Over the last 20 years the US multifamily market has blossomed into a key sector of the US residential market. From the early days of Mom and Pop rentals, the Private Rented Sector (PRS) now sees major corporations running hundreds of thousands of units. With a core focus on service and rent maximisation, PRS in the US has grown and matured.
The UK has seen a similar Mom and Pop approach with buy-to-let, though the Institutional PRS is in infancy compared with the American model. However, by considering the lessons learnt in the US over the last two decades, we can aim to avoid the pitfalls and errors made to increase returns and delivery in a more effective way from the outset.
One simple example is rent maximisation. After many years of trial and error the US now boasts high specification analytical tools and systems to effectively monitor daily pricing of rents. This means that at any point the manager and letting team know the value of their units to let effectively and mitigate voids. This can be adopted in the UK and some American suppliers are bringing the tools over. Analytical tools are vital if PRS to deliver returns to make the asset class viable and attractive to institutional investors.
We can also look to the US for its exemplary customer service in PRS. Confidence and the willingness to go the extra mile to assist renters is at the centre of the US’s successful model. The same quality of service needs to be adopted in the UK.
Another key differential that should be addressed is the lettings market. In the US a customer will be dealt with directly by the PRS management company and a letting will be handled in-house as part of the service. In the UK the lettings market has grown differently and, in most cases, a third-party letting agent will handle enquiries. This is not a problem in itself: the third party agent has a distinct place – we just have to align interests and make sure they are incentivised to achieve long-term renters.
The UK system leans towards short-term lets with fees driven by a constant turnover of lettings. In reality, be it buy-to-let or build-to-rent, the property owner in PRS should always want to have a long-term renter who is responsible and reliable and the customer’s needs should come first and foremost. We need to recognise this for the sector to evolve.
By working with the US and learning from their PRS model, we can showcase good standards of practice, share our learned experiences and evolve as a united sector that works for both investor and renter.
Savills is a member of the UK Apartment Association (UKAA), the first overseas affiliate to the US National Apartment Association (NAA), which has been set up with exactly this objective in mind. With the UKAA now up and running we hope to share the lessons learnt in the US to facilitate the growth of the market.