The rental sector is undergoing perhaps its most radical transformation ever, with a significant increase socially responsible investing. The rise of Build to Rent (BTR) schemes and institutional investors has ushered in a new era for the private rented sector (PRS), driven by a combination of political change, economic shifts, and a strong desire for sustainable development.
The role of policy and political change
One of the many catalysts for this new ‘breed’ of property investors has been the recent political and policy changes – not least the Renters’ Rights Bill, which, building on the draft legislation introduced in the last Parliament, aims to ‘professionalise’ the PRS. Prompted by the rise in Capital Gains Tax (announced in the October but clearly visible on the horizon since July’s general election) has led many landlords to adopt limited companies for property management, allowing them to benefit from tax advantages, as properties sold by companies are not subject to CGT.
The government’s commitment to building 1.5 million homes has provided further motivation of institutional investors to opt for residential property, many viewing it as more profitable than commercial property. This is especially true in the particularly in the Build to Rent (BTR) sector, where large-scale developments enable economies of scale. This shift towards corporate landlords has created a new wave of innovation in both property management and tenant services, with a heightened focus on Environmental, Social, and Governance (ESG) principles.
Institutional investors are increasingly prioritising ESG goals. A recent survey by Federated Hermes found that 88% of UK-based institutional investors consider ESG factors when making long-term investment decisions. Increasingly, these factors are now seen as more important than traditional financial metrics.
The BTR sector is at the forefront of this shift, as corporate landlords have the opportunity to leverage scale, but positive change is taking place at speed throughout the industry. Unlike homeowners who may resist installing sustainable features due to maintenance concerns, BTR developers can ensure that these features are well-maintained by dedicated property managers, making it a more attractive option for both landlords and tenants.
Social responsibility
The social aspect of ESG is also gaining prominence, with large corporations leading the charge in creating high-quality rental housing with a strong community focus. John Lewis, for example, plans to build residential communities that offer flexible tenancies and discounted rents for employees. These developments will not only provide much-needed housing but also integrate shared spaces, such as fitness studios and roof gardens, fostering a sense of community.
Furthermore, the changes to be introduced by the Renters’ Reform Bill include an emphasis on long-term tenancies, improving tenant services, and ensuring homes are well-managed and maintained.
Governance
Effective governance is key to the success of this new generation of landlords. BTR schemes, in particular, are characterised by professional management teams that ensure high standards of service and transparency. An example of this is LRG’s recent collaboration with The Depositary, a new reporting module which provides tenancy conclusion data. Other initiatives include streamlined tenancy management, reducing disputes over issues such as deposit returns and ensuring faster resolution times. This increased transparency and professionalism not only benefit tenants but also protect landlords from potential legal and financial challenges.
New services to support the professional landlord
As the sector becomes more professionalised, new services are emerging to support these changes, particularly in terms of property investment and management. Platforms such as those offered by LRG are designed to streamline the property investment process, providing comprehensive support to investors, from market insights and property analysis to secure transactions and real-time data. Centralising these functions enables landlords (both individuals and corporate investors) to save time, reduce complexity and make more informed decisions.
Additionally, the focus on security and efficiency is paramount. By integrating features such as two-factor authentication (2FA) and encrypted document sharing, platforms ensure that transactions are secure, and user data is protected. This is especially important for professional landlords who are managing large portfolios and dealing with significant financial transactions.
Whether through ‘carrot’ or ‘stick’, as the rental sector becomes more socially responsible, landlords who embrace these changes will not only meet regulatory requirements but also position themselves for long-term success in a rapidly changing market.
Professional portfolio investment and the requirement for landlords to be socially responsible
Andy Jones, Group Director of Corporate & BTR at Leaders Romans Group (LRG)
The rental sector is undergoing perhaps its most radical transformation ever, with a significant increase socially responsible investing. The rise of Build to Rent (BTR) schemes and institutional investors has ushered in a new era for the private rented sector (PRS), driven by a combination of political change, economic shifts, and a strong desire for sustainable development.
The role of policy and political change
One of the many catalysts for this new ‘breed’ of property investors has been the recent political and policy changes – not least the Renters’ Rights Bill, which, building on the draft legislation introduced in the last Parliament, aims to ‘professionalise’ the PRS. Prompted by the rise in Capital Gains Tax (announced in the October but clearly visible on the horizon since July’s general election) has led many landlords to adopt limited companies for property management, allowing them to benefit from tax advantages, as properties sold by companies are not subject to CGT.
The government’s commitment to building 1.5 million homes has provided further motivation of institutional investors to opt for residential property, many viewing it as more profitable than commercial property. This is especially true in the particularly in the Build to Rent (BTR) sector, where large-scale developments enable economies of scale. This shift towards corporate landlords has created a new wave of innovation in both property management and tenant services, with a heightened focus on Environmental, Social, and Governance (ESG) principles.
Institutional investors are increasingly prioritising ESG goals. A recent survey by Federated Hermes found that 88% of UK-based institutional investors consider ESG factors when making long-term investment decisions. Increasingly, these factors are now seen as more important than traditional financial metrics.
Environmental responsibility
The property and construction sectors, in particular, are under pressure to demonstrate their environmental and social credentials, given that heating and powering buildings currently makes up 40% of the UK’s total energy use.
The BTR sector is at the forefront of this shift, as corporate landlords have the opportunity to leverage scale, but positive change is taking place at speed throughout the industry. Unlike homeowners who may resist installing sustainable features due to maintenance concerns, BTR developers can ensure that these features are well-maintained by dedicated property managers, making it a more attractive option for both landlords and tenants.
Social responsibility
The social aspect of ESG is also gaining prominence, with large corporations leading the charge in creating high-quality rental housing with a strong community focus. John Lewis, for example, plans to build residential communities that offer flexible tenancies and discounted rents for employees. These developments will not only provide much-needed housing but also integrate shared spaces, such as fitness studios and roof gardens, fostering a sense of community.
Furthermore, the changes to be introduced by the Renters’ Reform Bill include an emphasis on long-term tenancies, improving tenant services, and ensuring homes are well-managed and maintained.
Governance
Effective governance is key to the success of this new generation of landlords. BTR schemes, in particular, are characterised by professional management teams that ensure high standards of service and transparency. An example of this is LRG’s recent collaboration with The Depositary, a new reporting module which provides tenancy conclusion data. Other initiatives include streamlined tenancy management, reducing disputes over issues such as deposit returns and ensuring faster resolution times. This increased transparency and professionalism not only benefit tenants but also protect landlords from potential legal and financial challenges.
New services to support the professional landlord
As the sector becomes more professionalised, new services are emerging to support these changes, particularly in terms of property investment and management. Platforms such as those offered by LRG are designed to streamline the property investment process, providing comprehensive support to investors, from market insights and property analysis to secure transactions and real-time data. Centralising these functions enables landlords (both individuals and corporate investors) to save time, reduce complexity and make more informed decisions.
Additionally, the focus on security and efficiency is paramount. By integrating features such as two-factor authentication (2FA) and encrypted document sharing, platforms ensure that transactions are secure, and user data is protected. This is especially important for professional landlords who are managing large portfolios and dealing with significant financial transactions.
Whether through ‘carrot’ or ‘stick’, as the rental sector becomes more socially responsible, landlords who embrace these changes will not only meet regulatory requirements but also position themselves for long-term success in a rapidly changing market.
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