The Build to Rent Sector and Selective Licensing

Selective Licensing was introduced in 2006 and was aimed at providing Local Authorities with greater powers to address perceived problems in the private rented sector (PRS). Recently, several local authorities have been applying the scheme to all rental properties, including Build to Rent (BTR), with all homes requiring registration and payment of a license fee.

The UKAA has spearheaded a co-ordinated a response on behalf of its members, articulating the differences between BTR and the wider PRS; arguing the case for an implementation of a selective licensing scheme which is reflective of both the high standards and reduced enforcement cost associated with the BTR sector.

Having established a working group which includes the majority of BTR operators, the UKAA has spoken on behalf of the sector in making representations to a range of local authorities and provided a template for UKAA members to use in their own representations, creating a consistent message to Local Authorities.

UKAA representation for the BTR sector

BTR is defined as purposely designed, built, and managed homes, specifically for rental, with shared amenities and delivered at scale. BTR is a distinct and highly-managed product within the wider PRS. This distinction is recognised by Government within the National Planning Policy Framework.

BTR is typically owned by long-term institutional investors and is professionally managed with a focus on delivering high quality and sustainable homes, with strong customer and community centricity.

The UKAA’s position on driving quality in the rental economy is already established. We support the principle of selective licensing to tackle rogue landlords and to improve standards in the private rented sector as a whole. Nevertheless, a broad-brush selective licensing scheme across all private rented sector homes, including BTR will have a disproportionate and negative impact on the BTR sector and its future delivery in an area due to the material obstruction it presents to the delivery of much needed new homes .

The UKAA’s concerns are summarised as follows:

1. A broad-brush fee structure across all PRS that includes BTR will have a significant impact on viability and deliverability of schemes which will potentially result in the loss of investment in an area, In turn leading to:
   1. a reduction in the number of BTR homes being provided in an area at a time when there is an overwhelming need for new homes;
   2. a reduction in the number of affordable housing units provided;
   3. a loss of employment opportunities, social and physical infrastructure;
   4. the loss of Council Tax revenue; and
   5. increasing supply/demand imbalances – therefore continuing to push rents up.
2. Increased operating cost and therefore rent increases required to cover the costs of the selective licensing scheme.
3. The creation of a significant bureaucratic and administrative burden in processing the selective licensing scheme, both for operators and for the local authority.

The BTR sector’s quality standards exceed the quality standards that selective licensing schemes seek to establish, with investors and operaters committed to long-term quality standards for residents. BTR resident satisfaction is high and is evidenced by independent research data. Given the track record of BTR in quality and customer care, UKAA members reasonably question the value of selective licensing to drive standards in the BTR sector.

UKAA members are supportive of the principle of implementing a selective licensing scheme. However, such a scheme should have a fee structure which is reflective of both the high standards and reduced enforcement cost associated with the BTR sector.

The UKAA fears that the application of Local Authority selective licensing schemes has already set a worrying precedent for the BTR sector. The challenges to selective licensing are material to the general growth of the sector, and our desire to establish positive long-term relationships with Local Authorities, as selective licensing and BTR expand across the UK.

We encourage Local Authorities to engage constructively with the BTR sector and the UKAA to agree a way forward which is both of benefit to renters and supports the future delivery of high-quality rental homes.

The UKAA has underpinned its representations by highlighting that the projected capacity of the BTR market is two million new homes, all institutionally funded and professionally managed. BTR is an important component in helping to address the UK’s housing supply crisis and as a sector we are making a significant and growing contribution to the UK’s housing stock by creating and nurturing new communities across a wide spectrum of locations throughout the UK.

For more information on the selective licensing and UKAA’s response on behalf of the sector, contact Brendan Geraghty [email protected]