Policy changes to invoke ‘high-rise’ of Build to Rent?

James Blackwell, Associate in Planning at Ashfords LLP discusses new changes to the National Planning Policy Framework which finally gives proper recognition to built-to-rent.

(Image shows Be:Here Hayes Built to Rent accommodation in Middlesex, one of a growing number of Build to Rent providers across the UK)

Released in September, the revised National Planning Policy Framework (NPPF 2.0) clearly has a firm focus on housing delivery. And alongside a raft of new planning practice guidance, the revisions to the NPPF finally give proper recognition to Build to Rent (‘BtR’) as a distinct asset class within the private rented sector. This is an important milestone for the developer industry, as BtR will undoubtedly become more commonplace with the benefit of clear policy guidance for both local planning authorities and developers alike.

In brief, the BtR sector consists of new (often large-scale) and professionally managed developments for the rental market. The shared management structure is key, as it can allow for provision of quality on-site facilities and services – and therefore offers an attractive alternative for those who are priced out of the home-ownership market. 

In accordance with the new planning practice guidance, local planning authorities (‘LPAs’) must consider a range of housing types and tenures in their area when carrying out their local housing need assessment, which should now include provision for those who wish to rent. Where a need is identified, the guidance requires LPAs to prepare a plan policy setting out their approach to promoting and accommodating Build to Rent schemes, including the circumstances and locations where BtR developments will be encouraged. 

Helpfully, the NPPF is now explicit that affordable housing on BtR schemes should normally be provided as affordable private rent – a class of affordable housing specifically designed for the sector. The policy suggests a benchmark provision of 20% (unless viability concerns dictate otherwise), with rent set at a level at least 20% below open market (inclusive of service charge). Whilst it may take some time to materialise, the Government has also intimated an intention to introduce model s106 clauses to address BtR affordable housing, which will need to cover the parameters of the lettings agreement, the rent levels, apportionment of the homes across the development, a management and service agreement and a marketing agreement setting out how their availability is to be publicised. 

Although by their nature, BtR homes are intended to remain within the rental market long-term, the guidance does account for scenarios where units need to be sold off into separate ownership. In the case of affordable homes, a claw-back mechanism is proposed – where any receipts can be recycled into alternative affordable housing.

Whilst still early days, the revised NPPF and accompanying planning practice guidance provide much needed clarity which will boost confidence in this growing sector – and with so many people now priced out of home-ownership, demand for quality homes in the rental market with longer-term security is set to soar. The policy recognition of the BtR sector has therefore come not a second too soon. 

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