What tenants want to see in a rental property of the future
There has been a noticeable shift in the private rented sector in recent years, writes Anton Frost, Partner, Carter Jonas Cambridge. Developments seem to suggest that the Government is discouraging investment into the buy-to-let market by the private landlord, whilst simultaneously promoting the institutional-led build-to-rent (BTR) model.
Against this backdrop, private individual landlords, institutional landlords and investors looking to attract and retain tenants need to understand what occupants want from a rental property – to understand tenant motivations, likes and dislikes and what they might pay a premium for.
Likewise, by understanding these key requirements and what tenants would like to see in a rental property of the future, we can go some way towards helping to shape the sector to better accommodate their needs.
A recent report from our in-house research team had just this in mind. The team collected responses from over 300 tenants living in urban and rural settings and flats, and houses. The findings go some way towards providing a comprehensive insight into tenant drivers and requirements.
There was a notable increase in tenants living in flats and houses who felt that sustainable energy measures are now an ‘essential’: 21 per cent of respondents in flats said this in 2019, compared with 15 per cent in 2017. This feature has moved up three places and is now considered more important than en-suite bathrooms or fitted wardrobes for the majority of our flat respondents.
The growing cost of utilities and rising energy prices (gas & electricity bills have increased around three per cent in real terms over the last two years to the end of 2018), combined with a heightened awareness of our daily impact on the climate and wider environment, is likely having an impact on renter priorities.
The research also found that high-speed broadband is considered essential for a rental property, even more so than a modernised kitchen or bathroom.
One of the key questions of the research asked what tenants would pay more for. This is particularly relevant in the current environment where an ever-increasing number of BTR developments and units have been developed or are coming on stream.
According to the British Property Federation (BPF) there are around 143,000 BTR units either completed or planned across the UK with research suggesting that given the extra amenities these units offer, there is an associated rental premium of around 9 per cent.
It is, therefore, crucial to understand just what it is that tenants are willing to pay a little extra for. While the current consensus is that BTR schemes can achieve higher rents because they offer features such as concierge service, communal spaces and an on-site gym, our flat respondents showed that these were of little added value.
Only 12 per cent of people saying they would pay more for an on-site gym and just five per cent and three per cent, respectively, would pay more for a concierge and communal space.
Encouragingly however 19 per cent of our respondents said they would be willing to pay more for a newly refurbished kitchen or bathroom. Given that most build to rent units (in this country anyway) are relatively new, this is something which would garner a rental premium without a BTR developer having to change anything.
On the other hand, there were some features flagged that the average BTR development may struggle to achieve. While 14 per cent of respondents said they would be willing to pay more for outside space, many BTR schemes are flats and can only provide a balcony/terrace and communal gardens.
Allocated parking can also be hard to incorporate into new developments; space issues and wider planning difficulties make it harder for schemes to include too much in the way of vehicle parking, although 12 per cent of our respondents said they would pay more for this luxury.
Looking to the future, one of the most frequent responses related to improving the condition and quality standards of rental properties.
Additionally, many tenants would like to have greater flexibility and control over the property. Rental properties in the UK do not traditionally allow for pets or redecoration of the interior, and this came up as an issue to improve going forward.
Finally, lower administration fees, fees charged by agents and landlords, and the introduction of some type of rent control system were all mentioned as changes tenants would like made in the private rented sector.
At the time of writing, party manifestos for the upcoming election are flying around, each of which has various proposals that could disrupt the sector further.
I wonder if perhaps predicting what a rental property of the future will look like is easier than predicting what the sector will look like in 12 months.