Most of UK’s big build-to-rent developers owned by foreign private equity firms
One of the UK’s fastest growing property markets is dominated by corporate landlords focused on providing homes for couples and singles, excluding many families with children, according to a thinktank report.The build-to-rent (BTR) sector constructs one in five new homes – including almost 30% of new homes in London – the Common Wealth thinktank says.It is concerned that the Labour government is turning to a select group of private equity-backed developers for a quick fix to the housing crisis.In a report, Open for Business or Up for Sale, the thinktank says a boom in developments designated for renters is being backed by “profit-seeking institutional investors”, often based overseas.Common Wealth said its research showed that four of the top five operators were backed by private equity funds and several were based abroad.
The sector could be at the heart of Labour’s housing plans to build at least 1,5m homes by the end of the parliament,Corporate landlords could be given a large slice of land in Labour’s 12 new towns, allowing them to deliver as much as a fifth of the expected 10,000 properties in each location,Almost 90% of BTR properties are occupied by couples and flatshares, or single individuals rather than families, the report says,This compares with the private rented sector as a whole, where one in four households are families.
Manchester, Birmingham, Leeds and Wakefield are among the cities with the highest concentration of BTR.“Housing in the sector also skews toward households on above-average and higher incomes, with industry data showing households in BTR are much more likely to be on incomes of over £68,000 a year than the average for the private rental sector,” the report says.In the top five BTR groups are Greystar Europe, Get Living, Simple Life Homes, Quintain Living and the L&Q PRS, a subsidiary of the social housing provider London and Quadrant.Simple Life Homes, which is owned by Sigma Capital, has several developments in the UK, including one- to three-bedroom homes available at its Albion Homes site in Salford, Greater Manchester.The housebuilder also manages private estates in Kent, Derbyshire and Devon.
Ministers are known to favour handing over large tracts of development land to the new breed of corporate landlords in order to speed up the delivery of new housing.Advertising newly built rental properties and signing contracts with tenants can take months rather than the years it takes to sell homes on sites of more than 500 dwellings.The arrival of renters in large numbers on a site in the early stages of a development encourages the providers of amenities such as schools, doctors’ surgeries and shops to open premises earlier and not wait several years until the development is sold to individual buyers.Homes in BTR developments are constructed for the private rental sector and units are not for sale to individual buyers.Buildings are owned by one single owner or consortium, typically institutional investors.
BTR developers are often criticised for drip-feeding properties into the local market to maintain prices.According to estate agent Savills, BTR housing stock stood at 105,000 homes at the end of 2023 from a private rented housing stock of about 5m homes.Marcus Dixon, head of research at real estate advisers JLL, said it was likely that foreign-backed funds were early adopters in the UK because their home markets in the US and continental Europe already had large institutional rental sectors.Sign up to ObservedAnalysis and opinion on the week's news and culture brought to you by the best Observer writers after newsletter promotion“It is a very stable income stream and compares favourably to other property markets like commercial offices and retail,” he said.“There are some UK pension funds looking at this market, but it is a more established concept in the US and Germany, where it is known to be a reliable business,” he added.
Rob Sumner, residential investment director of Simple Life Homes, said the BTR sector provided extra homes in addition to properties for sale and social housing,He said in many cases “houses would remain unbuilt were it not for the intervention of us and others like us”,He added: “Anecdotally, the homes delivered for us are typically the first to be built on a site and provide a much quicker sense of placemaking … Families with children constitute approximately 50% of our residents,”Sumner said the firm mainly built suburban homes for families, recognising that there was “a whole section of society who were too economically active to qualify for social provision but not in a position to be able to gather sufficient funds for a purchase deposit,And why should they have to settle for inferior quality housing stock?”A spokesperson for the Ministry of Housing, Communities and Local Government said: “We do not recognise these claims, and have committed to delivering a gold standard of 40% genuinely affordable housing for new towns, with a focus on social rent homes.
”Common Wealth said in its report: “The UK is in the midst of an unrelenting housing crisis, weighed down by issues of unaffordability, insecurity and inaccessibility.Along with falling home ownership, these conditions are leaving the UK with an ever-expanding private rental sector where profit-seeking institutional investors are both an important and rapidly growing presence.”It said ministers should seek to control the profits made by BTR developers on land designated by the public sector for housing.
Strong wage growth gives Bank of England interest rate dilemma
There was a brief period when the Bank of England was poised to cut interest rates and cut them quickly. Official figures showing strong wage growth appear to have ruled that out, at least for the time being.That is because policymakers at the central bank are likely to consider persistently high pay rises as inflationary. With prices already on track to edge up this year in response to elevated energy prices, only one or two quarter-point reductions in the cost of borrowing are possible without letting inflation jump even higher.There is always an element of doubt about the labour market figures from the Office for National Statistics (ONS), which have taken a battering from MPs concerned about their accuracy after a drop-off in survey respondents
Europe’s seaborne imports of gas fall by fifth to lowest since 2021, report finds
European imports of seaborne gas shipments fell by a fifth last year to their lowest level since the pandemic, according to a new report, while the UK’s plunged by nearly a half, but governments are continuing to spend billions on new import terminals.The Institute for Energy Economics and Financial Analysis (IEEFA) found that Europe’s imports of liquefied natural gas, known as LNG, fell by 19% last year to lows not seen since 2021 as governments worked to replace fossil fuels with renewable energy.However, a wave of fresh investments in new LNG import infrastructure after Russia’s invasion of Ukraine has moved ahead, which could mean that infrastructure worth billions will sit idle in the years to come, the institute warned.The findings are also likely to spark debate in the UK over the need for investment in new North Sea oil and gas projects and gas storage facilities. The report found that the UK recorded the steepest drop in LNG imports last year – a fall of 47% compared with the year before – after its gas demand fell to a record low
‘We must avoid a chilling effect’: the CMA chief on the UK’s pro-growth shift
Signs by the lifts in the Canary Wharf headquarters of the Competition and Markets Authority (CMA) remind staff not to talk about their work in public, given the billions of pounds resting on its decisions.But a very public debate is taking place about how the competition watchdog works and is run, with the Labour government determined to make an example of it.In October the prime minister rebuked regulators in front of global business leaders for “needlessly holding back the investment we need to take our country forward”.In January they were hauled into 10 to explain how they would support the government’s growth ambitions.Then days later, the government defenestrated the CMA’s chair, Marcus Bokkerink, replacing him with the former head of Amazon in the UK, Doug Gurr
Support for ESG proposals at record low driven by US investors, report shows
Support for shareholder proposals aimed at tackling environmental and social risks hit a record low last year, figures show, amid a “worrying retreat” by investors, particularly in the US.A report compiled by the responsible investment campaign group ShareAction found that, out of 279 environmental, social and governance (ESG) shareholder resolutions put forward at annual general meetings last year in the UK, Europe and the US, only four – or 1.4% – secured majority support.It marks a sharp decline from recent years, having dropped from 21% in 2021 to 14% in 2022, and 3% in 2023. However, it also reflects a severe drop in support for ESG issues in the US, where rightwing activists and politicians have targeted financial firms for supporting climate and diversity policies
European defence stocks rise by €18bn to record high ahead of Ukraine peace talks – as it happened
More than £10bn has been added to the value of Europe’s defence industry today, as investors anticipate a surge in military spending.Weapons makers are leading the risers on many of Europe’s stock exchanges today, as leaders from major European powers prepared to meet in Paris for emergency talks on the Ukraine war.Last week’s shock move by the US to sideline Kyiv and its European backers from peace negotiations has prompted expectations that Europe must spend more on defence.Before today’s summit Ursula von der Leyen said the issue was “about Ukraine – but also about us. We need an urgency mindset
Supreme court judges reject Reeves’ motor finance intervention
Rachel Reeves was dealt a fresh blow on Monday when her attempt to intervene in a high-profile supreme court case and curb a potential £44bn bill for lenders caught up in the car loan commissions scandal was rejected.Judges at the supreme court rejected the chancellor’s application, lodged last month, in which she urged them to avoid handing “windfall” compensation to borrowers harmed by allegedly secret commission payouts to car dealers that arranged the loans.The news weighed on lenders’ share prices, which had soared after the Treasury’s intervention amid hopes that it would reduce their potential compensation bill. Shares in Lloyds and Close Brothers, two of the biggest providers of motor finance in the UK, fell as much as 3.8% and 8
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