The considerable potential of BTR is threatened by obstacles in the planning system

Andy Jones, Group Director, Corporate & Build to Rent, Leaders Romans Group, looks at what needs to change in the planning system to fully unlock the potential of Build to Rent.

Related topics:  Construction,  Landlords,  Property,  Planning,  BTR
Andrew Jones | Leaders Romans Group
27th March 2023
BTR 622
"One of the greatest challenges facing BTR suburban communities is fear of the unknown. Sadly it would not be an exaggeration to say that this may be particularly true of the characters who make up a typical planning committee"

Build to Rent is the fastest growing property type, with a recent analysis by the British Property Federation stating that the sector is set to be worth £170bn by 2032, due to BTR units in the UK rising from 76,800 to over 380,000.

Bearing in mind that the Government’s 300,000 homes per year housebuilding target has been missed at every turn, BTR is clearly very well placed to help meet the Government’s otherwise seemingly unachievable housing. And yet there are many obstacles in the planning process which hinder its progress.

Putting aside the fact that BTR is not immune from the planning policy frustrations which affect all housebuilders – local plans stalled, nutrient neutrality ‘moratoriums’, local planning authority (LPA) ‘lockdowns’ and changing approaches to Green Belt release – there are other issues which impact on BTR directly.

For BTR suburban communities, the first, and possibly the most significant challenge, lies at the heart of the planning system. Planning exists to create well-functioning spaces, to enable social, economic and environmental priorities to shape places and to protect the natural and cultural heritage for future generations.

In doing so, long before the now infamous Government policy of the same name, it concerns ‘levelling up’: providing public benefits where they are most needed. The system of development taxes and developer contributions requires that this is delivered through the profit made on development.

Sequential testing

BTR suburban communities - which offer a range of property sizes (well suited to multi-generational living) in a sustainable, community-orientated mixed-use setting, often powered by renewable energy - undoubtedly have the potential to create the genuinely balanced communities that planning policy requires.

But the central issue facing the developers of those BTR suburban communities which provide a wide range of services solely for residents’ use, is demonstrating how a substantial mixed-use development, the co-living components of which are usually created ‘exclusively’ for its residents (as reflected in their service charges) can benefit the wider community.

Not only this but can a scheme which provides leisure facilities and cafés on-site support the viability of the local high street? And how will a private (potentially gated) development successfully integrate into the wider community?

As part of the planning process, it is possible that local authorities may ask for a sequential assessment to demonstrate that the new community will not over-provide to the detriment of existing services. So in the absence of a policy specific to this unique development type, existing planning policy risks scuppering many developments despite them meeting so many of the Government’s objectives.

Prioritisation of brownfield

A similar policy conundrum exists regarding the Government’s ‘Brownfield First’ policy. For many reasons, it is logical that planning policy favours urban brownfield developments which not only utilise otherwise redundant sites but bring much-needed footfall and vitality to high streets.

But on the other hand, BTR suburban communities are by their very nature, larger than average developments and the range of services and facilities available is determined by the number of residents and rental income. Furthermore, the ‘green’, family-orientated values that define them necessitate a semi-rural environment, usually on the edge of a settlement.

So proposed BTR suburban communities will need to be carefully positioned in relation to the principles of sustainable development – more so now in light of the revised NPPF’s shifting approach to greenbelt release.

Gaining understanding and acceptance from planning committees

As with any innovation, one of the greatest challenges facing BTR suburban communities is fear of the unknown. Sadly it would not be an exaggeration to say that this may be particularly true of the characters who make up a typical planning committee, and of the local residents who take the greatest interest in planning decisions.

In circumstances in which developers have successfully addressed all planning policy requirements, another significant challenge is communicating that too, and achieving buy-in from, local councillors.

Even if a scheme is recommended for approval, there is no guarantee that it will be understood and accepted by planning committee members, who frequently turn down planning applications against their officers’ recommendations.

Furthermore, the planning system also allows local residents to input into development decisions, through formal consultations on both Local Plans and individual planning applications.

Local residents may have pre-conceived ideas concerning the traditionally transient nature of rental communities and the demographic profile of those who rent rather than buy their homes. The over-provision of rental homes has already caused consternation in some areas, especially those popular with second-home owners.

Those concerned about local house prices may object on the grounds that due to supply and demand pressures, the provision of rental properties may fuel rising house prices to the detriment of those who have not yet bought their own home.

The success of public consultation on a planning application is dependent on good communication. Therefore messaging must include the many benefits that a BTR suburban community can bring – for example, that the product is family-orientated and is frequently favoured by professionals, such as those who might relocate regularly for work purposes - or simply prefer the convenience of a BTR suburban community over the cost and complexities of home-ownership.

Development teams should also focus on the many attractions of such schemes including the provision of well-managed and high-quality open spaces and amenities and should draw a clear distinction with the negative impressions of so-called 'rouge landlords' within the private rented sector – the very issues which the Government’s support of the BTR sector has sought to address.

A lack of policy

Policy is notably lacking. There are just four references to BTR in the current NPPF, three of which are in the glossary.

In the only mention in the body of the 75-page document is in the context of affordable housing: ‘Where major development involving the provision of housing is proposed, planning policies and decisions should expect at least 10% of the total number of homes to be available for affordable home ownership…[but] exemptions to this 10% requirement should be made where the site or proposed development provides solely for Build to Rent homes’.

The industry had anticipated that BTR would be addressed more comprehensively in December’s rewrite of the NPPF, but the new version, which is currently being consulted upon, has no reference to BTR whatsoever.

And although BTR schemes now exist in 45% of all English LPAs, the majority (London being a notable exception) do not yet have a policy in place, each instead taking a case-by-case approach based on viability. As the sector matures and the BTR suburban communities model becomes increasingly prevalent, affordable housing policies for the sector will no doubt become more established.

Political opposition

The lack of support at a policy level was exemplified last year when Secretary of State Michael Gove declared: ‘We need to shrink the private rented sector and get more people owning their own home.’

If the proposed Renters’ Reform Bill, in raising standards, pushes the 'rouge landlords’ out of the market it has served its purpose. But if the underlying objective is to further reduce stock, the problem will only be exacerbated. To reduce the size of the PRS would increase homelessness before homeownership.

Ticking all the boxes

In terms of placemaking, BTR suburban communities are entirely in sync with many evolving policies, including sustainability on multiple levels, ‘building beautiful’ and the concept of the 15-minute neighbourhood – complete, in some cases, with the provision of community hubs and small business incubators.

Schemes can also deliver tenancies of a longer duration than is available in the private rented sector, and Affordable Private Rent properties (those priced at least 20% below market rates, including service changes), which are ‘tenure blind’ and ‘pepper-potted’ across a scheme.

With many boxes already ticked, the challenge for development teams is to communicate the very real benefits of such communities – both in the context of planning policy and local residents’ preconceived ideas.

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