Is the Private Rented Sector finally coming of age?
March 28, 2014
The push for institutional investment in the Private Rented Sector (PRS) has helped bring the barriers down and increase confidence in the market, with a number of players and partners leading the way.
Last month Fizzy Living, the wholly owned subsidiary of Thames Valley Housing (TVH), was successful in raising £200m of capital commitment from Silver Arrow, a subsidiary of the Abu Dhabi Investment Authority. This investor will have a significant shareholding in the Fizzy Group and, with TVH as a joint venture partner, grow the Fizzy PRS business and brand. TVH brings the expertise in acquisition and development of new homes and Fizzy brings the management expertise.
TVH set up Fizzy two years ago with a clear strategy to bring in institutional investment to help grow the business, and be a long term provider of good quality and professionally managed homes for the PRS. Fizzy was set up to target a certain segment of the much bigger PRS, those who are young professionals that are either unable to access home ownership or require the flexibility of renting. This market has been ill served by providers who do not tailor their service to meet the demands of this demographic.
The 25 to 35 year old typically found in this market is used to high levels of customer service and having their needs met, whether it be through online shopping, 24 hour gyms or online banking services, all of which respond to their busy and demanding lifestyle. However, when it comes to their largest outgoing, their rent, there is no service to speak of! Tenants are lucky if they get any type of maintenance service at all, let alone being able to speak to the landlord and book in a time to meet that fits in with their working hours.
Fizzy, however, aims to give an efficient and personal service by understanding what matters most to this client group. By providing a security of tenure it reassures tenants that they won’t be turfed out on a whim when the property market is hot and the landlord wants to cash in by selling their property. In a recent survey 98% of Fizzy tenants stated that they love/like their property manager service, which perhaps isn’t surprising when you compare their service to what a typical buy-to-let landlord provides. These are levels of satisfaction not even John Lewis can match.
Investors like a clear strategy, the execution of that strategy and a customer focus. At TVH our interests are clearly aligned with the investor as we have an equity stake in the partnership and we are incentivised in line with the investors’ interests. TVH is able to meet its social purpose, by investing the profits back into the Housing Association to build more affordable homes.
The expansion into the PRS does not come at the cost of providing more affordable homes as nothing is secured against social housing assets. The investment and development of Fizzy uses the expertise of the Housing Association, as we have been around since 1966, to provide new homes and services that tenants need. We are good at this, so it is the perfect partnership.
With investment now a reality in the PRS, we need the local authorities to push ahead with changes in planning to ensure the viability of schemes for the professional PRS market. We see some London boroughs are leading the way, as increasingly those on middle incomes are pushed out of local markets.
Institutional investment in the PRS has the ability to produce additional housing, to complement what is currently produced for sale or affordable rent. So let’s push ahead with the policy changes that allow scheme viability and at the same time give tenants real choice and a fantastic service.
Thames Valley Housing Association