4 ways the Mayor is helping build-to-rent

The Mayor’s office has given the PRS market a boost with their latest Supplementary Planning Guidance (SPG). The Affordable Housing & Viability document provides some much-needed clarity for BTR planning applications going forward. Read on for our summary of the key points:

1. BTR is officially defined

We applaud the fact that the Mayor’s office has used this report to officially recognise BTR as a fundamental part of future development in the capital. A recent report stated that over half of the BTR starts in London this year were restricted to just 4 out of the 33 London boroughs, so we welcome the timing of the SPG. There appears to be enough in the document to encourage more London boroughs to embrace BTR as a concept.

2. There is flexibility for BTR over affordable housing

There is a clear message to Local Planning Authorities that affordable housing guidelines are to be interpreted differently for BTR developments than for the standard build-for-sale route. The document states that a percentage of units with discounted market rent could be enough to meet the stipulated affordable housing mix in an area.

3. A more viable unit mix

The SPG states that a BTR development need not comply with the preferred unit mixes outlined by an LPA. This one single aspect of the document should markedly improve BTR output because it allows for developers to respond to the demands of the rental market, i.e. a greater proportion of studios and 1-beds.

4. Innovative design trumps rigid space standards

Many will be encouraged by the section of the SPG that notes “space standards are not prescriptive regarding the layout of dwellings” and that LPAs are encouraged to “allow some flexibility on design standards” when assessing a BTR development that may have specific on-site services and facilities that could counteract a lack of space in the individual units.

Other notable highlights from the SPG:

1. A 15-year covenant for BTR units

Future BTR developments will be protected by a 15-year covenant. It will be possible to break this covenant, however a clawback amount will be calculated using a BTS viability study.

2. BTR defined as 50-units or greater

The document defines BTR as “a development, or block/phase within a development, of at least 50 units”. Surely a BTR development that is under 50 units can still be of great benefit to an area? Given the haphazard mix of buildings in London especially, it seems surprising that this rigid number is included in city hall’s definition of BTR. The SPG has already outlined the need for a 15-year covenant, good design and professional management, so we believe this should be enough to show the worth of a BTR development.

3. Adoption possible late 2019

The document is in draft form and therefore will only be a material consideration to current Planning Applications, with City Hall stating their intention to adopt the guidelines towards the end of 2019 as part of the London Mayor’s new London Plan. There is a 3-month consultation currently underway.

A welcome intervention

Although formal adoption may not be until the end of 2019, we believe the publication of the latest SPG represents a significant milestone for the sector and should be enough to encourage local authorities to adopt the ideas immediately. By creating a specific pathway for BTR developments to fit within the existing housing policy framework, and by officially recognising the difference in viability between BTR and BTS schemes, the mayor’s office has shown they are listening. It is still the LPAs who will ultimately determine the future of BTR in the capital, but they have been given some timely food for thought.

Originally published on prsinvest.com