BTR And PRS Developers In The UK And Ireland Can Solve The Rental Homes Crisis, But They Need Predictable Costs

Cities across the UK and Ireland have a chronic problem: There aren’t enough homes to rent.

Building more high-quality build-to-rent and private rented sector homes could be the answer, but developers need to find a way to overcome challenges, said Jon Hammond, head of residential, UK and Ireland, at Parcel Pending by Quadient.

“Costs are rising, viability is being questioned and supply issues are pushing time frames, all challenges BTR and PRS developers must negotiate,” he said. “They need solutions that deliver predictable costs while adding value for residents. If this can be achieved, we can create cities and homes people want today.”

Ireland’s rental homes crisis is particularly stark. On 1 August 2022, there were just 716 homes available to rent across the country, down from 2,500 a year earlier. Going back further, in August 2009 — the last peak in available rental homes — there were nearly 23,500 homes available. Today, there are reports of hundreds queueing to view a single rental home in Dublin.

Across the UK there are similar shortages in supply. Michael Howard, managing director of BTR and PRS operator Urbanbubble, said that his firm’s properties across the UK’s cities have been experiencing a tidal wave of demand in the last year.

“We recently opened our first property in Scotland, Solasta Riverside in Glasgow,” he said. “On the first day, we had 215 enquiries, which totalled 890 by the end of the first week. In that first week, we had made 82 lets, which equates to 25% leased. In Glasgow and Edinburgh there’s a chronic shortage of homes. But this is the story across other cities — Manchester, Bristol and more.”

The shortage of rental homes is due to several factors. First, people have returned to cities following a mass exodus during the height of the pandemic. Second, the cost of buying a home means that people are renting longer. Third, tax changes have resulted in many private landlords selling their properties.

“The reliance needs to fall on institutional investors and developers to create the supply the UK and Ireland need,” Hammond said. “This doesn’t mean creating homes as quickly as possible; today’s renters are seeking quality, which is a further challenge for developers to meet.”

Developers and investors have indeed been focusing on the BTR sector in recent years. Around £2.5B was invested in UK BTR during the first six months of 2022. However, the BTR sector has raised the bar of what UK renters expect from a rental home as it has grown, Hammond said.

The packages and amenities provided in a BTR block are far beyond what a renter could access from a privately rented home, as well as offering a community. Fuelling this is a wave of graduates who are used to the quality delivered by the purpose-built student accommodation sector today. To deliver this quality means overcoming the challenges that are affecting the entire real estate market, Howard said.

“There’s capital in the market, as well as quality opportunities to develop new schemes,” he said. “The biggest barriers now are supply chain and costs of construction, which are really affecting the viability of large schemes. The key costs of energy, insurance and labour have all increased, and it’s hard to predict what’s going to happen.”

Faced with such fluctuating costs, creating any kind of predictability is valuable, Hammond said. While energy and labour costs may continue to rise, it’s possible to fix the cost of certain services and amenities that might be offered in a BTR block to give certainty to developers and investors.

“For example, including smart lockers not only gives residents an amenity they value, but can be a fixed price for a set amount of time,” he said. “The benefit is that operators can factor this cost into service charges and [operating expenses] in advance, while residents can be assured they will receive the consistent service they expect.”

The alternative — for management staff to accept, sort and store parcel deliveries manually — creates uncertain labour costs and a potential slip in service quality. Parcels can go missing, and the increase in parcel volumes in the last few years creates significant work for property management teams.

Providing this kind of amenity will also help a BTR operator or developer stand out in an increasingly crowded marketplace, Hammond said. If the number of schemes required across the UK and Ireland is delivered, operators will be competing for tenants. Providing the highest-quality service possible will become a deal breaker.

This article was produced in collaboration between Parcel Pending by Quadient and Studio B. Bisnow news staff was not involved in the production of this content.

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