Monthly Archives: April 2014

Orbit recruits head of housing task force to board

Housing association Orbit Group has invited Andrew Stanford to join its board, in a strong signal that the organisation is looking to take a more proactive stance in the private rented sector.

 

Andrew Stanford, head of the PRS taskforce

Andrew Stanford, head of the PRS taskforce

Stanford is currently head of the Government’s Private Rented Sector Taskforce, which is charged with encouraging the growth of a professionally managed private rented housing market in the UK, in any way it sees practical. “We are delighted to have attracted someone of Andrew’s experience and calibre to what is already a highly experienced board team,” said chairman baroness Tessa Blackstone.

A chartered surveyor, Stanford worked for more than 20 years at respected property agency Cluttons, where his responsibilities included managing a major residential estate in South Kensington for the Wellcome Trust. More recently, he set up his own agency, Stanford Mallinson, which offers consultancy and advice to those active in the UK residential market.

Orbit is a broad based housing association with properties across the Midlands and South East, looking after more than 37,000 affordable homes. It developed 875 homes last year, and aims to add 1,300 this year. But while building a small number of homes for open market sale, according to its group websites, Orbit has yet to start building a private rented sector portfolio.

Changes aim to improve managing agent behaviour

The Government has announced measures it says will help ensure tenants get a better deal, by clamping down on “unscrupulous” letting agents. The new rules come into force as some suggest that Britain’s growing army of renters could become a political force to be courted by politicians, ahead of the 2015 general election.

Under the rules just announced, all letting and property management agents will have to register under one of three redress schemes. These “will ensure tenants and leaseholders have a straightforward option to hold their agents to account,” promises the Department for Communities and Local Government.

Three organisations – The Property Ombudsman, Ombudsman Property Services and The Property Redress Scheme – will investigate complaints about hidden fees or poor service, dishing out an independent ruling on the accusations. Where a complaint is upheld, tenants may be able to claim compensation. Around 3,000 agents – or 40% of the entire industry – have yet to sign up with one of the three organisations, but will be legally required to do so.

“All tenants and leaseholders have a right to fair and transparent treatment from their letting agent,” said housing minister Kris Hopkins. “A small minority of agents are ripping people off, and giving the whole industry a bad name.” He insists the redress scheme will “ensure tenants have a straightforward route to take action if they get a poor deal, while avoiding excessive red tape that would push up rents and reduce choice for tenants.”

The department has released a model tenancy agreement for long term tenancies, and is working through responses to a recent consultation over how to tackle the minority of poor landlords, without unnecessarily penalising those who perform satisfactorily.

And, as Alex Hilton, blogging for The Independent notes, there may be votes for politicians who can demonstrate they will look after renters better. His article suggests that “conditions are becoming Dickensian in nature and exploitation by landlords and letting agents is the norm”, not helped by a largely unregulated lettings market.
He asserts that it is perverse that the government pays large amounts to private landlords via housing benefit, yet fails to spend anywhere near as much on building affordable homes, adding: “Politicians are wrong if they think 9 million renters will accept this meekly at the election next year.”

Innovative joint venture delivers rental housing in London Docklands

Private rented homes will form the centrepiece of a new development in London’s Docklands, set to transform the Canada Water area south of the River Thames and east of central London.

An innovative deal involving developer Sellar Design & Developments and housing association Notting Hill Housing will deliver around 1,000 homes, of which just over one third will be for long term private rent. There will also be 453 apartments for sale, and 162 units for the affordable housing sector ie destined for tenants on local authority waiting lists. There will also be 69 units for shared ownership occupancy.

By combining private rented homes with housing built for sale, it will be possible for the developer to accelerate the construction programme for the whole project – something that is bound to give other developers with major residential schemes food for thought. “It condenses a development programme from what could be nine years to, say, five years,” said James Sellar, chief executive of Sellar Design & Development, speaking recently to Property Week.

Sellar and Notting Hill Housing project at Canada Water

Sellar and Notting Hill Housing project at Canada Water

Apart from the financial benefit to the developer, the increased pace of development should also benefit residents. Those who move in early will see all the elements of the scheme – including retail and commercial space and a sports and health centre – finished much more quickly, rather than waiting for potentially years for the developer to complete sales.

Both Sellar and Notting Hill will provide equity funding to start the project off, with a further loan from Notting Hill. The housing association has committed to buy the completed private rented sector homes, giving the developer the flexibility to start work more quickly on other phases such as the flats for sale.

The first block of rental apartments should be ready for renting in 2017. Designs for the project are by architects David Chipperfield and Maccreanor Lavington, and will include a 40 storey landmark tower. One key to unlocking the site, is the relocation of a Decathlon superstore, which will move to a new purpose built block within the new scheme.

Kate Davies, Chief Executive of Notting Hill Housing, commented: “The project marks a significant move in our ambition to create more quality new homes across central London and, in particular, to expand our ‘open market rent’ portfolio. This scheme will represent our largest ever development of new rental homes and will increase our exciting offering by almost 50%.”

James Sellar promised: “The scheme will provide a truly striking development in the heart of a previously overlooked part of London as well as creating a new town centre for Canada Water.”

Quintain adds rental flats to Wembley development

Listed property company Quintain has agreed a deal that will see it create a new private rented sector business, with a further phase of development at its Wembley regeneration site.

A new phase of building at the site, alongside Wembley Arena, will include 143 apartments for long term private rental by Quintain. The flats are part of a larger 475 apartment phase in seven buildings, that are to be constructed in partnership with investor Keystone Developers.

Quintain and Keystone start private rental flats in Wembley

 

The 50:50 joint venture will see Keystone invest alongside Quintain to build the properties. It has not been made clear whether the remainder of the apartments will be offered for sale or retained by Keystone, though previous phases have included significant parcels of flats for sale. With Keystone involved, Quintain will be able to build and complete faster than if it had to rely on its own financial resources.

Quintain, which owns substantial sites around the Wembley soccer stadium, has been developing the land in managed phases. It already has a lettings business, which was set up in 2008 and manages 150 properties on the site for other landlords.

The company says it expects “a new, strong income stream to be generated for the Group fro this PRS business”. It will buy the two blocks of PRS flats out of the joint venture, and expects the apartments to be available for rent in 2016.

“This joint venture unlocks value for shareholders from our largest London asset, paving the way for the delivery of more homes at Wembley into a supply-constrained London housing market,” said Quintain chief executive Maxwell James.

Keystone already worked with Quintain at Wembley, acquiring a student accommodation in 2011, which was built in an earlier phase of the development. “We are delighted to join forces with Quintain once again,” said Keystone group chairman Giorgio Laurenti, “and are pleased to continue investing in Wembley as the area regenerates into an increasingly vibrant location.”

 

Canada’s largest resi landlord heads for Europe

CAPREIT, the largest residential landlord in Canada with more than 41,000 homes in its portfolio, is moving to expand into Europe. It already has plans to spend around EUR80 million buying a portfolio of properties in Ireland, in what could be a warm-up act for a major assault on the UK market.

The company – full name Canadian Apartment Properties Real Estate Investment Trust – already owns a small number of apartments for rent in Dublin. Last week, it announced plans to list its Irish subsidiary IRES REIT on the Irish Stock Exchange, issuing shares in a flotation that will raise EUR200 million to spend on further residential properties for rental. The organisation will be arranged as a Real Estate Investment Trust, a structure which restricts corporate activities in return for providing tax advantages.

CAPREIT entered the Irish market in September 2013, buying 338 apartments in four Dublin locations through a portfolio purchase. Now, it is bidding for a package of around 600 homes and a number of development plots in Ireland, put up for sale by Danske Bank. The package, named Project Circle, could be sold for around EUR80 million, and has around half of its properties in the greater Dublin area, with other properties in Galway, Limerick and Cork.

“IRES REIT will be our vehicle to grow our portfolio of properties in Ireland,” said Tom Schwarz, president of CAPREIT. And chief executive officer David Ehrlich added: “We are delighted to be launching IRES REIT, which we believe will be the first Irish REIT investing primarily in multi-unit residential properties. We intend to continue building a strong Irish team, backed by CAPREIT’s extensive infrastructure and to develop a professionally managed long term apartment sector in Ireland.”

In common with the UK market, the Irish rental market is characterised by amateur landlords, with three quarters of landlords owning just one rental property. And similarly, there has been an increase in demand for renting, and for long term rental contracts. And as in the UK, not enough new homes are being delivered to meet demand.

Should its bid be successful, IRES REIT will have around 1,000 rental properties in the Irish market, making it a major landlord in a sector dominated by Dublin, where rents are typically double those charged outside. When looking to grow, it may find its desire for multi-unit blocks hampered by lack of stock, particularly outside Dublin.

However, with the scale of the Irish market bound to constrain its growth, and with the experience of an Anglo Saxon property market under its belt, how long will it be before CAPREIT makes the jump across the Irish Sea, to bring its rental property expertise into the UK and the London market? Time will tell……

Mayor plans housing bank to fund London rental properties

London mayor Boris Johnson has unveiled plans for a “London Housing Bank” to fund housing projects in the capital. A £200 million fund could potentially accelerate the building of up to 3,000 homes, for low cost rental.

The bank would help activate some of the stalled 200,000 planning consents that have already been granted across the region. There are various reasons why they are not yet built: “Often, this is due to the funding and sales constraints which can limit the pace of building,” says a mayoral press release.

The idea is that the home building could be accelerated. Completed homes would then be offered at a low cost rent, and turned over to market rent in due course. The Housing Bank would be repaid no later than 10 years after investing, through institutional sales.

“We’re doing everything we can to double house building across the capital and address a 30 year failure to build enough homes for this thriving city,” said mayor Johnson. “The proposed housing bank is just one of several highly innovative new schemes we are pioneering.”

Other ideas for the housing bank include the idea of encouraging off-plan selling, and offering funding guarantees. Funding could come from public and private sector investors, it is thought.

The consultation is currently being extended to relevant parties in the industry, with their thoughts required by a 21 May deadline.

Rising rates promise to upset returns for small landlords

Britain’s small time buy to let landlords could be in line for a shock, as interest rates rise. Many could see their cash flow turn negative by 2017 as rising mortgage rates collide with a practical ceiling on the amount tenants can afford to pay.

The situation could present many small landlords – those with typically just one property – with a headache, that could trigger a round of selling out of the sector. At the same time, the change could present institutional investor landlords – many of whom are poised on the edge of the market – with an opportunity to buy into the sector. Their longer term interest, and access to finance that is not prone to the short term fluctuations of the UK mortgage market, could still offer the opportunity for good medium term returns from the UK private rented sector.

The problem has been flagged up by the Telegraph newspaper, which has researched the impact of rising interest rates on buy to let mortgages. It notes figures from the Council of Mortgage Lenders showing that mortgage lending to landlords has increased 44% since the end of 2011. And rates being offered to buy to let landlords are lower than they were even in the property boom years of 2005 and 2006.

Taking comments from Bank of England governor Mark Carney, about a “return to normal” that will see interest rates rising to potentially 3% by 2017, the Telegraph has mapped the likely impact on these cheap landlord mortgages. Currently such loans are offered at bank base rate plus 3.4%; were that margin to be maintained, then a landlord would be faced with a 6.4% interest rate in 2017. Assuming a 70% loan to value mortgage, a current average £633 per month mortgage on a London rental property will rise in cost to £1,088; the return to a landlord will drop from £458 currently, to £33 per month – not enough to cover rental voids or maintenance costs.

Any hopes of increasing rents to cover rising costs are dashed by the view of specialists in the letting sector who warn of a “rent ceiling” in many places – dictated by increasing supply, and the fact that many renters are already squeezed by rising living costs, and wages that are static.

More from the Telegraph here.

Rent arrears fall will encourage investor sentiment

The number of UK residential tenants in serious rent arrears is down 35% year on year. Around 68,000 households remain seriously behind with payments, according to the latest Tenant Arrears Tracker from LSL Property Services.

The number of 68,000 relates to those two months or more behind on their rent payments, with the overall drop coming despite an 11.1% seasonal rise in cases of severe arrears. The number represents 1.4% of all tenancies, down from 2.3% a year ago. Overall tenant arrears, a wider measure, are also down, and stand at the second lowest level on record, at 6.9% of all rent paid being late or currently unpaid, as of February.

The news will encourage private rented sector landlords, believe LSL. David Brown from LSL Property Services commented: “The incentive for investment in the private rented sector is already growing on the back of solid rental yields and gathering capital accumulation – but now lower risk is proving to be the cherry on top for potential investors.”

While professional private landlords are generally funded using longer term debt finance, small time landlords in the UK market are often exposed to the short term mortgage finance market. And a tenant delaying rent payments can sometimes cause them to get into arrears with the mortgage payments they are responsible for. Paul Jardine, a receiver at Templeton LPA, part of the LSL group, said landlord mortgage arrears levels are dropping: “”Caution is still advisable, and landlords must maintain regular communication with tenants. Yet the next 12 months could be a real turning point.”

Olympic Park opens with rental homes on its perimeter

The Queen Elizabeth Olympic Park in Stratford has opened this weekend – and it’s the ideal backyard for sporty renters……

Queen Elizabeth Olympic Park

Queen Elizabeth Olympic Park

The park opens onto Get Living London’s new rental apartments in the former Olympic village, and gives local residents and visitors access to the park and to sports facilities including the Olympic swimming pool.

“With the Olympic Park reopening, this is a unique chance for renters to move to a quality new home with world-class sports and leisure facilities on their doorstep,” said Get Living London’s chief executive Derek Gorman.

Prices at East Village start at £310 per week for a one bed apartment, with four bed townhouses from £550 a week – more details here.