The Private Rented Sector is among the UK’s fastest growing sectors today – leaps and bounds above the small percentage of housing tenure it used to make up. Even in a pandemic, July 2020 saw letting agents receive an all-time high of 97 new tenants per branch (Private Rented Sector Report, 2020).
This growth continues to trend upward, with Future of London reporting 40% of city households could be private rented as early as 2030.
As a cost consultant, Tetra Tech has a deep-seated relationship with developers like SIGMA in helping deliver housing in this sector. Jon Mainwaring – Head of Practice, Cost Consultancy at Tetra Tech – shares his perspective on this evolving market.
Why has PRS grown so much?
When we began our journey of working with SIGMA back in 2015, PRS wasn’t nearly as popular as it is now. Rented accommodations have certainly taken off among young professionals and it’s easy to see why. A lot of people don’t want to be saddled with a mortgage, which is exacerbated by the difficulty of obtaining one in some areas of the UK, as well as the rise in property prices. They quite like the flexibility of living in rented property.
We are seeing this interest reflected through data. We know that over 20% of UK households are rented, with The Resolution Foundation reporting that over a third of tenants will likely keep renting after retirement.
What are the biggest challenges in delivering PRS schemes?
Pace is the running theme on a lot of the frameworks we have supported. Once projects receive planning permission, they need to be delivered onsite quickly to reap the benefits of the rental economy.
Different types of houses have different specifications, and the infrastructure changes from site to site. Aside from accounting for common challenges, such as how inflation might affect development, you also have to account for the ‘abnormal’ variables like contamination levels on a site and how that will affect cost. Fortunately, we have a team of people who understand these variables.
The pandemic has obviously proven a detractor. A lot of the private sector took some of the hardest hits in terms of projects either stalled or shelved; investors were understandably cautious about their funding decisions. But the rate at which we’ve seen confidence creep back up under such volatile conditions speaks volumes about the burgeoning nature of the sector.
What role does cost consultancy play in PRS?
As a cost consultant, our job is to help procure the developments, ensuring the materials and solutions that contractors and developers pay for always compare favourably to other housing developments in the market. We’re essentially the go-to for contract administration and finance control.
What are some of the guiding principles in how Tetra Tech consults contractors in PRS?
Products and specifications change all the time – everything from floor finishes to kitchens and doors. Because of this, we avoid variations while projects are live. If we become aware of something, we complete the project and adapt the lessons we learn from it on the next one. You don’t want to frustrate the build from the contractor’s point of view, as that can lead to unintended consequences.
We also pride ourselves on our very proactive approach. In the early stages of Brexit when one of our projects faced the uncertainty of potentially not being able to source materials, we helped procure advanced orders to ensure the project had the bricks, timber frames, materials, etc. to maintain output.
Different sites also require different methods; timber frame construction is very popular in the north, for instance, but in other places, we’re looking at more modular elements of construction. We have our own internal database that we refresh quarterly where we benchmark every single type of house so we can harmonise specifications. It all helps ensure our client is paying a price in line with market value.