A stalled construction sector? They need to start building to let
Mark Weedon Head of Residential and UK
Alternative Real EstateInvestment Property Databank
The cost of compliance for the Private Rented Sector
Alan WardChairman
Residential Landlords Association
We’re clearing the hurdles, but now need local support
Ian FletcherDirector of Policy (Real Estate)
British Property Federation
What can the Private Rented Sector learn from the Olympic Games?
Danielle Sanderson Senior Consultant
Real Service
Charting the evolution of East Village from Athletes’ Village to London’s newest neighbourhoodStuart CorbynChairmanQatari Diar DelanceyEast Village Operations
The Private Rented Sector – where can it go next?Clive Betts MPChairCommunities & Local Government Select Committee
6 The Private Rented Sector – where can it go next? Clive Betts MP, Chair, Communities & Local Government Select Committee
9 Institutional Investment
10 A stalled construction sector? They need to start building to let Mark Weedon, Head of Residential and UK Alternative Real Estate, Investment Property Databank (IPD)
12 Young Index, Quarter 2, 2012 David Mackenzie, Director of Asset Management, Young Group
13 Charting the evolution of East Village from Athletes’ Village to London’s newest neighbourhood Stuart Corbyn, Chairman, Qatari Diar Delancey, East Village Operations
16 Why good landlords are saying yes to licensing Sir Robin Wales, Mayor, London Borough of Newham
18 We’re clearing the hurdles, but now need local support Ian Fletcher, Director of Policy (Real Estate), British Property Federation
21 The cost of compliance for the Private Rented Sector Alan Ward, Chairman, Residential Landlords Association (RLA)
22 What can the Private Rented Sector learn from the Olympic Games? Danielle Sanderson, Senior Consultant, Real Service
It only opened a short while ago but already The Shard, a stunning addition to the London cityscape, has quickly become a firm favourite with those who we have spoken to. It is sure to stay as one of London’s top iconic landmarks and I wouldn’t be surprised if it topped our ‘Favourite London Landmarks’ poll.
Debra Yudolph, Partner of SAY Property Consulting, summed it up perfectly by saying: “The Shard is a stunning addition to the London skyline.“
Shard facts: The Shard is 309.6 metres (1,016ft) high. 95% of the construction materials are recycled. The Shard is the tallest building in Europe.
Battersea Power Station has seen numerous redevelopment plans come and go but even though it is largely unused, it still has a special place in most Londoners’ hearts and its iconic silhouette is a firm favourite.
Tim Hyatt, Former President of ARLA and Head of UK Lettings at Knight Frank, put it best when he said: “Battersea Power Station is a wonderful reminder of London’s history.”
Battersea facts: Battersea Power Station is one of the largest brick buildings in Europe with a footprint of just over 6 acres.
As part of our ‘In Conversation’ series, Young Group asks leading PRS figures to sum up what London means to them by telling us their favourite landmark. In this section we share what a handful of these individuals believe makes the capital special.
If you want to keep up-to-date with the latest news and views in regards to everything that affects the Private Rented Sector then these are the people the you will want to follow.
KNOW LONDON: 135 metres is the highest point passengers reach on the London Eye
For the inside track on the Private Rented Sector these are a handful of our recommended sources of
information:
prsupdate.co.uk
Young Group, has been investing, financing and asset managing property within the
Private Rented Sector since 2003
Property Week, organisers of the annual RESI conference, report on the commercial and
residential property sector
The Association of Residential Lettings Agents formed in 1981 as the professional &
regulatory body for UK letting agents
Young London’s multiple award-winning team lets and manages property across the capital’s
travel zones 1, 2 & 3
An online space where property professionals discuss and debate the latest Private Rented
Sector news
The BPF represents the interests of all those involved in property ownership and
investment
Every week Estates Gazette provides an overview of the commercial property sector
London; A City
Sharing statistics and insight into the Government’s housing policies
4
propertytalklive.co.uk
insidehousing.co.uk
KNOW LONDON: There are 270 tube stations on the London underground and with 60 stops, the District line has the most stations
1. SouthwarkSouthwark has seen extensive regeneration in the last decade and its location ensures there is never any shortage of things to do. There’s bound to be something of interest to you right on your doorstep.
2. BowBow falls within the Olympic Regeneration zone and, as a result, it has seen a lot of regenerative work in recent years. Being a stones throw from the magnificent Victoria Park is a real bonus too.
3. RotherhitheMuch of the area around Rotherhithe has gone through a phase of development, with the opening of a new library, new restaurants and the expansion of outdoor leisure facilities. Permission has also been granted for an extension of the local retail area.
4. Canary WharfCanary Wharf is no longer only a Monday to Friday destination as it can provide residents with all the amenities that they will ever need.
Why Live In...
Train stations are not usually considered iconic but it seems the redevelopment of Kings Cross and St Pancras is bucking this trend and has become a firm favourite with many.
Mark Weedon, Head of Residential and UK Alternative Investment at IPD, was very impressed with the finished area, “The entire new King’s Cross station area has been so well redeveloped in the last few years. The whole area just looks so good compared to the pre-development state and the facilities are superb now.”
King’s Cross Facts: The station opened in 1868. In the 21st century around 47 million passengers use the station every year. 1,200 tonnes of steel was used to create the new roof.
And lastly, an honourable mention must go to Fino’s Wine Bar in North Row at Marble Arch. This venue is a favourite networking location for those within the property industry.
Chosen by Bill McClintock, Chairman of The Property Ombudsman Service (whose full In Conversation piece can be found on P.7), decided to shun the usual suspects that appear on lists of top London landmarks and plumped for what, we believe, must be his favourite watering hole.
Fino’s Wine Bar Facts: Fino’s opened in 1971 and the bar stocks over 80 different wines from around the world.
1.
3.
2.
4.
of Landmarks
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The Private Rented Sector – where can it go next?
In May of 2012, the all-party House of Commons Communities and Local Government Select Committee published a report showcasing the findings of their research entitled Financing of new housing supply within Great BritainA.
We noted that the country has not come close to delivering the number of homes it needs for many years and that this had been exacerbated by the recent financial crisis, which has reduced the resources available for new housing. On the demand side, levels of household formation in England are running at around 232,000 per year and yet, in 2011, less than half this number of new homes were completedB.
The effects of this housing deficit are profound and becoming apparent: according to The Housing Report Edition 2, homelessness, private rents and the number of households in overcrowded conditions continue to riseC.
What is the solution? We found that there was no one ‘silver bullet’ for housing: action is needed across all tenures of housing, not least in the private rented sector. Our report concluded that increased investment from large financial institutions and pension funds might not be a panacea, but could make a significant contribution to the building of new homes in both the private and social rented sectors.
We identified a number of steps that could be taken to bring in such investment, including: the contribution of public land alongside institutional finance; investment by local authority pension funds; and housing associations working closely with potential investors. During the inquiry, we found optimism that the right conditions were now in place.
For its part, the Government commissioned Sir Adrian Montague to look at the barriers to investment in privately rented housing. In August of 2012 his report was published and many of his recommendations for increasing housing supply of rented homes are very similar to those proposed by the Select Committee, so hopefully we will see a positive response from ministers. There has however been some criticism that he rejected any further statutory regulation of the private rented sector, favouring a voluntary code instead.
However, while institutional investment could play a greater role, the private rented sector will continue to be dominated by smaller
landlords. We proposed that the Government should bring forward proposals to simplify tax and regulatory structures to encourage private landlords to expand their portfolios and invest in new build housing.
It is suggested that buy-to-let landlords now account for 89% of landlords and 71% of properties in the private rented sector, and that they have probably been the most significant source of private sector investment in housing over the past decade. This investment has largely been in existing homes and conversions, rather than in new build where the growth is required. Now, nearly 17% of all households rent privately compared to just 10% a decade earlier. This year, the proportion will probably overtake the number of households in the social rented sector.
However, the capital appreciation upon which the sector’s business model has been based may well have been a mirage and perhaps the elephant in the room is the view that housing is still over-valued and that, with the prospects for economic growth receding, house prices may still have some way to fall.
Capital depreciation may have been mitigated until
now by continuing increases in rental levels, but the government claims that its cuts in housing benefit will force reductions in rents. Suffice it to say, there is no sign of that yet.
We also must not forget housing standards. Whilst housing decency standards have improved over the last decade, the private rented sector still has the highest rate of non-decency; 37% compared to 25% for owner occupation and 20% for the social sectorD. And, the private rented sector disproportionately contains the very worst landlords in terms of management and maintenance. As the 2008 Rugg review concluded: “The existing regulatory framework does not offer sufficient sanction where landlords openly contravene regulations.” Although the government has set its mind against a national statutory licensing scheme, it will come under renewed pressure to act if landlords continue to blatantly, and sometimes dangerously, contravene the law.
Meanwhile, as statutory protection on tenure diminishes, an increasing proportion of tenants will be looking for more security, certainty and quality. Earlier this year, Shelter produced a briefing paper, Homes Fit For Families – The Case for
Clive Betts MPChairCommunities & Local Government Select Committee
increased investment from large financial institutions and pension funds might not be a panacea, but could make a
significant contribution to the building of new homes
Bibliography
6
Stable Private Renting, which spoke of a “new generation of no-choice private renters.” It found that almost three million adults expected to be renting privately for five years or more.
It discussed the uncertainty experienced by many private renting families, and their concerns about the impact of any move on their children’s education and wellbeing. Depressingly, almost half the families with children responding to a survey commissioned by Shelter did not think of their privately rented housing as “home”. And, as the recent Joseph Rowntree Foundation report on housing options and solutions for young people confirmed, increasing numbers of 18-30 year olds are being ‘pushed’ into the private rented sector; for many of these young people stability and security of tenure will be vitalE.
We cannot, therefore, continue to see the private rented sector merely as a stepping stone to owner occupation. Many people have little choice but to see it as a long-term solution to their housing needs. In such circumstances, is an assured shorthold tenancy lasting six months or a year appropriate?
Should we be looking at options for longer tenancies to give people and families the stability and security
they need? And, if so, how can we encourage landlords to offer these? The Joseph Rowntree Foundation pointed to international evidence suggesting that incentives such as tax breaks could be given to landlords in exchange for longer tenancies for vulnerable or low income tenantsF.
The possibility provided in the Localism Act for councils in future to discharge their statutory homelessness obligations by offering properties in the private rented sector places further responsibilities on the public sector to ensure the standard of provision and the fitness of landlords and their agents. Increasingly councils are also seeking to address wider issues of anti-social behaviour and the poor quality of housing provision by looking to extend discretionary licensing arrangements over wider areas.
Given this big picture, perhaps it is now the time for an inquiry that would consider what can be done to address the quality of housing in the sector, examine the issues surrounding rents and regulation, and look at options for giving tenants greater security of tenure.
Clive Betts MPclivebetts.com
In Conversation with Bill McClintock Chairman of The Property Ombudsman Service
In one sentence, could you sum up your role?I am Chairman of the operating company for The Property Ombudsman (TPO) scheme which has now been in existence for more than 20 years.
And in one sentence, what your organisation does?Broadly, we resolve disputes between consumers and sales or lettings agents on a less formal basis than the courts but which is nevertheless binding on member agents and free of cost to consumers.
Could you tell us a bit about your background?I started in agency in 1959 with Henry Duke in Dorchester and have progressed through the worlds of residential and commercial estate agency in the intervening years, taking senior positions both in the UK and abroad.
As Chairman of the Property Ombudsman Service, how do you see it evolving over the next 10 years?I would like to see all lettings agents required to have a redress scheme in place as well as professional indemnity insurance and client money protection insurance. More generally, I see the TPO scheme expanding its remit to other property-related areas. We have already started this process with The Glazing Ombudsman.
Have you noticed any changes in the industry since you started working with the Property Ombudsman scheme?Yes. The most significant is the Consumers, Estate Agents and Redress Act which required all residential estate agents to join an approved redress scheme. But it’s also worth remembering that standards in sales are improving as the value of individual awards made by the Ombudsman has almost halved in the last five years.
What are the main day-to-day challenges you face in your role?It used to be getting everyone to understand what TPO is all about; these days it’s striking the delicate balance needed to keep the company viable and the costs containable while ensuring the Ombudsman’s role remains entirely independent.
What is the most rewarding aspect of your role?Seeing an improvement in professional standards across the agency industry, but I also get great pleasure from the personal contact with the many people in the industry.
What would you say is your most memorable moment or proudest achievement?Raising standards across estate agency through my work with TPO by helping formulate its Codes of Practice and negotiating hard with the Office of Fair Tarding to agree them. Naturally, I did not achieve any of this by working on my own!
See Bill’s full In Conversation online at prsupdate.co.uk
BibliographyA) Communities & Local Government Committee, Eleventh Report - Financing of new housing supply, 23 April 2012
B) Communities & Local Government Committee, Eleventh Report - Financing of new housing supply, 23 April 2012
C) National Housing Federation, Shelter & Chartered Institute of Housing The Housing Report: Edition 2, 17 May 2012
D) Communities & Local Government Committee, English Housing Survey: Headline Report 2010-2011, February 2012
E) Joseph Rowntree Foundation, Housing Options and Solutions for Young People in 2020, June 2012
F) Joseph Rowntree Foundation, Housing Options and Solutions for Young People in 2020, June 2012
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Just Some of the 19 Business & Sector Awards we Have Won Since 2009
The role of the Private Rented Sector in delivering a housing solution has never been more important. We’re at a time when population growth, the growth of single person households and a population demographic that is marrying later and living longer are all acting to put additional pressure on our housing stock and the private rental market.
The Government has increasingly focused on attracting institutional investment to the Private Rented Sector as a way of delivering additional stock, as well as an appropriate choice of tenures, but debate has far outweighed action during the past few years. Their most recent action was to direct Sir Adrian
Montague to carry out his review of the barriers to institutional investment in private rented homes. Published in summer 2012, the review’s findings came as no real surprise to those of us in the sector.
However, I do believe that we’re approaching a tipping point; the case for PRS investment returns is well made, and increasingly understood and sentiment among those currently invested in the asset class remains robust, evidenced by our latest Young Index report.
Institutional and large scale investment into the PRS is slowly beginning to take place. A handful of smart investors have embraced the potential of delivering privately rented homes that set a new benchmark, both for quality of the homes and the quality of service provided to their residents.
If the UK’s private rented sector is to continue to grow, and all indications are that it must if the UK is to keep up with the demand for homes, factors such as the security of tenure and enhanced levels of service will be imperative in its success.
A stalled construction sector? They need to start building to let...
Mark WeedonHead of Residential and UK Alternative Real EstateInvestment Property Databank (IPD)
Will pepper pot portfolios ever tempt commercial property investors into the residential sector, or, better yet, will developers start to build stock specifically to let on the scale that commercial investors currently want?
The overriding truth is that UK residential property has now outperformed its commercial counterpart over three, five and ten years and values are now, on average, 2.6 per cent higher than they were before the downturn (commercial property is over twenty per cent below).
The statistics have left institutional investors with little choice but to pay more attention to the sector, and that interest is gaining more and more momentum, with both Schroders and Lend Lease announcing new development activity, and the first residential REITs possibly on the horizon.
Furthermore, other barriers to entering the residential market are being addressed and analysed. Recently, IPD conducted extensive research into both income returns and management costs, to provide quantifiable evidence to assist the debate.
The continued misunderstanding surrounding low residential income returns
Residential income returns are indisputably lower than commercial property’s - residential recorded 2.9 per cent in 2011; commercial 5.8. Commercial investors see this as a barrier for future
investment, as the sector has long known that capital growth is not the driver of returns (indeed, values have actually fallen significantly over the longer term in real terms). Such investors consider a reliance on price inflation for any element of the return as a risk, even if both demographic and economic fundamentals in an area point to further house price growth being a likely outcome.
However, prudent stock selection by UK residential property investors should deliver long term capital growth. Even during the downturn, values only fell by 18 per cent, and soon recovered, whilst in the commercial sector they continue to lag. Furthermore, occupier demand remains lacklustre in the UK commercial property market, with retail sales down and small industry struggling, which makes income return less reliable, particularly outside of the South East. Thus, to ask potential residential investors to accept capital growth as a legitimate part of their returns can in many cases be reasonable.
The reliability of residential income is not unquestionable, not least because of the shorter average length of tenancies, but for the moment both
demographics (the rise of single person households, and increases in population), and the continuing unavailability of mortgage finance means that demand from renters remains high in many UK regions, at least in the short to medium term.
The low overall income figures also ignore the regional variations offered across the country. The IPD residential index is heavily weighted towards central London assets which, for five years, have seen such high levels of capital growth that net income yields have been compressed to just 2.1%. Potential residential investors could look to build a balanced portfolio, utilising London assets that have strong capital growth, and regional assets that allow a higher income return due to the closer relationship between prices and rental growth. Outside of central and inner London, residential income returns are around 4.5 per cent, a more palatable return for existing commercial property investors than that delivered by the overall index.
The diversification potential of the assets is further argument in residential property’s favour, where their high capital growth will be a welcome accompaniment to the
higher income returns of commercial units.
Of course, for some funds, notably pensions or insurance, a pre-determined level of annual income is essential, to deal with annuities and liabilities.
Despite this, recently we saw the announcement by Islington Council Pension Trust to start a residential only fund; the first of its kind, demonstrating how keen funds can be to secure potentially high returns and diversify investment. And it is worth noting that research has shown income returns are only low in relative comparison to current capital values. They have actually delivered an equivalent cash sum as a percentage of capital invested 10 years ago to commercial property.
Management costs that prohibit profit?
The difficulties of managing residential portfolios, and the associated costs, have been a further hindrance to the reputation of the sector, but again, detailed research has shown that assumed comparisons with commercial property often overlook the factual truth.Typically, 30 per cent of residential income is lost to management costs, as opposed to five per cent for
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In Conversation with Mark Weedon
Could you sum up IPD?IPD (Investment Property Databank) are the global leader in performance measurement for the large scale, professionally managed property investment industry, producing market indices and benchmarking services to assist investors, fund managers, agents and consultants in their analysis of the property market and the portfolios they own/manage.
To guarantee IPD’s independence we do not participate in real estate investment markets and do not offer consultancy advice on investment decisions or other real estate issues.
Could you sum up your role at IPD?I’m responsible for client management, product delivery, product development, business development, public relations and sponsorship relationships for IPD’s UK alternative sector real estate performance measurement services. Until recently I have only been responsible for IPD’s UK residential service and my role still includes being head of residential at IPD.
Could you tell us a bit about your background?I studied economics with French at the University of Kent, including a year abroad at University in Grenoble. After university I worked as an analyst for British Gas before joining IPD as a graduate trainee analyst and haven’t looked back since then.
What are the main day-to-day challenges you face at IPD?I’m constantly juggling priorities, principally between delivering our core products and services to existing clients (residential, healthcare, rural, forestry, hotels) and trying to develop future business and heightened profile for our service.
My biggest challenge is not letting anything slip while focusing on the most pressing task at any time. Whilst often guided by necessity it is a challenge to manage my own workload, particularly allocating time to longer term projects.
What’s next for IPD?The IPD alternative real estate investment department (i.e. Me) has plenty going on. Most notably we recently were delighted to work in partnership with Property week on the RESI conference.
At the 2012 RESI Conference we hosted an IPD branded breakout session on the future of residential investment. We are also excited to be working on a new IPD annual conference which will focus on investment into alternative real estate sectors such as residential, social housing, healthcare, infrastructure, hotels and student accommodation.
See Mark’s full In Conversation online at prsupdate.co.uk
commercial property. This is a well known statistic, but the lesser known truth is that the two figures are relatively incomparable. It is only in the residential sector where a full analysis of gross-net income fall-away is carried out, as investors are aware of the greater cost, and the need to manage it.
To accurately compare the two costs, it is therefore necessary to use the same methodology as in the residential sector – by calculating a gross rent (not a net, which excludes income lost through vacant tenancies), and then calculating the net income fall-away on the same basis – with actual operating costs shown as a percentage of the gross rent, along with the amount of potential income lost due to voids and rent free periods.
The analysis actually shows that, once rent frees and voids are taken into account, the commercial industry keeps a considerably smaller portion of its income than previously thought. While residential property retains the lowest amount of income, at 70 per cent, offices keep just 73 per cent, and industrial units 79 per cent. Only the retail sector substantially outperforms the others, and there is little good news regarding tenant security for the majority of retailers in the near future.
A lack of supply, and the unrealistic performance expectations surrounding the sector
Unfortunately, for those areas that we can practically address, other traditional hurdles to entry remain, and will do for the foreseeable future.
Put simply, there is not enough of the right kind of stock. Large scale institutions want large scale investments – big blocks of flats that allow them to invest at suitable economies of scale, maximising income and minimising management costs and hassle.
For the moment, the build to let model remains the only viable option to meet demand, but is still very much an area in its infancy. Perhaps, owing to the falling UK construction sector, we will start to see more residential projects begun, but at the moment this remains very much a pipe dream.
Institutional investment into residential property
I often think of residential investment in terms of a push and pull diagram. Pulling, there are the high capital growth figures, the resounding stability, the low risk, and the relatively promising long term outlook for the sector. Pushing, there is a lack of stock, a misconception about income returns, and a general reluctance to move away from the status quo; a stifling mentality all too often seen in the property industry.
But I think what also needs to be considered is the ‘shove.’ For, while residential property may have its doubters and sceptics, the commercial property sector is undergoing a period of overriding challenges, which are shoving investors towards residential, whether they view the sector positively or not.
Mark Weedonipd.com
the statistics have left institutional investors with little choice but to pay more attention to the sector
11
The Young Index: PRS investor sentiment report Q2 2012
David MackenzieDirector of Asset ManagementYoung Group
Young Group is actively shaping the Private Rented Sector (PRS) through research and each quarter, through Young Index, Young Group polls investor sentiment among 500 of our PRS investment clients who hold UK property assets.
Appetite to Invest
The demand for purchasing additional investment property in London has remained broadly stable throughout the first half of 2012 with 44% of investors considering adding assets to their portfolios over the coming 12 months.
Sentiment towards PRS assets outside the capital has fallen back; 18% are now considering making purchases outside of the capital during the coming year, down from 24%. For the first time since Q4 2007, more respondents are considering making overseas purchases (29%) than in the UK regions.
Of those not considering additional PRS acquisitions over the coming 12 months, the overwhelming majority state finance related issues as the principal factor in their reticence to invest.
Perhaps unsurprisingly, respondents believe that prospects for capital growth and rental income in London outshine those across the rest of the UK.
Capital Values
Over the past two years, respondents’ expectations of capital value movements have fluctuated somewhat, but the trends over that
period for property within, and outside, the capital have continued to polarise.
Positivity for London’s PRS capital values abounds: 96.6% of respondents to this latest sentiment survey expect values of PRS property in London to rise or remain static over the coming 12 months, an increase of 11.2% on Q1 this year. This compares to just 41.4% who believe the same to be true for assets outside London, an identical figure as in Q1.
Turning to values, investors in PRS assets in London are expecting to see an increase in their value by an average of 2.0%, compared to a fall in capital value of 0.8% for assets outside the capital.
Rental Outlook
Irrespective of asset location, investors are positive about rental income. 98.3% of respondents expect income from London based assets to increase this year, up from 92.7% in Q1 2012. Sentiment for income from UK PRS assets outside the capital is similarly buoyant. 83.5% of investors predict an increase in rental income over the next 12 months. This translates to a rise of 6.2% in London but a fall of 1.2% for rental property outside of the Capital.
Rental income is increasingly important to investors. In Q2 this year, 20.7% cited it as more important to them than capital growth, against only 8.1% in Q1 2011.
Commitment to the PRS
Investors remain committed to the PRS; 94.5% have no intention of liquidating any PRS assets over the coming year. Of those who do, the vast majority will liquidate for cash rather than another investment class.
34.5% of investors are intending to hold their properties for at least the next 20 years and 58.2% for the coming decade.
The average anticipated future hold period in Q2 2012 was 14.3 years and on average, investors have already held PRS assets for 6.5 years. It is clear that investing in the PRS is a long term position, borne out by the fact that 52.7% of investors state that they are holding these residential property assets to bolster their pension provision.
Investors increasingly recognise the importance of property management in protecting and even enhancing asset value and income returns. 81.0% cited the burden of property management as the principal reason for using
an agent to manage their portfolio.
Economic Outlook
In Q1 this year, the percentage of investors predicting that the Bank of England base rate would remain static for the forthcoming 12 months fell by 14.4% from 58.3% to 43.9% as confidence in the economy’s recovery grew.
However, in Q2, sentiment has turned; 65.5% now expect the base rate to remain stable at the historic low of 0.5% through to Q2 2013. Even accounting for those who think a rise will be seen by the middle of 2013, the average base rate expectation stands at just 0.57%.
Turning to values, investors in PRS assets in London are expecting to see an increase in their value by an average of 2.0%, compared to a fall in capital value of 0.8% for assets outside the capital.
RENTAL OUTLOOKIrrespective of asset location, investors are positive about rental income. 98.3% of respondents expect income from London-based assets to increase this year, up from 92.7% in Q1 2012. Sentiment for income from UK PRS assets outside the capital is similarly buoyant. 83.5% of investors predict an increase in rental income over the next 12 months (� g. 3).
This translates to a rise of 6.2% in London but a fall of 1.2% for rental property outside of London.
Perhaps unsurprisingly, respondents believe that prospects for capital growth and rental income in London outshine those across the rest of the UK.
CAPITAL VALUESOver the past two years, respondents’ expectations of capital value movements have � uctuated somewhat, but the trends over that period for property within, and outside, the capital have continued to polarise (� g. 2).
Positivity for London’s PRS capital values abounds: 96.6% of respondents to this quarter’s sentiment survey expect values of PRS property in London to rise or remain static over the coming 12 months, an increase of 11.2% on Q1 this year. This compares to just 41.4% who believe the same to be true for assets outside London, an identical � gure as in Q1.
APPETITE TO INVEST IN THE PRSThe demand for purchasing additional investment property in London has remained broadly stable throughout Q2 with 44% of investors considering adding assets to their portfolios over the coming 12 months (� g. 1).
Sentiment towards PRS assets outside the capital has fallen back; 18% are now considering making purchases outside of the capital during the coming year, down from 24% in Q1 2012. For the � rst time since Q4 2007, more respondents are considering making overseas purchases (29%).
Of those not considering additional PRS acquisitions over the coming 12 months, the overwhelming majority state � nance-related issues as the principal factor in their reticence to invest (explored later in this report).
RESEARCH: YOUNG INDEX - Q2 2012
Private Rented Sector Sentiment ReportBy Neil YoungCEO, Young Group
indexISSUE 20 Q2 2012 - Published July 2012
YOUNG GROUPShaping the Private Rented Sector
YOUNG
� gure� gure� gur 1.
� gure 2.
� gure � gure 3.
younggroup.co.uk/research
12
by Stuart CorbynChairman, Qatari Diar Delancey, East Village Operations
Living Legacy
The eyes of the world were on East Village when, as the Olympic Village, it welcomed its first residents - over 10,000 of the world’s finest athletes from over 200 countries. And as the Closing Ceremony reached its climax, the Olympic Flame was extinguished and Londoners bid a sad farewell to the Games, at East Village we got ready to start an exciting new chapter...
Charting the evolution of East Village; from Athletes’ Village to London’s Newest Neighbourhood
To paraphrase Winston Churchill, the end of London 2012 was, for us, not the end; not even the beginning of the end; but perhaps it was the end of the beginning.
This is because the seed of creating East Village, London’s newest neighbourhood, was sown long before London won the Olympic bid, but the Games were a welcome catalyst that accelerated its delivery. And there are a number of key stakeholders involved in delivering this innovative new community, which will welcome its first residents in Summer 2013.
QDD – the partnership between Qatari Diar and Delancey – first came to be during the bidding process that culminated in our appointment in August 2011, when we successfully bid for just over half of the homes in the Village in a deal worth £557 million. Our partners are Triathlon Homes, a joint venture between two housing associations (East Thames Group and Southern Housing Group) and developers First Base, who have over 10 years’ experience in transforming various areas of London.
East Village will initially deliver 2,818 new homes, of which 1,439 will be private,
with the vast majority available to rent, and the remaining 1,379 affordable housing. This offers people with a range of income levels the choice of either buying or renting, including social rented, intermediate rented, part-buy, part-rent and shared equity tenures.
Together, QDD and Triathlon are committed to creating a mixed and balanced community within East Village. For QDD, the purchase represents a significant and very high-profile, long-term investment for both Delancey and Qatari Diar.
It offers a once in a lifetime opportunity to be able to develop and deliver a vibrant new neighbourhood and community for London which we believe we are in the best possible position to be able to deliver as a key part of the Olympic Legacy, meeting the housing needs of Londoners and making a valuable contribution to the wider regeneration of Stratford.
QDD’s investment in East Village is both innovative and ambitious. Whilst private renting was one of the mainstays of the housing market until the 1960s, it was only the Housing Act of 1988 that incentivised private owners and landlords
to enter the market. We are not aware of anybody who has acquired or built-up a portfolio of this size, even spread over a broader geographical area.
East Village really is unlike any other project in London. Unlike the Assured Shorthold Tenancies (ASTs) of 6-12 months offered elsewhere, we will be holding the majority of our apartments and homes on a long-term basis and they will be primarily leased out to individual tenants on longer term tenancies.
This will enable us to satisfy the huge demand from Londoners wishing to rent long term in first class, spacious, modern homes; generate long term revenue streams from their investment; carefully manage and nurture the buildings and the realm; invest long term in promoting and supporting a sustainable and respectful community; and seek to ensure a lasting legacy for the benefit of all. We believe this acquisition reflects the first truly great residential investment opportunity in the UK; offering the chance to break the mould and create a sustainable leasing model to provide first-class accommodation for those who see the chance to rent long term, as the way forward.
One of the principal reasons that we believe East Village will be a vibrant and successful new neighbourhood for London is because of the work that we are doing to ensure that when our first residents move in 2013, the cornerstones of the community will already be in place. The homes and the landscaping work will all be completed, our medical centre will be open, Chobham Academy will have already confirmed its inaugural intake of students, our community facilities will be up-and-running and a number of our public spaces – including around 30 shops, cafés and restaurants which will bring the best of East London to East Village – will be open for business.
East Village has been built on a grand scale, with a choice of homes ranging from 1 bedroom apartments to 4 bedroom townhouses, all uniquely designed by 16 of the world’s leading architects and offering spacious open-plan layouts, large balconies and winter gardens.
Every single resident will have access to private outdoor space, as well as stunning communal areas. We have also founded an estate management company that will be responsible for maintaining the public shared spaces.
Stuart CorbynChairmanQatari Diar Delancey, East Village Operations
East Village facts
this will enable us to satisfy the huge demand from Londoners wishing to rent long term in first class, spacious, modern homes
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We plan to invest considerable resources in maintaining East Village and keeping it looking as it did the first day that residents moved in. We will work closely with Newham Council to maintain the area.
Our vision is to deliver a neighbourhood that fosters a welcoming, inclusive, safe and vibrant community. We want to distinguish it from any other new developments in London and ensure it will become a place where people will enjoy spending their time. Beyond that, we feel it is imperative that East Village makes a long term, positive contribution to Stratford and the wider East London community as a whole.
East Village will set a new benchmark in terms of the quality of its offering and its proposition. We are committed to the long term ownership of the estate and have created a place where people will have more space, more time, more choice and the freedom to enjoy rewarding experiences.
In Conversation with Stuart CorbynCan you tell us a little about your background?A chartered surveyor, I started my career working in private practice both in the UK and the Netherlands before joining Cadogan Estate where I was Chief Executive for 23 years, retiring in 2008. Now I am the Non-Executive Chairman for Qatari Diar Delancey (QDD) East Village.
What attracted you to your current role?The unprecedented opportunity to be involved from day one with 70 acres of London in what will become a 21st century equivalent to the traditional private landed estates that have been such an important part of London.
What challenges did you face during the project?There are a number of different stakeholders involved in realising East Village and we’ve worked hard to ensure that they all respond positively and are galvanised to work together. Ultimately, we all want East Village to be a success!
What are the aspirations for East Village post-Olympics and do you believe it will become the benchmark for future Institutional Investment? We want to see East Village become a thriving and exciting new neighbourhood within London and a blueprint for Olympic Villages moving forward. It certainly is our hope that it will set a benchmark for other investments. We are very aware that others are watching us closely!
Do you see attitudes towards institutional investment changing over the next 10 years? I’m optimistic that institutions will begin to commit themselves to investment in this sector. I’m sure that the attitudes of both owners and occupiers will evolve in a way that makes long-term private rental more widely accepted as an alternative to owner occupation, in a way that already exists elsewhere in the world.
See Stuart’s full In Conversation online at prsupdate.co.uk
East Village facts
But beyond this, we hope that our innovative model will inspire others to follow our lead. East Village comes at a time when the poor provision of high-quality housing in London is the subject of great concern and we would like to see greater opportunities presented to Londoners who are keen to follow the European model of secure, long term tenancies. If we can achieve that, then I think we will have achieved our vision to create the most successful Olympic Legacy Village ever and a sustainable blueprint for other host cities moving forward.
Stuart Corbyneastvillagelondon.co.uk
• East Village is one of the best connected places in London – Central, Jubilee, DLR, London Overground, National Express, Stratford International & Crossrail (2018)
• East Village has 27 hectares of land (equivalent to St James’ Park) including 5 park areas, public squares, communal gardens, play areas and courtyards
• The Wetlands is a 6 acre, 7.5 million litre, area of East Village that has been designed as a habitat for native biodiversity
• 3,000 new trees have been planted and East Village features an orchard with fruit that residents will be encouraged to pick. There will be four types of Bramley apple trees, as well as cooking apple, plum and pear trees
• East Village has fantastic views of Queen Elizabeth Olympic Park, greater Stratford, Canary Wharf and London city centre
• East Village has 2,818 homes designed to the highest environmental and space standards by 16 world renowned architects
• East Village has 11 developments individually designed to provide character and choice of accommodation
• London’s 3rd largest park (the Queen Elizabeth Olympic Park), the largest park created in Europe for 150 years, neighbours East Village
• The homes have been designed to the Lifetime Homes standard which means corridors and doors are wide enough for wheelchairs and can be readily adapted if residents have accessibility issues
The Private Rented Sector is on an upward trajectory across the country. Nowhere is this more apparent than in the London Borough of Newham where 1 in 3 properties are now privately rented.
There’s absolutely no doubt of the importance of the sector – not only because of its size but because the private rented sector (PRS) has the potential to provide people with flexible, affordable and good quality homes at a time when home ownership is increasingly out of reach for many.
Newham, one of the most deprived boroughs in the UK, has an estimated 4,000 landlords. Many of them run good businesses and take seriously their responsibilities to their tenants and to the community. As a local authority we want to do everything we can to help and support decent landlords. They play a vital role in providing good quality accommodation for our residents. That’s why I hope that the majority of landlords will be supportive of the licensing scheme we want to introduce.
The scheme, which will be the first in the country to apply to a whole local authority area, comes into force on the 1st January 2013 and means all landlords will need a license for each property they let in the borough. We’ve piloted and evaluated the approach in our Neighbourhood Improvement Zone.
One of our main concerns with the drop in management standards is the high levels of anti-social behaviour. Managing a property takes hard work and engagement. When landlords and agents don’t bother, anti-social behaviour can flourish and properties are left to rot. Overcrowding and poor living conditions inevitably cause problems as large numbers of people struggle to live with too little space and poor facilities.
For instance, police alerted Newham housing officers to one property that was being used by prostitutes and crack addicts. The place was a complete state, neighbours were kept up at night by the noise and council officers found drug paraphernalia littered around the house. Obviously there’s a role for the police in cases like these and tenants must be held to account for their actions. But no good landlord would be happy with their property being used in this way. Yet we spent weeks tracking the landlord down, only to be told that a letting agent was managing the property. Needless to say the agent also denied any responsibility for the property.
Good landlords don’t want to own a house next door to a property where this sort of behaviour takes place. It
isn’t good enough and as a local authority we simply have to intervene to protect local people and businesses. In Newham we are doing everything we can to use our powers against these unscrupulous landlords and agents but time and time again we come up against a brick wall. We know that only by driving these poor behaviours out of the borough can we create a place where property investment is a sure fire win. That’s why we are introducing borough-wide PRS licensing. Under the scheme all landlords will have to license their property in order to operate in the borough and we’re also keen to license letting agents.
The scheme will enforce the management standards everyone wants to see. Our scheme sends out a clear message to unscrupulous landlords and agents that we won’t tolerate poor management practices. But equally the message to responsible landlords is that we’re on your side, we’re creating a level playing field where landlords who put in the time and effort are no longer undercut by the rogues.
The council has consulted extensively with residents, stakeholders, private sector tenants, landlords and
managing a property takes hard work and engagement
Unfortunately what we’re witnessing in Newham is a sector that is becoming ever more fast-moving and chaotic. The huge rise of the private rented sector here has led to a situation where standards are slipping and poor management practices are becoming more common.
Some of the practices we’re seeing now are completely unacceptable – people living in illegally constructed sheds, walk-in freezers and garages; rubbish pouring out of front gardens and properties overrun with vermin. This behaviour has a real human cost with vulnerable people who have little buying power forced to live in squalid conditions that do not befit one of the wealthiest cities on the planet.
That’s not what I want for my borough or our residents. Everyone deserves a high quality housing offer, providing stable accommodation for their families. Importantly, poor management standards are also bad for neighbourhoods and the housing market as a whole. I want to drive up standards and make our borough a pleasant, clean and safe place to live and invest in.
Sir Robin WalesMayor London Borough of Newham
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lettings agencies and 74% of residents and 76% of private tenants, who responded, support the scheme.
Whilst it’s fair to say not all landlords we consulted agreed, responsible landlords will see that they have nothing to fear. If you apply for your licence early, you’ll only pay £150 for a licence that lasts five years, just £30 a year or 58p a week.
We’re working to make it as unbureaucratic as possible and the licensing process will make it easier for us to focus our resources on those who haven’t signed up. Our pilot scheme has been a great success in tackling the rogue elements of the sector.
An important part of the scheme is for the council to offer support to landlords who want it. We’ll work with them to find tenants through our Bond scheme, where the council will act as a guarantor. Landlords can receive support from the council for any tenancy disputes they may have and also for dealing with
Sir Robin in front of the Olympic Stadium
in a well-supported and professional sector; tenants have stable and good quality accommodation but are also aware of their responsibilities; and the borough becomes a more attractive place to live and invest in. Within a month of launching our Private Rented Sector licensing scheme over 300 applications for a licence were logged with our licensing team. Landlords interested in running a good business are realising that licensing will help them and help their business.
So, if you’re a good landlord looking for an investment opportunity in an area where the Council will help make it easy for you, take a look at Newham. If you’re a cowboy, you’ve been warned!
Sir Robin Walesnewham.gov.uk
anti-social tenants. We’ll also be offering a service for ‘reluctant landlords’.
I’m well aware that some of our landlords fall into the sector by accident and might lack the knowledge and skills to properly manage their property. We want to do more to help these people by creating a support package to enable them to carry out their duties. This could be advice and training on how to run a property with signposting to good value repairs and maintenance companies, or we could offer to take over the management of the property.
The point of licensing is not to introduce further regulations to the sector, nor to burden landlords with onerous bureaucracy. But we have to help professionalise the sector. We’ve had a voluntary accreditation scheme here for a decade but very few landlords have signed up. My goal is for a private rented sector that works for everyone – landlords can make a good return
the message to responsible landlords is that we’re on your side
What is Newham’s private rented property licensing scheme?Newham is to become the first borough in the country to licence all private rented property. The mandatory scheme - covering an estimated 35,000 private tenancies (one in three of all the borough’s households) - is due to come into force on 1 January, 2013.
After consulting thoroughly with a variety of individuals from the local community and the Private Rented Sector, the Council’s team discovered that an overwhelming majority of privately renting tenants supported their licensing scheme.
The scheme will involve:
• Early registration (before 1st January, 2013) will only cost Landlords £150 for a five year licence.
• After January 1st, 2013 the fee will increase to £500.
• Landlords who fail to acquire a license will face fines of up to £20,000.
Landlords will need a separate licence for each property. Every landlord will be given reasonable time to licence their properties but the council will pursue those who flout the law.
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Ian FletcherDirector of Policy (Real Estate)British Property Federation (BPF)
We’re clearing the hurdles, but now need local support
The summer of 2012 saw our nation gloriously indulging itself in the once-in-a-lifetime opportunity that is the Olympic Games. Life, however, returned to normal and the focus shifted to more domestic matters, such as how do we build enough homes to house our nation?
As the parent of a seven year-old I wanted to let our son sample some of the action and, along with judo and basketball, we’re fortunate enough to live close to what seems to be becoming the UK’s home of road cycling – rural Surrey. Through sun and showers, we were there, sampling the efforts of ‘Cav’, Lizzie Armitstead and ‘Wiggo’, sitting out on our garden chairs, ourselves bedecked in red, white and blue.
Seeing Team GB “bring home the booty” as Boris Johnson put it, certainly gave the country a lift, but the experience of sharing the joy and events with other local people, whether they be spectators or volunteers, has also been widely
acknowledged to have made the games such a success.If ever there was a hill to climb of ‘Box Hill’ proportions it is how do we build enough homes to house our nation. This, particularly against the backdrop of the tightest lending conditions for several generations. How we deliver more housing has steadily been rising up the political agenda, not only because our young folk need the homes, but because the lack of building is a key contributor to our double dip recession.
One possible solution, which successive governments have seen merit in, is encouraging institutional
investment in the PRS; to get pension, life and other funds to invest in new rented homes. Not necessarily because governments want to support renting per se, but because building-to-let could contribute something towards those rather sickly looking housing supply numbers. Politicians rightly or wrongly reflect that whilst the private rented sector has expanded rapidly over the past decade, adding 1.3 million households since 2000, such growth has not added significantly to overall new homes built.
There has therefore been a succession of policy initiatives aimed at the institutional investor.
Under Labour, some support from the Homes and Communities Agency’s Private Rented Sector Initiative (PRSI). Under the Coalition, support has further translated itself into changes to the Stamp Duty Land Tax (SDLT) rules on residential bulk purchases; the offer of public sector land, on a profit-sharing basis; and then some tweaks to the Real Estate Investment Trust (REIT) rules. There was also the review, headed by Sir Adrian Montague, that considered the barriers to Insititutional Investment and reported back with recommendations on how these might be tackled.
For some, encouraging institutional investment into the private rented sector has remained unfinished business, with how large-scale private rented developments are planned for, the missing piece of the jigsaw. Within government, planning is the preserve of the Department for Communities and Local Government and, whereas most of the policy support thus far has been within HM Treasury’s remit, it is important that this review reports to DCLG, which has responsibility for planning.
The Montague Review has therefore had planning at its forefront, as it has considered the two
The Olympic Village will evolve into London’s Newest Neighbourhood, East Village
encouraging institutional investment into the private rented sector has remained unfinished business
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primary barriers to greater investment. The first, the yield derived from residential investment needs to be attractive to institutional investors more used to investing in commercial property. Whilst the gap between commercial and residential yields has narrowed, it has not yet been broached*.
Second, if an investor wants to invest in scale at present there are very few opportunities to acquire stock in sufficient scale. Some headlines have been written about build-to-let perhaps being treated differently for affordable housing purposes. Also, of such developments having planning conditions that require some long-term period of renting, which would stop build-to-let being flipped for sale simply to avoid affordable housing requirements, but have the added advantage of creating an asset valued for its income stream, rather than vacant possession.
Like most policy making, the Montague Review was not isolated from what
else is happening in the policy world but took place against the backdrop of a government that has just engaged in one of the most major reforms of our planning system and also a government that is fervent about localism. Headlines that therefore give the impression that this government is going to dictate that build-to-let developments will be sprouting up and down the country devoid of affordable housing requirements are seriously wide of the mark.
For this government is not about dictating, but about guiding and allowing decisions of that kind to be taken at a local level, and therefore, like the Olympics it will be local people, or at least their representatives, who will be in the box seat. Whatever the Government ultimately decides to do to encourage build-to-let it will need the support of local authorities.
Whilst central government can give clearer guidelines, and that will help, ultimately it will be local councils who plan for rented developments, waive affordable housing requirements, place planning conditions on them remaining rental property, or indeed invest their own not inconsiderable land holdings.
Some are tremendously supportive. The likes of Manchester, Hull and Birmingham councils have already embraced the need to support market rented developments. Outside the main city authorities, however, in smaller district councils there is a lack of capacity, rather than necessarily a lack of
interest to deal with such developments, which will need addressing.
As with a lot of private rented sector issues there is also a wider PR issue. Both to explain what an institutional PRS looks like and can offer, but also to help local councillors understand this is not going to lead to the problem PRS cases that sometimes end up in their postbags. It is perhaps natural that some councillors will flinch when faced with the prospect of several hundred market-rented homes; and not unnaturally reassurance will be needed that such developments will be well managed.
Build-to-let in its true-form, developments designed and built for renting, I think will create something different and exciting in the rental market. Many of the existing larger investors already embrace good standards, support initiatives such as SafeAgent, and membership of an Ombudsman scheme. Taking the best of what exists and encapsulating it into some sort of formal best practice or kitemark may help get local authorities further on-side.
Returning to the Olympics, one my favourite moments was seeing Jessica Ennis, with the weight of the nation on her shoulders, win the heptathlon gold on Super Saturday. Rather like Ennis, there is weight being placed on build-to-let. If the Government supports Montague, we will have undoubtedly cleared many of the hurdles, but not quite got build-to-let across the finishing line.
Ian Fletcherbpf.org.uk
*Mark Weedon, Head of Alternative Investment at IPD, explores this in more detail on p.10.
Sir Adrian Montague - Author of the Montague Report
not unnaturally reassurance will be needed that such developments will be well managed
Summary of the Montague ReportThe review set out to consider whether there was significant potential for institutional investment in privately rented homes, whether the changes Government had already made were sufficient to kick-start that investment, and what else might need to be done. It is clear that, on the demand side, there is real potential for investment in large scale developments of purpose built rented housing to grow and to be viable. This type of development can bring in new money, give a boost to housing supply, and provide more choice for tenants, particularly those who may be renting long term. And there is research which suggests that the lack of high quality private rented accommodation can put a brake on the wider growth of economic activity.
It is also widely accepted that the conditions now are more favourable to this kind of development than they have been in recent years. A combination of recent tax changes and wider market conditions have cleared the way for this market to grow. There are some models already emerging which are establishing the concept and slowly developing the expertise which will help others to overcome the barriers in the longer term. But the challenge right now is to secure a step change on a faster timescale – a significant boost to housebuilding now, to meet existing and growing demand for rented homes. Delivering that step change will require further action from Government – to address the structural gap that currently separates housebuilders, investors and local authorities, and to give confidence to investors.
Sir Adrian Montaguecommunities.gov.uk
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Demystifying
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Demystifying Renting Seminar
Just Some of the 19 Business & Sector Awards we Have Won Since 2009
The cost of compliance for the Private Rented Sector
“I make a promise to good landlords across the country: the Government has no plans to create any burdensome red tape and bureaucracy, so you are able to continue providing a service to your tenants.”
With these words, just weeks after he took office, Housing Minister Grant Shapps announced his intention to scrap plans for a national register of landlords and compulsory written tenancies. In the first instance removing an expensive piece of window dressing and the second a largely irrelevant gesture. He argued it was time for councils to make better use of the powers they already have to drive up standards and root out criminal landlords.
Just over two years on, and while central Government has largely stayed true to its word, research by the Residential Landlords Association (RLA) has identified over 100 individual pieces of legislation and regulation containing around 400 measures affecting the Private Rented Sector. Since the 2004 Housing Act there have been no fewer than 22 additional measures, surely enough to satisfy any local politician.
Yet despite the Whitehall rhetoric, Ministers’ zeal for localism has lead to an explosion of council imposed heavy handedness, at odds with the desire to reduce regulation.
The RLA objects not to regulation, but to the misconception that more regulation equals better regulation. Shelter have established that there were just 270 landlord prosecutions last year. With declining numbers of Environmental Health Officers asked to enforce yet more regulation how much worse will it get?
With the vast majority of landlords providing a decent service and accommodation to their tenants it’s time we got smarter regulation, the kind that enables local authorities to ruthlessly pursue criminal landlords providing dangerous accommodation. It cannot be right that councils expend so much energy regulating compliant landlords who are easy to find, leaving the criminal elements to go unchecked.
Any move to raise the regulatory bar by local authorities in particular, whilst grabbing cheap headlines will serve only to cause more misery for tenants, leaving them with few, if any, genuine choices over their housing options.
The fact that debate over the private rented sector seems to be on a continuous loop around what new ways can be found to regulate it is a sign of failure.
As a sector and a country we need to get smarter – tackling genuine criminal landlords who bring us all into disrepute whilst providing the vast majority of decent landlords the space, opportunity and support to provide the new housing that they country needs.
In its Housing Strategy published almost a year ago, Ministers declared that “The Government is committed to supporting growth and innovation by avoiding unnecessary regulatory burdens on landlords.” A welcome sentiment, though one not shared by local authorities; paradoxically, the very same councils now seeking homes from PRS landlords to enable them to house the homeless.
Amid the continued push for localism it’s time UK councils heeded Whitehall’s advice and let the private rented sector get on with the business of housing the many people struggling to obtain a roof over their heads.
Alan Wardrla.org.uk
* Sir Robin Wales, Mayor of Newham, outlines the Borough’s licensing scheme and his aspirations for the PRS on p.16.
Over 30 local authorities have opted to use Article 4 Directions, restricting the growth of shared housing mostly affecting students and young people seeking inexpensive and friendly homes.
These decisions are often in response to concerns from vocal minorities, not about the existence of these types of houses, but the behaviour of the tenants inside. Local authorities are using planning powers as a tool of social engineering.
Meanwhile, almost 20 councils, led by the London Borough of Newham* have opted to introduce selective licensing schemes that ultimately will see good landlords picking up the bill for registration, whilst criminal landlords carry on regardless.
And the cost? As much as £1,000 a year - or on average 17% of rents. As Professor Michael Ball of Reading University has clearly concluded in a report for the RLA, the costs associated with complying with this myriad of regulations and navigating the sea of legislation gets passed on to the tenants in the form of higher rents.
Alan WardChairmanResidential Landlords Association (RLA)
the RLA objects not to regulation, but to the misconception that more regulation equals better regulation
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What can the Private Rented Sector learn from the Olympic Games?
Danielle SandersonSenior ConsultantReal Service
With the end to the Olympic Games it’s not just a time to look back and bask in the glory of Team GB’s best medal haul in over a hundred years, but also to see what lessons can be taken from the games and applied to the various industries that were involved in bringing it to fruition.
At the London 2012 Olympics I worked as a Team Leader for entry to the Athletes’ Village. I volunteered because I had been an International Athlete myself, and appreciated the efforts of Volunteers who helped at races and Championships when I competed; I wanted to be part of The Olympics to help the athletes in some small way. The Games are widely regarded to have been a success, here I would like to reflect on the lessons learnt from London 2012 and how they can apply to the Private Rented Sector.
Planning
The attention to detail in the planning of the Games was awe-inspiring: the logistics of getting so many venues ready on time, accommodating and safely transporting nearly 20,000 athletes and officials and millions of spectators, broadcasting proceedings to billions of people worldwide and the smooth-running of the sporting competitions themselves!
It required massive investment, determination to succeed and recruitment of the right people. It required preparing for every eventuality. When I was competing as a distance runner, and getting stressed about the possibility of
failure, I tried to apply the dictum “Control the things you can, and let go of the rest”. No doubt a bit of luck was involved in everything going so smoothly, not least with the weather playing its part, but the Games’ organisers deserved success because of their rigorous planning.
The Customer Experience
Whilst we can’t guarantee success, we can minimise the chance of failure. The Games were spectator-friendly, because the organisers had thought hard about their customers’ journey, not just the physical travelling to and from the Games, though that went far more smoothly than many had predicted, but also the spectators’ experiences before, during and after the Games.
One way to ensure customers have a positive experience is to consider the “customer journey” – all the interactions that customers will have and the things they will do as part of their interaction with you. The London 2012 organisers had thought about making everything as straightforward as possible for spectators and athletes alike. People accepted that security had to be tight, but queues were well-managed, and passage through screening was efficient.
Free water fountains were provided, and whilst queues at some venues on hot days were long, Games Makers helped fill water bottles and kept spectators cheerful. The transport system coped admirably and food and drink outlets were adequate. Signage was good, and merchandise was plentiful, if slightly over-priced. This was mitigated by having several free, unticketed places such as Hyde Park and Greenwich where events were shown on giant screens.
Communication with spectators was also good, with informative e-mails, a comprehensive website, and effective use of social media and new technology, all of which are relevant to the housing industry, and indeed all businesses.
Spectators were impressed with the atmosphere at all venues, both within the Olympic Park and elsewhere. The sport itself was exciting, and of the highest quality, with one or two exceptions. The badminton players who deliberately tried to lose a match had the understandable ulterior motive of trying to win the Gold Medal. This made frustrating viewing but the moral is “don’t create perverse incentives!”
Customer Service
One aspect of the Games which has received much comment has been the way in which the Volunteer Games Makers have contributed to the success of the Olympics. The actions and conduct of Games Makers helped create an atmosphere of festivity and goodwill exhibiting enthusiasm, courtesy and a willingness to help. These small, straightforward things really do make a big difference.
Around 70,000 Games Makers were appointed, from a total of about 240,000 who applied. The selection process was rigorous. People who are willing to give a minimum of 10 days of their time, unpaid, are civic-minded. The shifts were often at inconvenient times – I had to get up at 4:20 am to catch the first tube train to Stratford to be ready to start work by 6:45 am. We had few official perks – one meal for an 8 hour shift, but only 20 minutes in which to eat it, and a Zone 1-6 travel card for each day we worked – but I enjoyed being part of it immensely. The unofficial perk was meeting so many people; I now have a ready supply when name-dropping is called for: The Queen, Princess Anne, Sebastian Coe, Tony Blair, Tessa Jowell, Ambassadors
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and Princes, not to mention the athletes and the media!
Our training sessions included a general “orientation”, role- and venue- specific training, and leadership training for Team Leaders. Customer service was reinforced through the mnemonic I DO ACT – exhorting us to be Inspirational, Distinctive, and Open, Alert, Consistent and part of the Team. These were called the “London 2012 Hosting Actions”.
From my experience as a Games Maker, to give excellent customer service you need enthusiastic, motivated staff who enjoy interacting with customers. Having been recruited for their attitude, these staff must be given the tools and authority to do their job: appropriate training to ensure they have the knowledge and skills they need and suitable back-up if they encounter an issue they cannot deal with.
All Publicity is not necessarily Good Publicity!
The media had been prophets of doom before the start of the Games, predicting travel and security chaos and fiascos. However, once the Games began, most journalists admitted to having been won over and began celebrating the success of London 2012. I am often frustrated by the power of the press to dictate public opinion and to spread negative attitudes, but we can also thank journalists and broadcasters for the improved esteem of British people once the media decided to start focusing on positive aspects of the Olympics. The BBC’s coverage was impressively comprehensive allowing the whole population to keep in touch with the sporting activity, as it happened.
The Psychology of the Games
The one aspect of London 2012 that I feel could be criticised is that the organisers did not always take into account the psychological impact of their interactions with the general public. The process of buying tickets was unsatisfactory: a limit of four tickets per event caused resentment for families like mine with three children and the ballot could have been organised more fairly to prevent some people acquiring many tickets whilst others obtained none. The expectations of the public could have been managed better beforehand and detractors could have been pacified somewhat. On the other hand, perhaps the low expectations of success were what caused the massive improvement in national morale when the forecast problems didn’t materialise? And the psychology of “Home Advantage” allowed
athletes to perform better than expected.
In Conclusion
London 2012 owes its success to many people and many things: planning and organisation, effective procedures, investment, personnel, good publicity and attention to detail. These elements are needed for any business to be successful. This is particularly true of the PRS where people’s selection and enjoyment of their home is the focus. Put yourself in your customers’ shoes, and consider their “journey”, both physical and psychological, to make their interactions with you as pleasant as possible.
Danielle Sandersonreal-service.co.uk
Young London’s Approach to Customer ServiceI don’t often reflect on our successes for long, preferring to look forward. However, we’ve continued to have a great run of recognition this year; our trophy cabinet is bursting at the seams with a total of 19 accolades. It’s interesting that the theme in the judges’ comments is consistently around our focus on customer service, specifically that we reward our team based on quantifiable customer service feedback, not on a standard commission structure.
As a business, we focus firmly on customer service and our mantra is to give ‘amazing service’ (take a look at page 26). We questioned how one can say that customer service is central to ones philosophy and then pay commissions only based on revenue? So it seemed logical to reward our team based on this and our remunerations structure has been aligned to customer service for the past two years.
When I mention our commission structure, I often get asked about hard, financial top-line targets. I firmly believe that if we are looking after our clients well, the financials will follow - and our business performance and strong growth is testament that it’s an approach which works.
Don’t forget, I’ve been a qualified accountant for over 15 years, as has David Mackenzie, our Director of Asset Management. Our experience clearly shows that only focusing on financials is not the correct approach. Delivering, measuring and rewarding amazing customer service ultimately achieves business success for all stakeholders.
As you can see, I’m very proud of the recognition we have received as a team, not least because it drives us on to keep delivering for our clients.
Neil YoungCEO, Young Group & Young London
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PRSupdate
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Property ManagementAs part of the full managed service that Young London provides, we regularly help residents in their obligations to keep their home in good order and encourage them to stay on top of the property’s general upkeep.
Over the past months our Property Management team has identified some of the most frequently asked general maintenance and good-housekeeping questions. These are often minor things with very simple fixes and we’ve written a number of articles for our blog to provide information on how to tackle them.
By heeding this information residents can avoid being charged unnecessary call-out costs and it also means that our landlords’ properties are kept in tip-top condition.
If you would like to read the articles then just scan the relevant QR code with your smartphone and you will jump straight to the online articles.
Alternatively you can visit www.PRSupdate.co.uk and browse the articles at your leisure to uncover a world of helpful property management advice!
Property Maintenance Top Tips
In this article we provide a few tips and tricks that are sure to help residents keep their home in tip top condition.
A Guide to Tenancy Deposit Schemes (TDS)
Deposit protection is an important legal requirement. To make sure landlords & residents are fully informed Young London has created a guide to answer all your TDS questions.
Top Reasons for Deposit Deductions
Residents want to get as much of their deposit back as possible and this guide highlights some of the most common reasons for deductions being made so that our residents are prepared.
A Guide to a Successful Move
Moving can be stressful. This article provides a guide to help our residents get organised ahead of the big day and make sure that their move is as hassle free as possible.
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Young London’s Customer Service Commitment
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Young London Wants to be AMAZING
Since our beginnings we’ve questioned everything about ‘traditional’ estate agency.
We look at everything afresh.
We build lasting relationships with landlords and
residents by delivering ‘AMAZING’ customer service.
We’ve broken the ‘traditional’ remuneration model;
staff are rewarded on their customers’ feedback NOT
on commission.
We keep as many aspects of the business as possible in-house, to remain accountable to our clients.
Our approach has been proven through business growth and acclaimed by numerous awards.
