Why social value within BTR needs to be oxygenated

The story of the build-to-rent (BTR) industry in the UK is only half told. Too often, we focus on the industry’s investment narrative and overlook its role in delivering social value. Yet, what unites and drives this industry is a desire to build good quality, much-needed homes – and in doing so leave a lasting positive legacy for both stakeholders and society. This is the social value within BTR that needs oxygenation.

The most fundamental and largest contribution to social value that the UK Apartment Association (UKAA), BTR industry and indeed all residential real estate can offer is to provide society with homes. In our culture, having a home is regarded as a basic human right. However, the supply of housing in the UK is woefully inadequate. This has a huge negative impact on society.

In terms of rental properties, Savills reports that buy-to-let landlords continue to exit the market in droves, with more than 330,000 net mortgage buy-to-let redemptions since 2016. Meanwhile, annual rental growth is rising, increasing to 11.9% in the year to August 2022.

The BTR industry is racing to fill that gap and deliver the homes that society so desperately needs. There are now 76,800 completed BTR homes, with 49,800 under construction and a further 113,500 in the pipeline when you include those currently in the pre-application stage. That’s a total of 240,200 homes. And Savills believes the industry has the potential to delivery nearly 10 times that. This would place it very close to the 2.6 million homes of the housing association economy, with its clear social purpose remit.

Reaching this number of BTR homes would create an impressive social contract between society and its residential investors. So, why are we focused so strongly on the investment narrative alone? Well, part of this is simply because the BTR industry is still so young. It is barely a decade old in the UK and it is only in the past few years that the investment case for rented residential homes has moved from the alternative investment market to the mainstream. The industry’s performance in 2022 cemented this position, with a fourth record-breaking year seeing the sector attract £4.3bn of investment.

Investors are hungry for BTR opportunities. This is very good news for the growth of the industry and the pace of its investment criteria maturation. It’s also why, to date, the BTR narrative has been so investor focused, with the nascent industry growing in confidence and seeking to attract and maintain investment.

But BTR does so much more than just provide a return to investors – and this is where the social value half of the story comes in. The BTR industry regenerates cities and provides employment. It has ushered in consumer culture and care to residential real estate in the UK and has nurtured community within its buildings, as well as with the local communities in which it finds itself. It pioneered customer centricity, off-site manufacturing and brand.

The BTR industry has also been an environmental, social and governance (ESG) pioneer. Though we are still at the early stages of this, the industry it is full of people who recognise that value lies in sustainable economic, social and environmental solutions – and who are working hard to deliver this.

At its core, BTR provides quality homes to those who need them. That’s why it is now time to describe, demonstrate and distribute the social value that BTR delivers. We should celebrate the industry’s recognition of the role it has to play in the ESG agenda and how hard it is working towards this. We need to show that participants in the BTR ecosystem – the investors and lenders, developers, contractors, advisors, operators, and supply chain – are making a massive contribution to delivering homes to a desperate market and that they are doing this with a wide agenda.

Return on investment will always be important, of course, but it is considered equally alongside stewardship of the planet, the reduction of carbon consumption and the creation of healthy, happy, and vibrant communities. That’s why we must balance the strong and established investment narrative with an equally compelling and detailed description of the social value BTR also delivers.