Build to rent is becoming a mainstay in the private rental sector however it could herald the demise of the smaller landlord with a continued fall in numbers.

Increasing numbers of companies and corporates are becoming more prevalent in the sector at the expense of so-called accidental landlords.

The managing director of development finance of a major retail and commercial bank explains the new trend in the sector and changing tenant profile for build to rent ‘habitats’.

Terry Woodley stated the government has over the last few years been trying to encourage landlords to become companies rather than having to deal with smaller landlords and ‘accidentals’, he said: “They changed how tax could be applied in regards to the income buy-to-let landlords receive, and I feel that was a way to shift people into a corporate entity and to run their investment portfolios more like a business.”

Woodley said it was expected that those with portfolios who decided against becoming a business for the time being, would probably sell up to landlord investment companies.

He states that the upward trend in developers taking on build to rent developments is being ‘encouraged’ by the government.

Woodley said: “The government has encouraged developers to construct large scale projects, similar in structure to buildings in the student sector, through shared risk or by providing finance.”

But he doesn’t believe that build-to-rent will overtly affect numbers of the smaller landlords, and said:  “With these large scale buildings, often there is not enough space to construct them in locations near to a city centre; the style and structure of these larger properties are also not to everyone’s tastes.”

Woodley strongly affirms there is still a place for accidental landlords in the sector who own single properties in city centres.

He also highlights the critical situation of demand outweighing supply of rental homes which cannot be solved until a government builds enough homes to house everyone.

He says: “This is not to say the build-to-rent sector will not be incredibly popular in its own right, more simply that accidental landlords will still have a space in the market, despite the government’s best efforts.”

Commenting on the build-to-rent side of the market there has been a steady increase of developments over the last few years. Developers and investors understand the economics of such schemes and positive potentials, are continuing to take on new developments of such properties.

He said: “You get a natural kind of tenant profile for build-to-rent, this is often people from the student sector, who have lived in student accommodation which is a similar type of property.”

So he points towards the developers of build-to-rent properties are building communal spaces for those living in buildings and laundromats which ‘mirrors’ student accommodation.

Woodley said: “The momentum in the build-to-rent space is gathering, I do not believe we will see it stopping, or even really slowing down, as it has a sustainable and profitable tenant profile.”

Woodley stated that the trend for developers is to shift from build-to-sell to build-to-rent.

“Developers have seen how profitable this can be, and so are shifting their focus to this side of the market instead; the build-to-rent sector presents the opportunity for significant profits, and so developers are continuing to put their eggs in this basket,” he said.

Woodley concurs that although build-to-rent projects are usually large developments to the tune of £30 million plus and in spite of the major outlay they remain highly profitable.