It’s buy-to-let – but not as we know it

The FT Lex Column had a short piece (actually all Lex pieces are short) on the recent growth in the US of institutional and private equity investment in the Single Family Home Rental market over the last few years. This basically looks like buy-to-let on a massive scale. The scale of repossessions in the downturn provided an opportunity to make bulk purchases of empty homes. However, LEX highlight the management costs of looking after the assets.

The easy part for the SFR players has been to buy properties. The housing crash created a bounty of distressed and foreclosed properties to snatch. KBW estimates that large institutions have spent $20bn buying more than 100,000 properties.

The trickier part is attracting good-quality renters and maintaining homes. Over the past year, shares in the four listed companies have traded flat, roughly in line with the market… Financiers can default to dealmaking while they sort out the finer points of unclogging toilets.

Is it a viable model in the UK?  It seems unlikely. Another long-established US sector, build-to-rent has really struggled in the UK as an IPF report highlighted yesterday. We do have some owners who have experienced of managing large numbers of residential units in the UK. They’re called housing associations and look what is happening to them! I don’t think that there’s a private sector provider that can offer to manage a large volume of dispersed, rented units at a national or a regional scale.  It also looks like the private equity funds are taking advantage of a one-off “bounty”.  Repossession levels in the UK have remained low.

Of course it could be done but would the costs make it a viable model?


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