To date, words have spoken louder than actions when it comes to the private rented sector (PRS).
But even the most sceptical observers have started to change their tune in the wake of the flurry of build-to-rent announcements since the turn of the year.
The latest came from residential landlord Grainger, which last week said it was planning an £850m push into PRS as part of a new strategy that would see it sell off other business streams to focus solely on build-to-rent and its long-term regulated tenancy business.
Speaking to Property Week, Grainger’s new chief executive, Helen Gordon, says the business hopes to establish itself as the UK’s foremost PRS landlord in a professionalised rental sector.
“The sort of services that Grainger can deliver will really differentiate us in the sector - the discerning renter will decide that they want to be with a long-established landlord. It’s about people building the high-quality management platform,” says Gordon.
So could the much-hyped PRS finally be taking off?
Momentum certainly seems to be gathering. Legal & General last week announced a £600m build-to-rent partnership with Dutch pension fund manager PGGM, which aims to build an initial 3,000 homes.
Meanwhile, Greystar, the largest PRS player in the US, said it was planning the UK’s largest purpose-built rented housing scheme, in Greenford, west London, as part of plans to introduce the US ‘multi-family’ concept to the UK; Invesco Real Estate launched a £250m PRS fund; and RBS committed £1bn to fund the development of new build-to-rent homes, as revealed by Property Week.
Altogether, January saw close to £3bn committed to build-to-rent - all against the background noise of stock market turmoil and worries about the global economy.
“It’s been a phenomenal start to the year,” says Ian Fletcher, director of policy at the British Property Federation. “I think PRS really is coming of age. It’s no longer just pockets of outer London and some of the core cities - people are beginning to look beyond that for investment opportunities and are finding them.
“It was always going to take time for the sector to get going - the student accommodation sector has taken around 25 years to get where it is today - but I think build-to-rent will get there a lot quicker.”
Whether this will be build-to-rent’s year remains to be seen. But significantly, players do now appear to be putting their money where their mouths are. Grainger teed up its drive with the £100m purchase of the 600-unit Clippers Quay PRS development in Salford, one of the UK’s largest build-to-rent schemes outside London.
The UK’s largest listed residential landlord, which will split its £850m investment evenly between new-build development and the acquisition of tenanted properties, already has 3,600 PRS units, with a further 2,100 in the pipeline (including Clippers Quay), but now plans to significantly expand that over the next five years.
Gordon says she sees a huge opportunity in the rental market, which is still dominated by small buy-to-let landlords, to establish a consumer-facing brand known for providing a high-quality professional service to ‘generation rent’.
“We are the largest residential landlord at the moment, but we haven’t necessarily got that whizzy name,” she says. “But I think as far as renters go, people in Grainger properties definitely recognise the quality of the management.”
No less significant is L&G’s partnership with PGGM, which will see the joint venture take on planning, development and construction risk - something that is still rare for institutional investors in the sector.
“The market is still relatively risk-averse,” agrees James Lidgate, director of housing at L&G Capital. “There is a pre-conception, certainly on the larger-scale institutional investment side, that those risks are mitigated wherever possible and ideally taken out of the equation altogether.
“Most opportunities that I see are with planning in place, with a developer in place, and on a forward funding basis - that’s where the majority of activity is still taking place. But with PGGM we are more comfortable with taking on those risks.”
As far as Lidgate is concerned, the more investors, lenders and developers that commit to the sector the better, which is why he sees the flurry of activity at the beginning of the year as so “exciting”.
“If we had the marketplace to ourselves that would mean the sector had failed and that we were wrong to make the decision to jump in to the extent that we have,” he adds.
There is of course still a long way to go before PRS emerges as a professionalised, viable alternative to home ownership for generation rent. Indeed, just this week Savills estimated that one million more rental homes would need to be built by 2020 to match demand. But it looks as though 2016 will at least be a year in which this vision comes into sharper focus