Manchester: A beeline for housing growth

“Manchester-ism” has become the word of the moment when it comes to political discourse, but could it also be the watchword for housing growth and investment, asks Ben Beadle of the National Residential Landlords Association.

There can be no doubt that the North West city is a shining example of what can be accomplished when the state and private investment alight on a strategy to drive investment. It has succeeded where many other parts of the UK have failed, providing proof that build-to-rent (BTR) works and can deliver at scale. However, that investment has taken a very particular form in the rainy city.

The skyline has been re-written by the advent of brick, glass, and steel edifices housing thousands of city-centre apartments. The first chapter of Cottonopolis’ rebirth focussed on density, on multioccupancy, and on urban assets. The next needs to address nascent demand for family housing and will inevitably be written in the suburbs.

A Northern success story 

Greater Manchester now has 15,954 operational BTR homes across 42 communities, second only to London, with a further 16,207 in the pipeline. Recent completions such as The Fairfax, One Port Street and Podium show the quality on offer, and tenants are paying for it, with a rental premium of around 7.5% over comparable local stock. This is a market that has delivered at pace.

A density dilemma

If we examine the rapid expansion of Manchester’s housing stock, though, the success is surprisingly limited in archetype. Manchester’s BTR is overwhelmingly studios, one, and two-bedroom apartments in the urban centre. Three-bedroom homes are a few and far between.

The model that has worked so effectively is high-density and centralised. It is ideal for students and young professionals, but far less appealing to families in search of a garden, a spare room and a good school catchment area.

Tenants are not alike

This is where the tension lies. The households renting today are myriad and diverse. Too few fit the BTR bill and have their needs met by new-build apartments.

The average private tenant in the North West is now 41 years old. Increasingly they are part of a family with children. In fact, households with dependent children make up as much as 38% of the private rented sector, up from 12% in 2001. And they are staying longer. The average tenancy now runs to 4.7 years, with many households remaining in the sector well beyond that. These are families who want space, schools and security, and increasingly they are looking for it beyond the city centre. Too often, they cannot find it. What awaits them further out is frequently older, less energy-efficient housing that offers flexibility but not always the long-term security a growing family needs. Our own polling shows that tenants in their forties worry far more about a tenancy ending than those in their twenties do. Life stage changes what people want from a home, and the market has been slow to keep up.

Private landlords are stalled, not fleeing

The obvious question is why traditional landlords, the backbone of the sector, are not meeting that demand themselves. The honest answer, which we set out in full in our recent Scaling Ceiling report, is that many have hit a ceiling on their ability to grow. Contrary to the headlines, our members are not abandoning the market. Fewer than one in five intends to sell in the coming year. But higher mortgage costs, SDLT levy on additional properties, and the cost of future energy-efficiency upgrades have stalled their capacity to expand. Only around 7% bought a property in the past 12 months. They are remarkably resilient. They are also, increasingly, capital constrained.

That matters for the North West. In the region’s growth corridors, few individual landlords can fund hundreds of net-new family homes. Likewise, with so much doubt about the future the certainty of demand a developer needs to build for them is lacking.

Where new family supply is required at genuine scale, single-family BTR houses, families can call home, rather than stepping stone blocks may be the best route for delivery.

A bridge, not a battle

None of this should be seen as a threat to NRLA members, and we do not consider it one. It is an opportunity to learn and teach, a moment for development and the evolution of private renting. We think of it as more akin to a division of labour.

The traditional private rented sector will remain the flexible, local bedrock it has always been, adding stock selectively and housing millions well. Institutional capital, meanwhile, can build family homes at a scale the current model cannot, and it is well placed to answer the frustrations families feel most keenly about long term stability and energy efficiency.

A conventional landlord cannot instantly upgrade a Victorian terrace or guarantee a decade of tenure. Purpose-built single-family housing can be designed to do exactly that. The two approaches are complementary, and the sector is stronger when they work in harmony rather than with distrust and competition.

Solid foundations for progress

The next phase of the PRS evolution depends on realignment and the removal of obstacles.

Investors need to look beyond the Salford and Trafford apartment towers toward suburban houses in the commuter belt and the towns beyond it. Simultaneously, planners need to stop treating BTR as a byword for high-density blocks, because as long as the category is defined in such narrow terms, the family homes we most need will keep slipping through the gap.

Manchester has proved the model works. The job now is to broaden it. The city region’s rental future should not be a choice between towers and houses. With the right capital and the right planning, it can be both.

• Ben Beadle is chief executive of the NRLA