UKAA in Conversation with… Gillian McLees Director of BTR, Rettie and Co.

Tell us a little about yourself and how you became involved in BTR

I have been in the property industry for about 25 years now and have always enjoyed the service aspect of it. I could never have been an estate agent – I wouldn’t know how to buy or sell a single house!

I started at Regus, the serviced office business, and having left university, I was 21, young, super keen and open to anything.

I was given so many opportunities to work my way up the ladder there because the growth of that sector was phenomenal. There was a centre opening somewhere in the world almost every day. I had a great experience there and learned all about perceived value of additional services, auxiliary income and not just thinking that property was allabout pounds per square foot.

I went from there into PBSA and from there to BTR and have been wondering about the thread or pattern to these moves. I guess it was about the service aspect and also that these platforms were very nascent, they were new.

PBSA was a whole new thing when I went there so my job was as much about explaining the concept, and how it would work for a client’s business model, as well as the actual product itself.

I managed Scotland’s first privately, institutionally funded PBSA scheme in Glasgow which was a completely different offering to what was on the market at the time, with its service-led output. Now they are a crucial part of our housing sector and we’re transacting on these in terms of millions of pounds. A journey we can see replicating in BTR.

My philosophy was to ask myself: “What can I do to improvethe renter’s experience?” I think that was the start of my socialand moral compass within property.

Maybe I was a bit naïve and fluffy, but I felt the next generation of doctors, lawyers, nurses need somewhere to live, maybe it was their first time away from home, and I felt a sense of duty of care to these young people. I wanted to make the world a better place – let’s face it, we’ve got to have hope in something.

That’s what attracted me to BTR. I could see it was looking to reinvent renting and remove the negative connotations around being a landlord.

We were showing the world that PBSA can achieve great things. In Glasgow especially, all those apartments in tenement blocks with five or six bedrooms, which had been used as HMO, were suddenly available for families. That’s the thing about students everyone wants the vibrancy and economic bonuses that they bring, but nobody wants them in their back yard.

I managed all of Scotland, Ireland and Northern England so was on the road a lot. And then this thing called BTR came up and a lot of my investors were thinking about getting involved, especially in the cities where there were moratoriaon PBSA.

Rettie approached me because they wanted to get into BTRand they needed somebody who had a strong customer-centric focus and who could operate at scale. Only someone who has worked in PBSA, or maybe hotels, could offer thatexperience.

At that point there wasn’t an operational large traditional BTR buildings  in Scotland, so I came on board at a very strategic place. Rettie were advising and consulting on developments in the pipeline and we now manage a number of, affordable BTR developments; in addition to our institutionally funded assets for our home provider clients it’s that affordability within BTR which I believe will mark out BTR in Scotland as something different across all tenures.

Your philosophy in Scotland sounds more socially aware than in England. Is that fair?

I do what I do because of my moral beliefs. We are never going to be the best version of ourselves unless we all have access to three basic human rights – housing, education and health.

I understand that BTR in the early days was not perceived as a sector which could help the housing crisis as it was seen as being about fancy apartments for rich people. But that was just the start, because the people who invest first are the risk takers who disrupt the market and so it had to focus on thehigh end at birth, what we are delivering now is an updated version of BTR that includes all tenures like affordable, suburban, and single family BTR.

The statistics show there is an offering for all tenures, those at the forefront created the business case and allowed other schemes to come in at other points in the scale.

Scotland was a little slower in getting the sector off the ground because of the 2016 Housing Act changed the tenancy laws and that put a temporary brake on BTR. So, it’s probably true that when it really got going, we did start from a more social grounding than perhaps in England, we had learned how to make BTR an offering for all.

It was mostly mid-market rents – nurses and junior doctors who are earning £25-30k a year who wouldn’t qualify for housing benefit but needed somewhere affordable because rents are so high in our cities, these were our first BTR offerings and have been operational and delivering results in the affordable BTR space for almost 10 years

This is key for BTR going forward. The people I’ve seen experiencing homelessness recently are not stereotypical – perhaps with chaotic lives or addiction issues – and I’m very aware that most of us are only three pay cheques away from losing our homes.

That situation’s only going to get worse, and I can see already there are many, many working homeless people. For me, I think this is why BTR is going to solve the housing crisis. If someone can come up with a different solution, I’ll listen but I can’t see anything else myself.

The document Who Lives In BTR demonstrates that it attracts all sorts, families, downsizers, like myself.

In Scotland we have a supply and demand issue, as the success of the BTR Communities that have opened to date have shown. We are changing the face of renting in Scotland.

We are looking to make the landlord and tenant relationship less combative one by redefining the interactions with each other. Giving the tenant more choice.  

Where do you see the ESG agenda in BTR, especially in social terms?

ESG is not suddenly a big thing – it’s always been a big thing to me. Depending on which part of the property industry you’re operating in you will always have a focus on one of the letters so for me it has always been the social aspect. It is hard to quantify, because it’s outside of your bricks and mortar but it’s basically about embracing a different attitude to property.

The consideration of social value has to start right at the development stage and that’s something I recognised from PBSA.

When I started in PBSA you wouldn’t have any engagement with your neighbourhood and how you were going to affect it – perhaps bar any planning issues – it was all about being operational by September 1. By the end of my time with PBSA there was a much larger drive to include our neighbours and consult with them about what our building could do for them socially.

In Glasgow the consultation led to us installing an outside gym for community use as well as student use and instead of the MP writing saying they’d had complaining letters we were getting positive feedback.

We started from the position that we will engage and consult from the beginning; we let them know our plans to control noise, deal with the bins, where the CCTV will be and how we will put in extra lighting.  This experience comes from the times we have upset our neighbours and at BTR we have taken those learnings and applied them to reinventing letting.

How does EDI fit into the agenda?

There’s that often-quoted snippet that the property industry is ‘male, pale and stale’.

But BTR is service led with lots of females working at the touchy-feely end.

What we need is more women in legal and in investment but it’s not just gender issue, it’s social/economic background as well – we must make people realise there are different parts of the property sector.

Your background can prevent you getting a seat at the table,so we have to change that and get the message out that property is not just bankers and those with connections, it is about skills and CPD within those who choose the sector.

We talk about specific BTR training or maybe qualifications in customer service, but perhaps we should start with the basics of renting, getting a reference, contacting a utility company, an understanding of the customer journey.

We want to keep the staff we’ve got and give them a career trajectory, but it might be we should start with those renting basics.

What are your thoughts around the rent controls which are in force in Scotland?

I’ve been heavily involved on behalf of Rettie, UKAA and the Scottish Property Federation in lobbying, consulting and working with government to make this better.

From a moral aspect I’m not averse to rent control, or some form of making rents affordable, and I also think the majority of corporate clients aren’t either if they know in advance and can include it in their forecasting.

It is the uncertainty and the lack of consultation that was the issue, this is why we are working collaboratively with the Scottish Government to feed in direct from the investors/developers and operators in Scotland. I also have to say that the new housing minister Paul McLennan MSP has been incredibly proactive in reaching out to investment committee. I am currently organising a second meeting with all stakeholders including the minister to discuss the future.

Currently we are trying to fix a problem of under supply by putting in control measures – it’s a supply  issue and it ismessing with one without fixing the other. That’s making it worse. Fix the supply and the cost will follow.

The controls were first introduced in September 2021 when arguably there was a high need for them, but it’s the nature of them and the way they were announced, which was arbitrary and without consultation, which was problematic.

It was a really tough winter in 2021 and the government said it was going to freeze rents for six months and our corporate clients were okay with that. But to keep extending what wasemergency legislation meant for a pandemic to put controls on the lettings market is not ideal. Again, the uncertainty increased risk.

From a company perspective if risk is increased, investorswon’t invest, and the controls changed the level of risk for investors looking at Scotland.

We specialise in affordable BTR – I also sit on the board of a large housing association so I love social housing – but there’s also a huge need for prime properties and also properties sitting in the middle. So we seen the effect of the pandemic across all tenures in our BTR stock.

We did a huge amount of research for the BPF and practically all our investor contacts said they were re-evaluating the money they were going to put into Scotland. It may be a short-term blip, but others are possibly taking the £5bn they were going to invest in Scotland and putting it somewhere else where the returns might be the same, but the risk is lower.

Following the meetings I have had with Paul McLennan, the Scottish Housing Minister, and he’s keen to get in front of investors and we are working together hosting a roundtable.He is keen to back BTR and all investment into Scotland so it’s positive there’s someone to feed that to within government, but we only have a short period of time before the Housing Bill comes in at the start of next year.

We must show what BTR can deliver economically, socially, morally and ensure the private investment into BTR can continue to assist in the Housing Crisis we have across the UK because otherwise, I believe we’re going to have a level of homelessness we haven’t seen for a long time.

The message I’ve got from government is that it wants BTR and has recognised BTR in Scotland is the best way of getting numbers of homes at scale and pace.

How we attract investors while there’s background music of rent control and possibly an independence debate, is the question, but I’m being positive.

How is the UKAA’s Scottish hub progressing?

The UKAA needs congratulating because it’s one of the first membership organisations to really have a focus and a voice in Scotland. I feel we are in that big room.

I remember when I joined the UKAA, I was still learning in my new post and then Covid came. I had just received an annual membership bill and thought about not renewing because I didn’t know if I would have a job in six weeks’ time.

I also wasn’t sure what I got out of UKAA which seemed all based down south with nothing relevant to Scotland. However, I spoke to Dave Butler, the CEO at the time, and he was very clever turning it around by suggesting that if I put something in, I would get a lot out.

He suggested starting a hub in Scotland and it’s now going great guns. When we started. I was the only person prepared to be Chair but that’s not true now and I think we can become a template for other hubs.

From a member organisation point-of view, UKAA was the first to recognise Scotland had something different to offer and that’s only going to help us both grow.

What would be your last final word, your call to action?

I want to impress on everyone the importance of the next sixmonths for Scotland’s BTR market, and even the markets elsewhere in the UK.

We are all about to face elections; all MPs are looking at what’s working or not working in their constituencies, and we have an obligation as a sector to educate as many of them as we can.

We must change the narrative and show that BTR is not about nasty landlords out to steal your pounds and leave you in sub-standard accommodation. We need as many good news stories as possible on how BTR can make a positive difference.

So, if the UKAA, the SPF or the BPF ask you to consult on any aspect of legislation please make sure you contribute.

It’s key for Scotland at the moment, but it could spread wider – a Labour government is already looking at what it can do in the sector. Scotland’s at the forefront of that legislative issue but I think we could all be facing it soon so lets agree on the best way of contributing.

If we are going to create a marketplace which will deliver the homes we need, we are going to have to work collaboratively at this important stage.