By Sadie Malim
Moorfield Group’s Sadie Malim on investing in rental solutions
The great housing challenge of our time is how we provide for a population of long-term renters. The number of households occupied by private renters in England has increased steadily from two million in 2000 to an all-time high of 4.61 million in 2022.
Sadie Malim, chief legal and corporate development officer at Moorfield Group
The great housing challenge of our time is how we provide for a population of long-term renters. The number of households occupied by private renters in England has increased steadily from two million in 2000 to an all-time high of 4.61 million in 2022.
This has been driven principally by two factors. The first is housing unaffordability, which has put home ownership out of reach for many people and forced them to rent for longer. The second is a shift in lifestyle that means more people are settling down later, if at all, and choosing to rent for longer.
Neither of these factors seems set to disappear any time soon, so the number of renters is only predicted to grow. The number of pensioners renting in retirement is expected to more than double over the next 20 years; according to the Pensions Policy Institute, 3.6 million households will be renting in retirement by 2041 – 1.9 million more than today.
Investors are embracing a ‘cradle to grave’ approach, creating strategies for each stage of life
So, can the government and the property industry meet the needs of the coming wave of ‘silver renters’ and the lifelong renters who will follow them?
Real estate is certainly sensing the opportunity. The living sectors, once considered alternative, are now becoming mainstream, as reflected in investment activity. According to JLL, build-to-rent (BTR) housing, student accommodation and healthcare properties, such as care homes, accounted for a record 31% of total direct investment in UK real estate last year, overtaking offices.
Mature strategy: older people’s rental housing is becoming a more mainstream market for investors
The growing maturity of living real estate subsectors means investors are increasingly comfortable with exposure to a broad range of living assets. A growing number of property investors are embracing a ‘cradle to grave’ approach, creating bespoke strategies that cater to each life stage.
Moorfield prides itself on having been an early mover in UK living real estate investment. We first entered the purpose-built student accommodation (PBSA) market in 1997, the retirement living market in 2008, multi-family BTR in 2012 and single-family housing in 2021. We sensed that the sheer weight of structural change in the tenure make-up of the UK housing market would create an opening for residential, in varying specialised forms, to become an institutional-grade asset class.
Barriers to investment
Yet, while our investment thesis is increasingly being borne out, there are still barriers that will prevent the real estate industry from delivering enough high-quality product across the spectrum of living real estate to meet the needs of a growing population of lifelong renters.
The planning system is most obviously one barrier. It will take more than reforms to streamline and add certainty to the process; central government must commit additional resources to local planning departments that have been starved of funds – and talent – for years.
The other barrier is a lack of clarity on the future of building regulations. Investors are nervous about being caught on the wrong side of fire safety legislation, which will limit the development of co-living, multi-family and PBSA homes in urban centres, where lack of supply is most acute.
It is important to remember that creating housing stock that is fit for purpose for lifelong renters is not only about building new homes that are purpose-built and designed for a specific life stage – it is also about improving the quality of the homes we already have. Sadly, damp and cold are still all too present in many of our homes.
Attracted by decarbonisation and the avoidance of planning and development risk, institutional investors looking to scale up investment at speed are increasingly interested in acquiring existing stock. However, policy moves such as removing the multiple dwellings relief on stamp duty send a negative signal to the market.
The government’s role is not only to enable private capital to fund the development of new housing and the improvement of existing stock. An increased cohort of lifetime renters will force a fundamental rethink of social security in old age. People’s homes used to be a nest egg to supplement their pension, but if future generations will not have the same level of asset ownership, how will they be provided for in retirement?
This is perhaps something that the industry could solve by providing an accessible investment product alongside professionally managed accommodation.
Sadie Malim is chief legal and corporate development officer at Moorfield Group