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Last Updated: Friday, 29 February 2008, 10:24 GMT
Branded build-to-let plan on show
To let boards
Demand for rented property in London remains high
Housing developments with a strong brand identity should be available for tenants, a report by the British Property Federation (BPF) says.

There is an "insatiable demand" for rented property in London from residents in the 20,000 to 50,000 wage bracket, the group says.

It wants incentives for large companies to enter the residential rental market and build-up recognised brands.

But a group representing smaller landlords has questioned the proposals.

The report published by the BPF and GLA Economics calls for new planning rules to develop a professional rented sector offering rented accommodation.

It says such accommodation, including family homes and long-term tenancies, would be professionally managed like a commercial office block. It would build up a brand identity, similar to consumer goods.

High demand

The cost of private renting is typically at least 30% cheaper than buying an equivalent property, claimed BPF residential director Ian Fletcher.

The build-to-let product would ... have the added advantage of increasing competition between the small and large landlords ultimately forcing bad landlords out of the sector
BPF report

He claimed developments would benefit non-key workers in the 20,000 to 50,000 a year wage range.

Tenant demand for private rented property has been strong enough for the buy-to-let market to remain strong despite the credit squeeze, according to the Council for Mortgage Lenders.

Owner occupation peaked in the UK in 2000, at a rate of 71%.

But since then the numbers have stalled, and then fallen slightly.

This has been most marked in London in recent years, according to government statistics. Between 2001 and 2006 the number of owner-occupiers in the capital dropped by 111,000, a fall of 6.3%.

Buy-to-let bust?

Demand prompted huge apartment building projects in towns and cities across the country, snapped up by private landlords using buy-to-let mortgages which in turn drove up prices.

Just because a residential housing block is managed and run by an institution, it does not guarantee that tenants will be better catered for or that standards will improve
David Salusbury, National Landlords Association chairman

While tenants are still easy to find, there are suggestions that some investors are now finding it difficult to sell these properties in cities where supply has been swamped.

The BPF report assumes that new housing is developed solely for ownership, but it wants to create a separate residential market for rental property similar to that seen in the US.

This would value property on its potential rental income, not on how much it would fetch in a sale.

While maintaining some prospect of capital gains for investors from a sale, it could mean property is restricted to rental-only for a period of around ten years.

The report recommends:

  • councils' planning policies demand rented housing where there is a need for it
  • a reduction in more traditional affordable housing requirements
  • financial incentives - such as stamp duty concessions - to encourage build-to-let
  • greater incentives to landlords to offer longer-term tenancies

The report suggests that the build-to-let market could become attractive to investors who previously might have concentrated on office or retail developments.

Greater London Authority
The report is being presented at the Greater London Authority

Bringing big players into the market would also push down the cost of rents for tenants and increase quality, it suggested.

Mixed reaction

Mr Fletcher said that demand hotspots could also be found in the South East and South West and some large companies were already entering the market.

Adam Sampson, chief executive of Shelter, said: "With affordability still such a huge barrier to ownership, we need the government to investigate new ways to increase supply and house those not provided for under social housing arrangements."

But David Salusbury, chairman of the National Landlords Association which represents many small landlord operations, questioned the report.

"We need to be careful not to equate 'big' with 'better'. Just because a residential housing block is managed and run by an institution, it does not guarantee that tenants will be better catered for or that standards will improve," he said.

He added that people's homes should be treated differently than just as goods or services.

"We need communities that are diverse with decent and affordable housing that is truly a mixture of owner-occupiers, social housing and privately rented accommodation," he said.

"The concern is that corporate management can seem distant and not hands on."

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