Introduction
Build to Rent is booming in the UK and is expected to grow by 25% over the next 10 years as demand for housing grows. Brexit may have affected Build to Rent indirectly by affecting the UK economy in general. Build to Rent is not immune from the UK economy- unemployment would impact demand for Build to Rent and this will affect demand for Rents. Brexit may have a direct effect on Build to Rent if construction cost increases are passed onto tenants via higher rents.
The issue of affordability is compounded by a lack of supply; according to the National Housebuilding Council (2016), there was a shortfall of 244,000 homes being built in England alone. This is exacerbated by the fact that Build to Rent has quickly become one the most popular approaches for investors and housebuilders looking to meet demand.
The UK’s housing crisis and the need for sustainable solutions
The UK has a housing crisis. This is both bad for the country and also for those living in it. Not only are there many people on the waiting list for public housing, there are also people who can’t afford to buy one. With home prices sky-high, many people cannot afford to live where they grew up or in places where there are good employment opportunities.
The housing crisis likely has many causes, from a shortage in the construction of new homes to households that are unable to afford mortgage payments.
Currently, 68% of people under the age of 35, the so-called millennials, live with their parents because they cannot afford rent or a down payment on a home. This is not only bad for them but also for the economy since many of them are being forced to live with their parents until they are in their 40s when they would otherwise be more likely to start a family and have children.
It is evident that there needs to be a long-term solution that meets both the demand of the population while causing minimal impact on the longevity of our planet.
How Brexit might affect the UK Build to Rent market
With the UK’s decision to leave the European Union, there is much uncertainty about what will happen. This should not be taken lightly- Brexit could affect Build to Rent and Rents in a number of ways. One way it would affect Build to Rent is if construction costs go up because of Brexit. If this happens, landlords may pass on these increases onto their tenants by increasing their rents accordingly. It also might have a direct effect on Build to Rent if unemployment rates go up. If unemployment goes up significantly, many people will not be able to afford the rents which will cause demand for rentability to go down.
This will cause Build to Rent investment to look elsewhere, leading them away from the UK and towards other countries.
Over-regulation has been a big problem in the build-to-rent industry.
The BtR market has not been able to grow as much as it could have because British over-regulation is making the process of building new rental housing considerably more difficult. Over-regulation is not only an issue for Build to Rent but also for the larger housing market in England as well.
A report from the Centre for Policy Studies found that the country has far too many regulations and this affects both new construction and existing buildings, which causes them to be less useful. The developers of Build to Rent want to build more homes but are held back by over-regulation and uneducated planning bodies.
The benefits of Build to Rent in a Brexit Climate
Build To Rent is a sustainable method of providing housing. There are many benefits to Build to Rent, including affordability, sustainability, and the provision for those who cannot afford to purchase homes.
The idea behind Build to Rent is that rented apartments will be built in areas with high demand and short supply. This means that they will be built near cities where people need affordable rental homes but also near public transportation options, which would allow for an easier commute. These new buildings will contain homes that are affordable and environmentally friendly – this means that rents will be higher than they might have been in the market was unregulated and rent prices were not regulated.
Build To Rent is beneficial to both tenants and landlords because it allows for a longer-term tenancy (usually three to five years). This means that people who are renting apartments in Build To Rent buildings are less likely to move, as moving will incur more costs and may require the tenant to pay a higher security deposit. This is beneficial for both tenants and landlords because they know that they will have a stable income from their new tenant for an extended period of time. If tenants move often, this means that landlords will have to incur the costs of finding new tenants more regularly and that tenants will be unable to develop a strong community with neighbors they know for an extended period of time.
Conclusion
Build to Rent is booming in the UK and Brexit may have affected the sector indirectly by affecting the UK economy in general. While this is a subject that many people may not be too concerned about, it could have implications for the construction industry in general and even those who are looking to invest. If you’re considering building-to-rent projects or investing within these markets then take note of how Brexit will affect them going forward because there are some potential changes on the horizon with regards to housing costs.
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