Build it and it will rent

Single Family Rental (SFR) is the new rental opportunity that’s picking up steam in the market. This model is like BTR, with the main difference lying in the mode in which it is deployed. Where BTR is typically a series of apartments within a single building, SFR is often suburban – with a number of semi-detached or detached houses, as part of a bigger masterplan. These are single houses with single families, instead of multiple homes in a single building.

And while this new residential model is picking up interest, the main challenge appears to be a struggle to find supply, especially with investors & developers that are dependent on house builders to bring these types of developments forward.

One reason for this might be that, while SFR offers more of a mix and a stronger sense of community, in terms of amenity space, SFR hasn’t quite found its feet yet. And to add to that, it’s scale just isn’t quite the same. We’re seeing much smaller SFR developments coming out (say 50-100) versus much bigger BTR developments (upwards of 300). Most SFRs in the market are small portions of larger, traditionally sold housing masterplans, meaning there’s been little to no opportunity to design the homes specifically to suit the rental market.

There’s also a huge difference in terms of objectives when it comes to SFR – for investors vs. developers, housebuilders vs. operators, landlords vs. residents – especially when we consider what’s desired in these developments.

To push this sector forward, a good question for the designers or developers to consider is: ‘who is set to gain the biggest advantage from renter-ready products?’. This will identify the party who’ll push to make improvements in the sector. Is it the housebuilders, the greenfield developers, or the investor/operators?

Everyone will have a different idea of what’s important or what’s required for ROI.

For example, investors might focus more on the ESG as that’s a key focus in funding decisions now, whereas housebuilders will typically be looking to reduce complexity, options, or variants in order to manage build cost. The housebuilders and developers could see this as an opportunity for futureproofing and risk-adjusting schemes, therefore getting the best ROI.

Ultimately, if we want SFR to work, the focus must be on how to benefit the resident. If the development is making residents’ lives better, then all parties should see a positive outcome (i.e., value growth, rental income etc.) Designing and delivering developments which really suit the lives of the people who live and work in them must be the main goal. We’re always thinking about how our design work can have a long-lasting impact and benefit to the people who engage with it. It’s one of the reasons we’re so invested in working in BTR – it’s the alignment of long-term outcomes.

Resident satisfaction really is the silver bullet in rental, but it takes a long time to measure and realise and, as we said, SFR is only at the beginning of its journey versus BTR and PRS.

So, while SFR continues to grow, what do we need to factor in to measure its success? When it comes to the design, is the opportunity to differentiate lying not in what’s built-in, but in the add-ons? For example, could you build a basic house but add extra amenity through what comes with the house – i.e., office pod in the garden or no dining area but instead a pavilion/conservatory space that’s an addition?

Bearing this in mind, SFR also isn’t necessarily targeting one type of demographic – the ‘single family’. We’ve seen such a change in the rental market so it might also need to be a product that speaks to post-grads or older couples – it really all depends on location. As it stands, we might not have enough data to know the rental profile for SFR – in the same thought, we might not even have the right or enough data for BTR.

We need to be cautious of generalising SFR design – we did that with BTR – and we should think of everybody. We also need to consider the impact of Covid and people moving further out – it’s all kinds of people who now have work from home access. What elements of their homes are key to them? And if we incorporate something that can get them to stay longer (i.e., a conservatory) does that create a better ROI for the investor?

To truly be a successful product, SFR will also rely on the diversity of age and backgrounds as the key to its success. This means the creation of communities where instead of just 50 detached houses, these developments should be made up of a mixture: one apartment block, next to artists’ studios, next to houses, with a central hub and so on. This will bring the most value to all involved – bringing life and visitors to these developments, not just residents.

This approach is the same as to BTR in that sense – what gets the people in? But the actual outcome won’t have the same answer. There will need to be different elements designed in to deliver the same thing and this will be the key takeaway for us as we continue to see this product evolve.