Exploring Self-Build to Rent

Hi everyone 👋,

📝 The Main Bit

In my most recent Grand Review we looked at the Co-operative build in Brighton. In an interview at the time one of the self-builders suggested that self-build to rent is one of the only ways that people on low incomes would be able to access housing that is well built and affordable at the same time. In this week’s newsletter I wanted to explore the idea a bit further.

The current UK Housing Market is split into a few dominant sectors. According to the Office of National Statistics about 30% of homes are owned outright by their occupants, and a further 40% are owner-occupied on a mortgage. About 18% are social housing of some kind, and the remaining 12% are privately rented.

The affordability of the different sectors is markedly different. In the English Housing Survey 2021 to 2022 the report states that “on average, mortgagors spent 22% of their household income on mortgage payments, whereas rent payments including housing support were 27% for social renters and 33% of household income for private renters. Excluding housing support, the average proportion of income spent on rent was 36% for social renters and 38% for private renters.”

That is a huge chunk of household income that goes towards housing costs for social and private renters. And the paradox with this situation is that to become an owner-occupier on a mortgage and have more available household income you also need to have more available household income to save for a deposit! (Although these figures will change with the increase of interest rates)

The ever-decreasing pool of available private and social rental properties and basic economic principles of supply and demand creates an inflationary effect of prices too which worsens the problem. So, we need to build more houses to increase supply, and not just houses for people who have high enough incomes to buy. There needs to be social housing too so that people who currently have no spare capacity to save for large deposits can find adequate housing for their families. This is where self-build to rent can play a part.

Self-build to rent is a term that refers to a type of housing development where people can design and build their own homes on a plot of land that they rent from a landlord. This way, they can enjoy the benefits of customising their living space without having to buy the property or take out a mortgage because they may be unable to. Self-build to rent projects are usually supported by local authorities or community groups that provide guidance and resources for the self-builders.

What the Brighton cooperative build, and many other cooperative builds example is a solution to utilising assets of various parties. The tenants/self-builders were hard working people who are driven to create a home for themselves but don’t have the option to buy. The landowners may not have the additional resources to build a development themselves but have the land and can use it to create a sustainable cashflow through the monthly rent payments after the build. The councils have the planning and skills knowledge to approve designs and support the build – they aren’t building houses themselves, but they have the knowledge and ability to support others.

Imagine living in a house that you helped design and build, a house that reflects your values and needs, a house that is part of a community of like-minded people.

Cooperative housing is a way of creating affordable, sustainable and democratic housing by pooling resources, skills and ideas. Families who participate in cooperative housing projects benefit from lower costs, greater control, shared facilities and social support. They also contribute to the environmental and social well-being of their neighbourhoods by using eco-friendly materials, reducing energy consumption and fostering community spirit.

To me, it seems that for people on the lower end of the affordability spectrum self-build to rent opens the door to allow people to solve their own housing supply issues.

🕵️‍♂️ Property Glossary

I share definitions each week of words and terms that pop up now and then in the property world and can be confusing.

Abatement Notice

An Abatement Notice is a formal notification issued by a local authority in accordance with the Environmental Protection Act of 1990. Its purpose is to require the elimination or cessation of a legally recognised source of disturbance or inconvenience.

📺 Interesting Things I’ve Watched

https://www.youtube-nocookie.com/embed/qfzu204Csug?rel=0&autoplay=0&showinfo=0&enablejsapi=0

Adding to the theme shared a few weeks ago about the effects that inflation have on property price and build price this video by Rob Dix expands the idea into a graph of real terms house price. After correcting for inflation, it is easy to see a far different story than from price alone and that the headlines in the media that suggest house price crash is yet to happen may not be true.

It is impossible to predict the future from the past trends, but it does change the narrative of the story being shared daily at the moment.

Apps I Use

Readwise – I’ve been paying for Readwise since 2021 and gained access to Readwise Reader Beta in 2022 and find it extremely useful for knowledge retention and research. I pass all my email newsletters through it and whenever I get a spare few minutes I can pick up where I last left off without any friction.

If you sign up using the link you’ll get an extra month free (two in total) so you can really test out the software without it costing you a penny. They don’t advertise widely so it is down to word of mouth like this that gets the tool new users. I find it invaluable.

Monzo – Carefully budgeting my spending is fundamental to being able to save towards the build. Monzo has helped me track and itemise spending for years. I now pay for the Premium account which gives me access to extra features and things like airport lounge access, phone insurance, worldwide travel insurance so it practically pays for itself. If you join using this link we’ll both get £5 (which I’ll use towards the build!).

Focus@Will – This app has superpowers. It has the ability to allow me to switch off from a noisy home and get some work done and it seems to work for me in about 5 minutes.