Will Build-to-Let Be the Next Big Thing for Banks and Investors?

Build to Let

Once little more than a novelty, the UK’s build-to-let sector is slowly but surely finding its way on to the radars of major investors. In particular, Lloyds bank has outlined an ambitious plan to build an extensive 50,000-strong BTL property portfolio by the end of the current decade.

Consequently, many private renters across the country could soon see their conventional landlords replaced with banks and businesses.

With available inventory at an all-time low and skyrocketing rents having become the norm, the future private rentals sector has never looked brighter, at least for those buying or building properties to rent out to private tenants.

Build-to-let is the arm of the sector where new-build properties and apartment blocks are owned and managed by just one landlord, after being built to order.  Advocates of big business BTL insist that corporate ownership could solve many of the problems faced by renters today, ranging from unacceptable fees to “rogue” landlords and short-term leases.

Announcing its aggressive move into the BTL sector, Lloyds is establishing its own private home rentals subsidiary – Citra Living – with the intention of adding tens of thousands of homes to its property rentals portfolio by 2030.

This one corporate landlord alone would occupy a full 1% of the UK’s total rental stock.

Meanwhile, John Lewis has also outlined plans to build homes to rent out privately, as part of its five-year strategy to expand “beyond retail”.  Specifically, the company said at least £400 million would be invested in new ventures, with the aim of generating 40% of its overall profits from non-retail activities within the next 10 years.

“Entering the ‘build to rent’ market also allows us to furnish properties using John Lewis Home products and deliver Waitrose food,” it said.

How Private Renters Stand to Be Affected

Some analysts and experts are optimistic about the potential for larger banks and corporations to move into the buy-to-let sector. They believe that by taking control of the market at least partially away from smaller landlords, private tenants may be afforded more protection and rights.

“The hope is that a larger corporate landlord such as Lloyds Bank would have the infrastructure, expertise and finances to ensure that they comply with their legal obligations, as opposed to smaller and ‘rogue’ landlords, meaning tenants should be provided with the information and protection they are entitled to,” commented Hodge Jones & Allen housing team partner, Sophie Bell.

There are those who only envisage problems for tenants and the sector long-term, should the trend of corporate BTL property ownership become popular over the coming years.

By 2030, Lloyds bank has set its sights on building at least 50,000 homes, which would subsequently make it the single biggest BTL landlord operating in the UK.

“The only upside for consumers is it may, and I emphasise the word may, bring lower rents if there are more properties to occupy,” warned Lewis Shaw, founder of Shaw Financial Services.

“However, the likely outcome is that the opposite will happen; it would be very easy for large institutional investors or lenders to monopolise large swathes of an area and increase prices.”

Category: Mortgages