Build to rent models under the microscope
As capital looks for new investment opportunities, our challenge is to create private sector solutions that deliver affordable housing as part of the build to rent model, says WSP’s Gary McCarthy.
A director of WSP, McCarthy is head of public private partnerships and capital investment services in the United Kingdom. He’s advised on several build to rent transactions in the UK, but says his market is still at the early stages of the model.
“There is a perception internationally that the UK is leading the way on build to rent, and whilst that is probably true we are still at the beginning and one of our challenges is bringing together private sector solutions to affordable housing,” he says.
Build to rent, also called multi-family, refers to multi-unit residential buildings owned by a single entity. The sector is expanding in the United Kingdom, with almost 81,000 homes either completed or planned, according to recent official figures.
The largest build to rent development in the UK is found at London’s Wembley Park. This project will include 5,000 homes as part of a broader $5 billion project being delivered by property investment company Quintain.
Not all build to rent projects are on such vast scales, though, and McCarthy points to a project he advised on at Barking and Dagenham and its unique model for delivering affordable housing as one for Australia to consider.
The $129 million public-private partnership deal built 477 new affordable rent homes in the London borough of Barking and Dagenham through an innovative deal structure that is reported to be the first entirely privately financed, local authority led, affordable housing project in the UK.
The properties are available to local people at affordable rents ranging between and 80 per cent of local market rates.
The structure of the transaction provides for the project to be entirely self-financing from the rental income paid over the term of the lease and at the end of the lease period all properties automatically transfer into full ownership of the local authority.
The development was let and managed by Barking and Dagenham Reside, a new company set up by the council.
The construction of the properties was completed in 2015 and the local authority plans for a further ,000 homes to be built over the next 20 years, through a mix of partnerships and financing arrangements, in an urban regeneration project that will transform the borough. At least 30 per cent of the development will be affordable housing.
“There has been lots of talk about affordable housing, but the industry knows that government won’t be able to deliver enough to keep pace with demand.
“We have a clear issue between the lack of housing and a huge amount of capital looking for investment opportunities. Our challenge is to come up with private sector solutions.”
Gary will be travelling to Australia in November. For more information contact Andrew Schroth, director of business growth from WSP Australia, on (02) 9272 5100.