Ryan Prince of Canadian landlord Realstar believes the UK government needs to consider further incentives to develop the private rented sector.
Speaking at a MIPIM UK breakfast seminar, organised by Estates Gazette and sponsored by lawyers Macfarlanes, Prince said: “We see a big opportunity, but it’s going to need to get a lot of help to get there.”
The vice chairman international of Realstar noted that if there was going to be government help, then that would need to be judicious. He noted the experience of Canada, where the rental sector received a major tax incentive in the 1970s, which promoted much construction – though since the incentives expired, there has been insufficient further building at scale. The on-off nature of delivery was exacerbated by the subsequent introduction of rent controls.
“In the short term, that’s good for renters, in the long term that’s bad for renters,” as no new homes are built and the quality of the existing stock drifts downward. “By and large, rent controls have hurt the market.” Prince suggested the options for assistance might include a new planning class, or other financial incentives.
Realstar, which runs a portfolio of 30,000 rental homes in Canada, also invests in hotels and student accommodation. “We like anything with a bed in,” commented Ryan Prince, Realstar’s vice chairman international. The company has been in the UK for 12 years, invested in hotels including several Holiday Inns.
More recently it has started to build a UK rental homes portfolio, but Prince said the company had bought blocks of flats in distressed opportunities, with a good priced deal making the assets attractive. “We’ve converted bulit-for-sale projects into build-for-rent,” which is said was less than ideal. “The challenge now is how you convert a deal or two into a sector.” “Rental homes are no different from hotels and student housing. You are valuing for yield. Inherently today I think the challenge is, housebuilders will make more money by selling. There needs to be a way to value on yield. In the current regime, it’s very difficult.” He believed the planners cannot be relied on to deliver PRS at scale.
Prince said that operational efficiency was a massively important driver to delivering good rental returns. In Canada, his company expects no more than half a day to turn around an apartment, while it operates at 99% occupancy.
There was some concern that the new brands emerging in the private rented sector are jostling for a market lead prematurely. “Brands come from delivery,” said Prince, and it was about handling the small “nickel and dime” issues well, to satisfy tenants. “Some of the branding in this market has gotten a little ahead of itself.”