EXCLUSIVE: The $75M Plan That Will Give UK Single-Family Housing A Massive Shake-Up
How do you make U.S. and European-style single-family rental work in the homeownership-obsessed UK? The answer: You make it feel more like buying.
That seems to be the conclusion that IMMO Capital is edging toward as it prepares to scale up its UK business to match initial growth in Spain and Germany.
IMMO, the tech-driven single-family housing platform aimed at funnelling institutional investment into refurbished SFR, said it is in the early stages of devising a way for renters to contribute part of their rent to an investment portfolio. This would allow renters to reap some of the capital growth that homeowners usually expect.
IMMO is pondering the move in the wake of a successful $75M series B equity funding to accelerate its expansion across Europe. This includes the purchase of 10,000 homes backed by $2.5B in commitments from institutional investors.
IMMO swerved away from the UK in the wake of the 2016 Brexit referendum, but armed with new capital is now looking at 2,000 to 3,000 units in an initial wave.
But its growth plans mean some novel innovations.
The business sees a huge opportunity acquiring individual UK properties from buy-to-let investors who have become exhausted with what has become a heavily regulated sector. Buy-to-let landlords have also seen successive chancellors of the exchequer turn the tax system against them.
“A lot of UK private landlords selling their stock — they now face 168 regulations governing the sector and many of them are not loving that, nor the tax dynamic, so they are selling and often that stock is leaving the rental market," said newly appointed IMMO Director Anna Clare Harper, who is leading the UK expansion programme. "If we acquire from them then we can keep that stock in the rental market where it is needed, and also push up standards.
“In the U.S. single-family market institutional investment is now running at about 18%, and the UK tends to follow, and that’s our goal. We want to get to that level with professional property management, because better management is the thing that really unlocks the market. We want the residents who live in our houses to love our houses.”
The preference for homeownership in the UK — in contrast to mainland Europe where IMMO have worked so far — means some adaptions may be needed.
“We are looking at the idea of giving renters a share of an investment portfolio, so they can benefit from growth but without burden of ownership,” Harper said.
The plan is thought to be in development.
IMMO is also considering partnerships with public sector agencies to refurbish larger blocks of housing.
The completion earlier this week of Liverpool’s Welsh Streets refurbishment provides a spur.
The £17M project, a partnership between housing association Plus Dane, Liverpool City Council and Homes England, took 127 Victorian terraced houses and turned them into 99 affordable contemporary homes.
“This is absolutely something we’d consider, the only thing holding us back is the lack of stock — how many streets are for sale? — and issues around the social disruption involved. It could be a workable model and we would absolutely do that at scale,” Harper said.
“We are looking at partnerships with a number of different public organizations. This includes working on ways to allow institutional funders to invest in housing for some vulnerable groups, because investors want to work on social impact issues as well as diversifying their portfolio, and this particular sector is undersupplied.”
IMMO uses screening software to measure around 3,000 individual properties each month against 300 data points, then selects the best 1%, refurbishing them to high environmental standards. These form the basis of its private rental platform.
