structured to cover larger forecast capital expenditure. This stands in contrast to the behaviours seen in the unregulated private rented sector where buy-to-let landlords capitalise house price growth or avoid large repair costs by using section 21 notices (no fault eviction).
2. Poor Quality Property or Service – Relationship management is the key factor here. Consumers complain when there is no accountability. Institutions with sensitive investors are mandated to ensure wellbeing of their residents and this is monitored by strict governance processes. The growing importance of ESG further ensures that responsible property management is central to the operational approach, so residents have any problems dealt with immediately. As noted previously, maintenance of the building fabric is closely monitored with professional management.
3. Stakeholder Engagement – The opportunity to be a positive actor through the communal nature of long-term rental housing. To safeguard income through the retention of residents, the manager will focus on creating a sense of community and embedding the development into the community. This can be achieved by new development with a focus on local housing need, sharing of facilities, improvement of the local surroundings, contributions to local initiatives, creation of new employment, innovation of delivery methods and sustainable operational models reducing consumption.
The current environment presents much uncertainty but reminds us to focus investment on the basic fundamentals of need and risk adjusted return. The Build to Rent sector is one of the first real estate sectors to have the ‘Material Uncertainty’ clause lifted by the Valuers. In our view, the supply and operation of social infrastructure across the UK for the deepest occupier base (low to middle income households) offers a defensive approach to scalable real estate investment and the creation of sustainable income streams.