The BTR market needs to do more to appeal to the mainstream

The BTR market is undoubtedly playing an important role in solving the housing crisis, with investors flooding into the sector over the last decade. But while the numbers are impressive – in London alone, some 91,623 homes have been built or are under construction or in planning – more needs to be done to make the sector sustainable. I’m not talking about the environment, but in terms of the longevity of the sector and the cost of renting.

The sector is currently banking on rents moving just one way – up. But with housing a key battleground at the next election, all parties will be falling over themselves to increase supply of homes through deregulation, incentives and strategic planning, and hopefully, this will lead to supply finally moving closer to meeting demand, leading to rents in the BTR sector stabilising and potentially even falling.

At present, the BTR market commands a premium of 23% over other private rented homes, with this figure rising to 41% in some areas of the UK, reports Unlatch.

The providers try to justify this by pointing to the running costs of the amenities on offer, from private members clubs to pools and cinemas. But who’s asking for the amenities?

A survey by The Property Marketing Strategists identifies a reluctance to pay extra for concierge services (35%), gaming rooms (39%), cinema rooms (46%), pubs or bars (41%) and communal dining rooms (37%), yet, unsurprisingly, a willingness to pay for smart technology to keep bills down (57%).

Meanwhile, SAY Consulting’s hereSAY mystery shoppers report notes that benchmarking of both ‘development’ (down 21%) and ‘incentives and value for money’ (down 7%) scored lower than last year.

Investment in BTR has reached record high levels and in Knight Frank’s BTR update report published just before the summer, it revealed that investment in the UK’s build-to-rent market hit nearly £960m in the second quarter of the year – taking investment for H1 to more than £2bn.

Many of these investors are pension funds or those taking a long-term view on the market, at a time when the cost of borrowing is inflated.

At the same, the government recently announced legislation changes for private landlords, with additional regulation coming through from local authorities to crack down on bad landlords. This is likely to generate further demand as these renters look for new homes to move into. Yet, to best service these renters and the renters of the future, BTR providers need to move away from catering to the top to delivering for the everyday renter.

The BTR market demonstrated its appeal to renters during the pandemic. Flexibility was its trump card. But taking flexibility a step forward, with multi-use spaces or through technology to offer convenience, will offer developers opportunity to future-proof their sites and flex to the changing demands of the market, ensuring it appeals to the many and not the few.