North West Rental Market | Summary + photos
“The towers are going up and so are rents – increasing by 30% since 2020,” said Dan Whelan, deputy editor of Place North West, as he opened the North West Rental Market conference. And with 1.3 million people on housing waiting lists nationally, he added: “The affordable end of the market is struggling to provide enough quality stock.”
See gallery of photos below
So, with these strong positives and negatives, is the rental sector looking rosy?
North West Rental Market was sponsored by JMW, Mansell Building Solutions and Yardi.
Showcasing SFR
Lee Hill, commercial director at Ascend Properties, the UK’s largest third party manager of build-to-rent single family homes, described how his organisation had 7,000 SFR across the UK in its care. He said: “The exciting and emerging single family build-to-rent market has become one of the most dynamic and in-demand asset classes in property.”
He said there were some similarities with multi-family housing, such as community and customer care, but added: “In single family, the things they see as important are location, schools, playgrounds and motorway links – amenities we don’t have to provide onsite.”
He described Greater Manchester as a ‘barometer’ for this sector and added: “It has arguably the most mature single family rental market in the UK and is high up on the target list for all major investors.”
He went on to detail how the average rent is £965pcm, and that there had been an average rent increase of 11.5% in the past 12 months. Research shows 75% of tenants remain in their homes after the initial tenancy period, with a 98.7% average occupancy rate, and an average tenancy length of two years and 10 months.
Hill added: “They view this as a long-term tenancy option.”
Multi-family market
Tom Sinclair, senior director at CBRE, was also positive about the market: “Across all markets we’re seeing continued resident demand. Almost any developer and any operator will tell you they’re 100% let and have waiting lists.
“What we’ve seen over the last three years are major barriers to delivery and that’s slowing down the ability for new offerings to calm that rental market and offer an ability for rents to moderate and become more affordable.”
Demographics and future demands
James Blakey, planning and engagement director for Moda, outlined a “huge growth” in PBSA and also co-living which he thinks is “starting to gather some momentum after a difficult start”.
He also said Moda was seeing a significant shift in the “plus-55” market, and described how Angel Gardens, one of its Manchester developments, had an age range of residents from two months old to others in their 80s, from around 90 different nationalities. Planning ahead, every new Moda property is being future-proofed for drone deliveries, Blakey added.
Meanwhile Edwina Coward, development manager for Packaged Living, was quizzed about her work in multi-family schemes in Liverpool and Manchester. She gave strong examples of environmental commitments – like the fact there is no gas in any of their developments. She said: “Sustainable living is at the forefront of our delivery. Renters are not just renting their apartment, they are renting the wider building as well so there is a focus on amenity spaces and flexibility of uses.
“Manchester is always going to be the largest investment hub of the North West, Liverpool has to work slightly harder. It’s key for us to concentrate on the products themselves and making sure it meets expectation. We are still attracting the residents that we need.”
Viability in mind
John McKeon is investment director of Housing Growth Partnership, an investment group jointly owned by Lloyds Banking Group and Homes England. His organisation is active in the living sector and McKeon said there were still challenges around high interest rates, build costs and inflation on any site other than prime.
He added: “Secondary locations are reliant on public intervention and grants to make them viable. I think that will change over time as interest rates come down and there is increased transactional activity in the market.”
CBRE’s Tom Sinclair said the single-family market has really accelerated in its growth and he was still seeing strong investor demand, however he added: “Support from local authorities and regional organisations is really important to try and mitigate the viability gap on new development.”
Affordability
Sinclair said issues around interest rates, build costs, and safety requirements such as second staircases force developers down a route which means they have to try to achieve the highest possible rents just to “make the numbers work”.
The suggestion of a Government rent freeze provoked a strong reaction from Blakey. He said: “Rent control is an utter disaster. Look to Scotland and the dire consequences for the Scottish market over the last two years. Scotland has lost £3bn of investment – that equates to around 15,000 houses. There is no appetite for investors to come in to the market. It constrains and strangles that investment market. Look throughout Europe – it doesn’t work.”
Paul Dennett, mayor of Salford City Council, said: “Increasing our ability to drive truly affordable housing to meet housing need, not just in numerical terms but in types of housing, is not where it needs to be. We need radical reform that goes to the heart of Whitehall and Westminster to tackle the housing and homelessness crisis.”
Ben Denton, chief executive of L&G Affordable Homes, said his company looks after £1.4tn of society’s capital and says “there is nothing better than delivering affordable housing” emphasising that “it delivers positive long-term social impacts”. L&G Affordable Homes grows at a rate of around 2,000 homes a year. “How can we use our position in pulling long-term capital into the affordable housing marketplace to deliver more affordable housing? That’s the basic thesis of the business.”
But he added a note of caution: “We are really worried about the extent to which the affordable housing sector has been denuded over the last 20 or 30 years. It pushes costs from housing into other bits of the public sector which causes local authorities to be in difficult financial circumstances and challenges residents.
“What I hope with a new government is that people can get real about the amount that needs to be delivered.”
Sky high?
The discussion around towers is always a hot one – particularly in relation to Liverpool. Coward described one of her Packaged Living schemes in Old Hall Street, where the constrained site meant going higher wasn’t viable as the layout of the building couldn’t work. Speaking more broadly, she said high-rise was becoming easier in the sector as planning authorities “understand the product a bit more”.
Blakey referenced a Moda scheme in Ardwick which had received a ‘13-storey haircut’. He referenced the public consultation which revealed local residents didn’t want 43 storeys “so we took it off”. Residents did, however, want a doctor, a food store and public realm, so they were included, as is 22% affordable PBSA.
Supply and demand
McKeon was optimistic for the sector, while Hill from Ascend said demand from renters was “quite outstanding” and “far outweighing supply” as interest rates meant it was cheaper to rent than commit to a mortgage.
McKeon went on to talk about the wider regions, saying the likes of Leeds and Birmingham were seeing plenty of activity but added: “The challenge is to make BTR work in Preston, Bolton, Bury, and we need a ripple effect. Once we get transactions in Stockport and wider Greater Manchester, that starts to breed more confidence and investors start to look at more secondary locations.
Right to Buy
“Scrap Right to Buy,” said Dennett. “It has fundamentally failed this country. Revisit things like Help to Buy to support people who have aspirations to get on the property ladder. Forty per cent of Right to Buy homes end up in the rental market and contribute to rising rents.”
Emma Richman, director of operations at Peaks & Plains, based in Cheshire East, could give specific examples of how RTB had caused issues for her organisation. She said: “We lost a four-bedroomed property in Knutsford. We’re not going to be able to replace that.
“Estates have been decimated. It’s a poor version of the private rented sector and it gives housing associations a really bad name. We can’t replace that level of stock. It [RTB] absolutely has to go.”
Council intervention
Whelan asked Mayor Dennett about Dérive, his authority’s development company, and whether councils should be stepping in to try to resolve the housing shortage. Dennett was firm in his stance: “The only time we met housing need was after World War Two when councils were empowered in resource terms, money and people, to get on with meeting housing need by building council houses.
“We absolutely cannot leave it to the market. Looking at data, Dérive delivered more social rented homes than all of our housing associations put together.
“When housing is brought through the market, time and time again developers tell us they can’t provide affordable housing, and especially in high rise developments. Whether it’s ‘can’t’ or ‘don’t want to’ – I think it’s a bit of both. Viability is a real issue. We’ve got cost of development versus what we can sell the property on for. How do we tackle these big systemic issues?
“Having a place to call home is a human right.”
Green Belt or brownfield?
Asked if panellists would support releasing land in the Green Belt, something Whelan said was “seen by many as a solution to the supply issue”, Tom Hawley, head of affordable housing growth in the north at Homes England, said the government had a “brownfield first” policy but added: “We follow the lead set by local authorities when they are designating areas appropriately. We respond to the local steer.”
Cllr Gavin White, executive member for housing and development, Manchester City Council, said this was a “live debate” in Greater Manchester and said 96% of the Places for Everyone sites in Manchester were brownfield. However, he said “at the margins” there was a concept of ‘grey belt’ where it “wasn’t beautiful countryside but was designated Green Belt for historical reasons we’ve got to grapple with how that’s developed”. He added: “We’ve got to get on with building homes because of the stark reality of what our residents face.”
Pressing priorities
Helen Spencer, executive director of growth at Great Places Housing Group, spoke about the role of housing associations in filling gaps left by the withdrawal of other services: “It has naturally created a lot of tension in the boardrooms about where to prioritise investment.
“Customers need to be at the heart of all decision-making – we have 25,000 homes and they look to us to be a responsible landlord and steward. We are in a relatively fortunate position that a lot of our stock is new, delivered in the last 30 years, but nevertheless we do have pre-war terraces and a lot of property that requires focus on the net zero agenda.”
Peaks & Plains’ Emma Richman agreed about problems with ageing stock, explaining how damp and mould were a “massive issue”, and that there was a lot of new legislation which needed to be adhered to. “The demand [for new housing] is huge but there is also this pull to asset management and some of the regulations which have come in. Disrepair takes away our resources, and then the balance of prioritising new homes over your existing stock is something that will be a challenge.”
Utopian planning
With a general election looming, Whelan asked panellists how a new government could create an “affordable housing utopia”. Richman and Spencer both referenced clarity for the long-term rent settlement. Spencer said: “The biggest challenge can be “is your appraisal still going to work if there is a change to that base rent settlement?”
White said he wanted a commitment to social housing, beyond a five-year government term. Hawley wanted to emphasise the ‘ripple effect’ of good affordable housing on society – the benefits on mental health, for the health service, and people’s quality of life. “If we put more money into an affordable homes projects then, in theory we will get more economic benefits.”
Join Place North at a forthcoming event
Cheshire Development Update | 6 June
Education Property & PBSA | 13 June
Cumbria Development Update | 20 June
Click image to launch gallery
- Around 150 people attended the rental market conference at Manchester Hall. Credit: PNW
