The UK’s cities need more housing. A lot of it. And different types at different price points.
At the core of this challenge is a population of young professionals who cannot afford to buy property in the exorbitant housing markets of London and the larger regional cities, but who earn too much to qualify for affordable housing.
New build-to-rent developments can help alleviate some of this burden. Not only have we seen an uptick in interest for purpose-designed and professionally managed rental accommodation, but the beauty of this model is that it is based on what residents want, where they want it, and at an affordable price point.
To do this in the most efficient way, we need more flexibility in our residential space standards.
The Nationally Described Spaces Standards are embedded in policy and planning guidance throughout the UK, and unless there is specific guidance from local authorities, these guidelines apply, whether they make sense for a specific area or not. The NDSS set out the minimum net internal area, storage space, and dimensions of bedrooms to ensure that a home meets basic standards.
The intentions behind these laws are laudable, protecting against substandard dwellings, but they miss some important considerations for the build-to-rent sector. And, to be clear, flexibility in space standards will only work if there is a covenant in place that the building will remain a rental asset under single management for 15 years or more.
To give an example of how flexible standards could work, with smart open-plan design, a two-bedroom, two-bathroom flat can be designed to meet the NDSS requirements for room widths and storage, all within 65 sq m.
That’s 5 sq m less than the 70 sq m required by the NDSS, but the space is more liveable than a traditional flat because an open plan means no wasted space. And saving 5 sq m per flat in a building with 150 units could be enough to make or break the viability of a scheme.
Good design and a good product are determined by usability and quality, not by an arbitrary net internal area. But lest you think that is the only reason to make the space standards more flexible for build-to-rent developments, here are four more:
1. More dosh, more options. Studies confirm there is significant demand for build-to-rent developments, particularly among renters who want to live in city centres and inner suburban locations that are close to their jobs, amenities and shops. In fact, if it saves enough dosh, most under-25s would choose to rent a smaller flat, as long as it is in a central location. Introducing more flexibility to our current space standards would deliver more affordable, smaller dwellings of higher quality to this market.
2. Survival of the best. The investment model for build-to-rent properties is dependent on quality. Poorly designed flats do not capture the same rents as well designed units, regardless of size. The need to retain tenants to minimise empty dwellings and lease turnover means that developers are financially driven to provide a quality product.
3. Sharing is caring. Unlike build-for-sale developments, build-to-rent designs often rely on shared common spaces and services, in essence increasing their liveable space. Centralised amenities like a concierge, gym, communal areas, and a practical layout of cores to move in and out of the building mean that residents are not renting just their unit, but the entire building.
4. Spurring more growth. On a financial appraisal basis alone, a build-to-rent developer will rarely be able to compete with a for-sale scheme when buying land. When protected by a covenant that the development must remain a single asset that can be invested at an institutional level, flexible space standards enable the land value to be increased. That means more build-to-rent developers can get into the market, leading to more economically resilient city centres that attract and retain young people.
It is clear that we need workable, realistic solutions to solve our housing shortage. Although the intentions behind the national standards bring a good level of protection for residents, standards should be flexible to accommodate emerging build-to-rent tenure, a growing market of sophisticated renters, and the economic competitiveness of developers committed to a build-to-rent product.
These developments are good for investors and developers, but they are also good for communities and residents, who will have more choice, a wider variety of affordable options, and access to top quality housing.
John Badman is a director at CallisonRTKL
