There has been, and continues to be, a great deal of commentary on the subject of the housing crisis in the UK and a recent report from the CBI on the subject contains some helpful perspectives and recommendations. This is a topic of great interest to me, and to Moorfield, and I recently participated on a panel in the Property Week Retirement Living conference where we discussed some of the most pertinent issues.
A lot has been written about the need to focus on increasing housing supply rather than just stimulating demand and we would support that approach. The first time buyer market receives the greatest attention and most government support is aimed at increasing demand / providing finance to help people step up onto the first rung of the housing ladder. However, we think that more can be done to encourage an increase in the supply of housing and more development is required of all types and tenures of housing.
The CBI highlighted two areas of specific interest: (i) that the importance of the role of the Private Rented Sector (PRS) needs to be recognised and (ii) that the Government should give greater consideration to improving the attractiveness of specialist retirement homes to both developers and potential residents, through for example SDLT exemptions.
There is a great deal of investor interest in the PRS sector, principally through large scale, professionally managed, Build to Rent (BTR) communities, and this should be encouraged through government support as part of creating more housing supply. There are many who prefer to rent and increasing the supply of high quality product will give greater choice and help keep rents and house prices under check because of greater choice. At Moorfield, we are focused on this growth sector of the real estate market. We also support the idea, through our own investment and development programme, that the establishment of attractive senior housing will encourage downsizing and so free up family homes, and therefore this also will be part of the solution to unlocking the logjam on the housing ladder.
Moorfield has been a pioneer of the student accommodation sector through its Domain business which was sold in 2007 and is now using and evolving that experience to develop a BTR portfolio. The Keel in Liverpool www.thekeel-liverpool.co.uk which opened a year ago and is fully occupied, is one of the first BTR schemes delivered in the UK and we also have a pipeline of new developments, which will deliver over 1,000 homes. We also recently raised a £200m specialist fund to acquire and grow Audley www.audleyretirement.co.uk which is one of the leading retirement village developers and operators in the UK, and has c.1,500 homes being developed.
However, we are just scratching the surface, as we are a long way behind other countries in our provision of BTR and senior living and therefore we need to continue to make it easier for capital to invest and develop the homes that are needed, with further efficiencies in the planning system alongside a non-penal tax environment being critical. We do of course need to ensure that developers create the homes that customers desire and that all schemes are professionally and carefully managed.
Innovation is also required in the construction industry to help meet the demand for housing. The Farmer Review of the UK Construction Labour Model highlights the opportunity presented by BTR, where the scale of development could underpin investment in innovative ways of building and the development of new skills across the industry.
If Government and the private sector work together I believe that we can produce the step-change in delivery and mind-set that is required.
Notes:
Renters have doubled in number over the last 15 years but renting only makes up 18% of housing in the UK vs. 32% in the US and 49% in Germany. In the US, ‘multifamily’ is a mainstream asset class with over $100bn of transactions last year but in the UK the institutions/commercial property investors only own 2% of the c.£800bn PRS market and a professionally managed BTR market doesn’t yet really exist.
The over 65s are expected to increase in number from 10m in 2012 to 17m by 2037 and the over 60s own c.£1.3trillion of mainly un-mortgaged housing with downsizing increasingly popular. However, only 1% of over 60 year olds live in specialist retirement accommodation vs. 17% in the US and 13% in Australia and New Zealand.
Sources: IPF, ONS, Demos, DCLG
Farmer Report:http://www.cast-consultancy.com/wp-content/uploads/2016/10/Farmer-Review-1.pdf
CBI report: http://www.cbi.org.uk/cbi-prod/assets/File/2016-Housing-Report(1).pdf