Manchester PRS lunch
The sketch above, by Sandy Morrison* captures HTA’s recent round table discussion on PRS chaired by Ben Derbyshire and co-hosted with Thames Valley Housing Association. The meeting coincided with the Manchester CIH conference in late June. Re-building the market for PRS to the point that the UK can realistically expect significant new supply has turned out to be a long uphill struggle. Contributors to the lunchtime discussion encouraged each other along the way as the following report illustrates.
*Visit Sandy's Drawing Room for more of Sandy Morrison’s idiosyncratic and perceptive visual characterization of the relationship between people and place.
Sandy Morrison was one of four speakers to describe the progress that has been made in recent months towards significantly increased supply of housing through institutional investment in businesses that develop and manage high quality and affordable privately rented housing. Sandy has been leading HTA’s design research on all aspects of design for such buildings and illustrated an approach that coherently links all aspects of design for such businesses – not just the buildings they occupy. Design impacts the branding, marketing, web interface, customer experience, interior design and landscape design too. Sandy pointed out many ways in which the necessity of consumer orientation produces an innovative and distinctive response that adds value.
Geeta Nanda OBE, Chief Executive of Thames Valley Housing Association, told us how her organisation had responded to the challenge, having appropriately ring-fenced other areas of her business, by setting out on the journey to discover and practice what is required to effectively deliver high quality services to Fizzy Living’s demanding ‘Rentysomething’ post-Facebook generation of customers. Geeta’s prudent brand of energetic entrepreneurialism (which has recently earned her a well deserved OBE) has enabled Fizzy to forge ahead in the emerging sector to become the undoubted market leader, exploring solutions in all areas, including, crucially, meeting the expectations of institutional investors.
Simon Berrill, as senior advisor to Macquarie Capital, brings long experience of investment funding to bear on the issue and has been advising TVHA in their so far successful search for finance to support the growth of their enterprise. Simon gave a highly encouraging view of the sector from the standpoint of institutional investment which he believes will arrive in volume in due course. Simon called for patience and positive persuasion to reel in institutions that have a long way to go in gaining an understanding of an investment class that has virtually no recent history in the UK by comparison with North America and northern Europe. He was confident we would get there in due course, whereupon the currently welcome Government support would no longer be necessary.
John German, recently installed as investment Director at Invesco following his previous role as Head of Grosvenor’s Residential Fund, pointed to his company’s substantial commitment to the private rented sector in the USA and Asia. He encouraged delegates with the news that Invesco have just completed a deal, sharing development risk in a substantial portfolio in Continental Europe and offered the view that conditions were almost ripe for similar large scale investments to become commonplace in the UK market, albeit subject to very specific geographical determinants. John particularly highlighted the need for more sophistication in the valuation methods investors use to support business models and began a debate about the Planning context for PRS that ran through the open discussion which followed over lunch.
Mike De'Ath. Partner at HTA, reflected on a recent study tour of multifamily housing in the USA by noting the maturity of their sector where the inter relationship between investors, providers and designers had led to a well defined, often branded, product which was well understood by the renter. The revenue based viability model had been voted preferred investment for the past 5 years and highlighted the value of a management approach that was more akin to hospitality combined with sales than anything currently comparable in the UK.
The ensuing discussion amongst a particularly expert group of guests was too wide ranging to summarise here. Debate ranged from the need for a Use Class Order to be established for PRS, to valuation methods, the role of Local Authorities, the definition of private residential as an investment class, and the need of investors for single point representation of the development process which they find complex and do not understand. On the question of political support and the role for Government, Stephen Stringer defended the track record to date, which he pointed out was pretty much unprecedented in it’s support for the private sector and pointed to a genuine understanding that private rent sits alongside social housing and private sale as three principle sources of housing supply to the nation.
Stephen Stringer, of DCLG strongly endorsed the positive contribution that such round table meetings make to progressing the re-introduction of private rent to the UK market by improving the mutual understanding of the various sectors which must come together and collaborate effectively if we are to succeed in delivering large scale new supply. He asked guests to contact him or colleagues (also present) of the Private Rented Sector Taskforce with their top priorities for Government’s contribution over the coming years. Please let us know your own ideas and we will happily co-ordinate a response to Stephen at DCLG.