Find out what key decision-makers in the sector think.
- There is a misalignment between the expectations of BTR developers/investors and planning authorities surrounding creating a successful BTR development. Further education by the industry as a whole is needed around the mixed-tenure model to facilitate new developments.
- Despite current market challenges, residential remains a resilient asset class. Rent payments and yields have held up well and investors are changing their strategy to reflect an increased appetite for this area.
- The BTR industry is now putting much more emphasis on the concept of "community". Quality shared spaces and a diversity of tenant base, to include provision for key worker housing, are increasingly essential to the success of new schemes.
- The impact of COVID-19 has accelerated emerging changes to the BTR schemes both in respect of the use of space and tenant mix.
- COVID has not killed communal living; a sense of community has triumphed over COVID.
THE LEGAL BIT
- Although much of the detail is still to be confirmed, we are about to experience a fundamental change to the planning regime as we know it. The Use Classes Order will be significantly overhauled to reflect an increased flexibility between office, retail and community space. Permitted development rights are being expanded to allow (in certain circumstances) new residential developments without planning approval and unimplemented existing permissions are to be granted an extension to 1 May 2021 to allow for the impact of COVID-19.
- The current moratorium on possession proceedings for non-payment of rent will shortly be coming to an end but new provisions in the Civil Procedure Rules have been introduced to require landlords to report on the impact of COVID-19 on the tenant's ability to pay their rent, with the right of the Court to adjourn proceedings where this has not been done.
THE CURRENT MARKET POSITION
- There has been an understandable dip in new investment in the sector, with an increasing divergence between the expectations of eastern and western based global investors. Despite lockdown, some large deals have still gone ahead, notably the Muse Developments deal at Lewisham Gateway.
- There is a sense of increasing optimism in the market for investment in the BTR sector. Traditionally non BTR investors are switching their focus to the BTR sector.
- Private equity funding generally still remains too expensive to be competitive and so the current market is being led by institutional investment. The challenges brought into focus by COVID-19 have led to the acceleration in the strength of cash flows into the market and has brought the BTR sector into an asset class of its own.
- Planning authorities, the planning regime and planning permissions. Despite the proposed overhaul of planning life as we know it, even when the challenge of availability of land has been overcome, BTR developers are still facing further challenges due to a lack of understanding by planning authorities about the BTR sector. Too many hurdles are still being put in place, such as onerous requirements for viability assessments and a requirement for "family" housing units in areas of demand by young professionals.
- COVID-19 has changed how each of us perceive our home. It is no longer simply a place where we live, it is increasingly somewhere where we work, either by choice or compulsion. BTR schemes need to adapt to this shift in focus and meet the evolving demand for more and better quality private and communal spaces
- The current pandemic has taught us that even when the competing demands of living and working in our home can be met, creating a sense of community has never been more important in building a successful development in the BTR sector. This is likely to change the design of schemes, with in addition to quality communal facilities, outside space such as balconies and roof terraces being in high demand and able to command a premium.
- There is an increasingly strong investor demand for provision of affordable key worker rental units as an integral part of any BTR scheme. Anecdotal evidence suggests that key workers are more likely to renew their tenancies and take better care of their properties. Key workers are key!