Generation rent didn’t last long did it? This week the prime minister pledged to transform them into generation buy. So what does it mean for investors in the nascent private rented sector?
Even before David Cameron’s pledge at the Conservative Party conference on Wednesday, many in this sector had questioned the wisdom of such a policy. Yes, it is vital to tackle a housing crisis that is making home ownership an impossible dream for too many people, but to assume that demographic changes are not making renting a conscious choice for some is wrong.
To sum up the views of a group of politicians, developers and young entrepreneurs at a Mishcon de Reya/Estates Gazette pre-conference dinner in Manchester on Sunday night: millennials aspire to home ownership less and later than their parents; politicians sound out-of-date when they fail to acknowledge this; and for an increasing number of people, the home they own is not the one they live in.
Choice, in this most sensitive of debates, clearly matters. And choice was not a word used here by Cameron in his first party conference speech as leader of a Conservative majority government. Instead he set out plans to replace affordable housing requirements for rental homes with discounted “starter homes” to be sold to young people.
It is laudable in many ways. And at no point did the PM say he would not support the creation of a professional rental sector.
But Cameron’s emphasis on home ownership appears to mark a return to the stigmatisation of the rental sector as a second-class form of tenure. And it comes despite his previous endorsement of the pro-PRS recommendations made by Sir Adrian Montague in 2012.
Neither will the gear change help the government meet its target of delivering 1m new homes in this parliament (a goal put at further risk by offering the Right to Buy to housing association tenants). The IPF believes it takes a decade to deliver a typical 1,000-home project through a traditional housebuilder model. Under build-to-rent that is cut to four years. Others believe it can be more powerful still. PRS can deliver eight times faster than homes built for sale, according to Aberdeen Asset Management’s Ed Crockett.
Don’t interpret this as a call to focus on rental products alone. Of course choice is important. But of paramount importance is increasing supply and doing so quickly. So Cameron’s call for “a national crusade to get homes built” is welcome as long as it stops short of becoming a crusade to get homes sold.
ν At Expo Real in Munich this week the mood was positive. Most of those I spoke to were struggling to read developments in China, but relaxed that other sources of capital (north America especially) would plug any gap should it materialise. Stock picking (by geography and by sector) is more relevant than ever, while city centre densification (delivered sensitively) is essential if this industry is to meet long-term urbanising, demographic changes.
And don’t be surprised if “city regions” become buzzwords too, just as they have been in Germany and elsewhere for some time.
The northern powerhouse was out in force in Munich. Chairing a debate with Manchester city council chief executive Sir Howard Bernstein, I noticed his peers from Leeds and Liverpool councils (Tom Riordan and Ged Fitzgerald) listening intently; indeed, the three of them had been locked in discussion until moments earlier.
Expect such collaboration to be carried into MIPIM UK later this month.
• Speaking of MIPIM UK, a tantalising development: 100 Chinese investors, developers and construction companies are now expected to attend the show in a fortnight’s time. They will join exhibitors and compatriots Wanda One, ABP and China Greenland, each of which is already developing in London. Match this cohort with the local authorities at the show and the prospects for UK regeneration – and perhaps housing delivering too – would be very much enhanced.
