Supply Issues in the UK - Built to Rent Scheme - A Singaporean Perspective

UK has a Built to Rent Scheme.  It is worth understanding what this scheme is all about.

Private Rented Sector

The UK Government wants to encourage a wider range of investors to build houses for private rent. Privated rented housing is a growing part of the housing market.  It comprises almost 16.5% of all households, or nearly 3.8 million homes in England.  This sector offers a flexible form of tenure and meets a wide range of housing needs.  It contributes to greater labour mobility and is increasingly the choice for young people. 

Built to Rent Scheme
In short, UK Government gives some funding to developers to build residential units for this purpose. In the latest announcement, the Housing Minister Kris Hopkins announced on 4th April that nearly 500 homes for private rent across 4 sites in London and Chelmsford would be built.

Quoting from the Minister,
" With millions hoping to live in and around London, there is real demand for good quality homes available to rent on flexible terms."

Mayor of London Boris Johnson said,
"With London's population soaring, and to help address a 30-year failure to build enough homes, we have set the most ambitious house-building targets in City Hall history.  The private rented sector has a huge part to play in this.  More well-designed, good quality homes to rent will help rebalance the capital's rental market, improve services for tenants and stimulate new development and economic growth as well as providing the new homes that hardworking Londoners so desperately need."

A Singaporean Perspective 
Wow.  To echo Boris Johnson, the word that comes to my mind is desperation.  Putting planning permission issues aside, the building sector is extremely cash-strapped and so the UK Government needs to come up with schemes to push developers to build these homes.

Next, they just managed to get 485 homes and the Housing Minister and Mayor of London has to make grand statements.

Yesterday, Commonwealth Tower in Singapore just launched - almost 900 new homes, and that is just one project.

Learning points
1.  Millions want to live and work in London, however, they can't afford the rents.
2.  Supply is really tight in London and planning permission is one cause.
3.  Another cause of tight supply is tight credit.

Further questions to explore 
Boris Johnson pointed out the 30 year failure to build enough homes.  If he is right, then why and how did such a failure come about?  Note that it wasn't as if the statisticians or the Government or the private sector realised the imbalances only recently.  In fact, they had known all along this was the case.  Very interesting to ponder over this question.

Happy Investing!