COMMENT: Life in America is different; things are bigger and sometimes better. The coffee is weak, pants are not pants and strange things happen when you ask for cheese on your burger, writes Dan Batterton, BTR fund manager, LGIM Real Assets.
But I like American housing. I like the space, the clapperboard and the retirement communities. And I really like those big, serviced multifamily buildings because they always seem to have the best back stories. From the Jets and the Sharks fighting outside a housing block in West Side Story to Joey and Chandler’s flat in Manhattan, shared rental schemes are a pivotal part of the American psyche, alongside our cinematic landscape.
Which leads my thinking back to the UK, where in London renters now outnumber homeowners, according to The English Housing Survey. While this shift from ownership towards rental has been mirrored in America’s major cities, professionally managed schemes have existed in the US for many decades and are seen as a genuine option.
But in the UK it is different – renting has an image problem! What first springs to mind when you think about renting? Grim student digs, first-job flat shares, an interim stopover while you wait for that sale to go through. For too long it has been perceived as a residual choice; something you do because there isn’t a better option.
Renting not by choice
And this plays out in real life, too: research by Knight Frank suggests that only 37% of renters are in the sector through choice. Not really surprising when you consider the results from the latest English Housing Survey, where almost a third of homes rented from private landlords fail basic health and safety standards.
And that’s before we even get to the awkwardly British issue of customer service, where many “professional” landlords fall considerably short of the levels of hospitality taken for granted in America.
But we think it’s time for a reality check on the idea of residual renting. There is rare cross-Whitehall agreement on the need for diversification in the housing supply, and that this needs to be more than just accommodation – it needs to be homes.
Purpose-built Build to Rent schemes, which are helping evolve the motivation for moving into rental, are a great first step. Renting can be aspirational.
The transition from residual to lifestyle renting is being underpinned by operational models that put residents first across the leasing lifecycle. This is a really important point, because without residents there would be no business. Sounds obvious, but renting of old was a single touch-point journey; you paid your money upfront and that was all the contact you had with a landlord unless your boiler blew up.
As owners we have to put our residents at the heart of every decision, turning the rental sector into a service industry with customers rather than tenants
It is different now: operators of the best-in-class developments view leasing as a multiple touch-point journey and will constantly engage with residents. There are even scheme ambassadors in some locations – it’s no longer embarrassing to be a renter!
This means that as owners we have to put our residents at the heart of every decision, turning the rental sector into a service industry with customers rather than tenants. This is very much the case at our scheme in Salford, the Slate Yard, where we have pioneered a new service proposition with a move away from the traditional renting model, so that renting can become an active and positive choice.
We want our schemes to provide residents with a lifestyle that they would otherwise not have access to, even if they owned their own home.
This is when customer service can play a key role in making renting an active choice. Investing in our building means investing in our staff. We are ensuring that we are making an investment into well-trained staff who, after all, will be the ones interacting with our customers day in and day out.
Not purely altruistic
This isn’t a purely altruistic act on the part of property owners, of course. Aligning your offer with what your residents want, whether that be longer leases, no upfront fees, fantastic 24-7 customer service, or saying yes to pets, means they might stay longer. And that means more stable cashflows and resilient income streams, a more valuable building. This makes it a win-win for residents and the property owner.
Looking forward, policy changes expected as part of the London Plan that allow large-scale operators to manage both private rental and affordable rents schemes will drive economies of scale. This is important in what can sometimes be a low-margin business. Ensuring that service is not compromised to cost control is a vital part of the toolkit when putting residents first.
So the US might have done multifamily first, but I think the UK always performs best when it’s the underdog. As demand for rental accommodation across the UK sees no sign of abating, we’re coming out fighting against residual renting – and with much better coffee.
