Monthly Archives: March 2014

Boris promises more homes for London – rented and affordable, too

More homes, more rental property and greater market transparency have all been promised by London mayor Boris Johnson, in a speech at the MIPIM international property conference.

Johnson said he had set a target of delivering 40,000 homes a year for next 10 years, across a mix of tenures. He cautioned against those complaining about foreigners investing in London property, as such investment shows confidence in the market and is overall beneficial.

Boris Johnson, speaking at MIPIM

Boris Johnson, speaking at MIPIM

“There will be many, many people now – and you’re seeing a growing proportion in London – who depend on the private rented sector, and we’ve got to expand that too. We’re putting huge amounts of our land in, we’ve made about £3.5bn of land available.”

Investment from institutions into the private rented sector is, he said, “at last starting to take off. But what we should on no account do, is turn up our noses at foreign investment, because very often it is that investment that allows us to deliver so many of the homes that Londoners need.”

Johnson specifically mentioned investor Qatari Diar, which has bought into the former Olympic village in Stratford; while Dutch and American pension funds are coming in to help develop private rented accommodation in Elephant & Castle.

The mayor said he expected private developers to help deliver affordable housing. In the current buoyant property market, developers should expect to deliver a useful number of affordable homes in their projects.

“It’s up to us, in government, to do everything we can to ensure that Londoners are in a position to get those homes, and that means making sure there are enough affordable homes in development. And I am proud to say over the course of this mayoralty we will have done 100,000.”

Johnson also said there was justifiable annoyance that residential developers flew to the Far East to sell their London residential developments off plan, sometimes completely ignoring the home market. He has encouraged many of them to sign up to a code of conduct that will ensure they promote projects to a UK audience of potential buyers, at the same time as they court overseas investors.

Want to watch Boris, and hear how well(?) his gags went down? Click for video.

Manchester sees strong interest in building homes for rent

Developers in Manchester are looking to grow a substantial private rented sector in the city, to accommodate a growing local population of young professionals.

The city’s universities attract a large number of students each year, and many of them are happy to stay on in the city they have come to call home, once they have completed their courses, so long as they can find a job, and a place to live. The 2011 census recorded a 20% increase in the city’s population over the previous decade.

As a result, there is strong interest in taking a position in a growing rental market – but schemes still need some support. Figures reported by trade magazine Property Week reveal private rental development projects in Manchester accounted for one third of the applications to the Build to Rent scheme from the government, representing a potential 10,000 homes. Build to Rent helps provide interim finance to get projects built, with the government looking to make a commercial return and get their loan back, once projects are completed and let, by a commercial sale to a long term institutional investor.

“The city has been able to retain its graduates, and the private rented sector is very attractive to them, because young people generally don’t have the deposit required for owner occupation,” according to Deborah McLaughlin, north-west director of the Homes & Communities Agency, which is running Build to Rent. Build to Rent is particularly useful as investors can be wary of funding developments before they are completed and rental income is flowing in.

Fizzy Living receives £200 million investment to build rental homes

Private rented sector developer Fizzy Living has received a £200 million cash investment to help speed the growth of its rental homes portfolio. The funds have come from the Abu Dhabi Investment Authority, via its investment vehicle Silver Arrow.

The injection will enable Fizzy Living, which is owned by Thames Valley Housing Association, to significantly expand its activities in the private rented sector, where it has set out firmly to provide rental homes primarily for young professionals, and initially in the greater London area.

Said John Garrity, group chair of TVHA: “As the PRS market is growing quickly with new players emerging all the time, it was a specific objective of ours for Fizzy to have access to a larger capital source within the first two years of operation. We now look forward to Fizzy proceeding rapidly towards its goal of building a large portfolio of quality private rental accommodation.”

The involvement of ADIA, which is well known for its significant investment in other areas of property, including major commercial projects, shows that the UK rented housing sector is now attracting institutional funds. The deal also suggests that ADIA has seen past the historic opinion of many institutional investors, who believed that offices, retail and warehouse properties presented better returns than housing.

Fizzy is likely to split the money between purchasing complete blocks of apartments or whole schemes from developers, and undertaking its own residential developments. Already the company has Poplar, Stepney Green, Canning Town and Epsom which it is renting out.

Fizzy Living launched in early 2012 with £30 million of funding from TVHA. It has subsequently drawn in a further £40 million from Macquarie Capital, but the involvement of ADIA will now considerably accelerate its activities.

TVHA is probably the leader among housing associations getting into the private rented sector. It has managed to finesse the relationship between a not for profit parent and its commercial arms-length subsidiary in Fizzy Living successfully, while other housing associations are still struggling to get comfortable with the concept. Garrity made the point that “profits generated from this venture are invested back into the association to meet our social purpose”.

One key to Fizzy Living’s success is the fact that it has its own, stand-alone branding, complete with an edgy design and website designed to appeal to the target market; and a strong customer service ethos to support its renters.

Geeta Nanda, CEO of TVHA, noted that ADIA’s investment reflected that differentiation in the market: This, we believe, is largely to do with the clarity of Fizzy’s focus, which delivers a great solution to the housing needs of a defined demographic.”

Longer term tenancies needed to make renting more attractive

A leading industry figure has called for longer tenancy agreements as part of a set of measures to help make the private rented sector more professional, and more acceptable, as a long term slice of the UK’s housing market.

Peter Girling, chairman of Girlings Retirement Rentals notes a plethora of recent reports have shone a light on the sector, and pointed out its shortcomings. At the same time, they have noted how long term rented homes form a valuable part of many other Western economies, and have the potential to be just as valuable in the UK.

Writing in an opinion piece on the 24Dash website, he notes that renting works well for many people, including his target audience, the retired. Work needs to be done, he says to kill off the negative perception that renting is somehow less attractive than home ownership. For some sectors of the community, such as mobile workers, buying and selling can be an expensive headache. “The industry needs to look to the future and offer options such as long term tenancies and professional management services to make renting more attractive.” Girling also says that the industry needs to work together to weed out rogue landlords.

More on Girling’s thoughts here.

 

Residential REIT planned to invest in London rental property

London estate agent Ludlowthompson has revealed plans to create a £100 million company to invest in rented homes across London. It has appointed banks to plan a flotation on the London AIM market to raise money for the project.

Industry publication Property Week says Ludlowthompson directors want to buy between 400 and 450 homes with a maximum price of £500,000, in London and areas with good commuter links to the capital. It plans to buy properties that are already let to tenants, or properties currently for sale which it will then let long term.
Stephen Ludlow, founder of the 10 strong chain of estate agents, would be executive director of the new REIT – a tax efficient form of corporate structure designed to encourage investment in property. Ludlow says a senior former chairman of a FTSE100 company in the media sector has been lined up to be non-executive chairman of the new REIT.

If soundings are favourable, the listing could take place as early as April, giving the new REIT team cash to start building a portfolio before summer 2014. The move is an exciting development, and one that has the potential to give others confidence that now is the time to make a big move into investment in the London rented property market.

Peabody celebrates 150 years as a private landlord

The Peabody Estate is celebrating the 150th anniversary of the opening of its first housing development. Its first  estate block opened in Commercial Street, Spitalfields to accept its first tenants on February 29, 1864. And the new arrivals enjoyed luxuries including separate laundry rooms, and space for children to play.

Today, Peabody provides homes for 70,000 Londoners. Peabody chief executive Stephen Howell commented:

“It is 150 years ago today since the birth of social housing at scale, conceived by George Peabody to ‘ameliorate the condition of the poor and needy of the great metropolis’ of London.

“One hundred and fifty years later we have extended this enduring mission; providing a good home, a real sense of purpose and a strong feeling of belonging to over 70,000 Londoners. In the midst of austerity and an affordable housing crisis in the capital, this work has never been more important.”

Ironically, the Commercial Street building is no longer owned by Peabody, providing affordable housing. Instead it is a privately owned building, offering private rented sector flats.

Commercial Street, the first Peabody flats

Peabody was founded by an unusual character, a generous banker named George Peabody, who set out to build better housing for the poorer folk of London. Where is his modern equivalent, when the capital really needs them? More on the Peabody history here.

 

Consultation to change short term rental rules in London

London’s outdated rental laws are due for an overhaul that could simplify lettings. It could also ease the situation that means renters on websites such as AirBnb, the peer to peer accommodation listing site, are often breaking the rules when they offer London accommodation for short term rent.

A consultation has opened into the proposal to align London’s currently unique rules, with those that apply in the rest of the UK. Currently, Londoners have to obtain official permission to rent out a property for a period of less than three months, as under the 1973 Greater London Powers Act, such a rental is considered a change of use.

“London is a holiday hotspot, with thousands of working people visiting every year looking for somewhere comfortable and convenient to stay,” housing minister Kris Hopkins told the London Standard. “Yet the capital’s homeowners get tangled in red tape each time they look to offer their homes. This, and the wide range of property websites offering opportunities to advertise homes for rent, makes this law increasingly outdated and unworkable.”

“I want to hear whether we update this rule, or whether London needs its own rules at all, to ensure as flexible a market as possible for tenants and tourists alike.”

The consultation will bring new and old into direct conflict. Website AirBnB recently put out a report to argue for its service, letting people rent out a room or flat on a flexible direct basis; that argued the website delivers £500m a year of benefit to the London economy, helping hard-pressed homeowners pay the bills while offering accommodation to people who otherwise couldn’t afford to visit.

Naturally, the hotel companies are up in arms, disputing the loss of business argument, and pointing out that private lets don’t adhere to tight health and safety regulations.

Local authorities in London are also not keen. During the run up to the 2012 Olympics, several started enforcement of the rules to prevent enterprising Londoners renting out their flats. One of their arguments is this: if you live in a quiet apartment block, and your neighbour starts renting out a flat via AirBnb or similar, and a succession of weekend stag or hen parties arrive to stay in your building, interrupting your quiet nights and leaving a mess, you’d probably be very unhappy.

You will find more about the rules and legalities of renting out a London home for the short term, here.

And there’s more on the government consultation here.