Transport for London is actively considering how it is going to use PRS on its London sites and is understood to have begun informal consultations with developers.
From larger schemes such as its 1,100-home Limmo Peninsula site, E16, which was released to the market this week, and even its joint venture with Capco at Earls Court, SW5, to smaller spaces above station towers, TfL can use PRS to increase delivery speeds – and as an alternative to private sale in a cooling market.
Crucially, bearing in mind its funding shortfall, TfL can retain a shared ownership of the sites and access a long-term income stream that could help fund the Tube for decades to come.
However, as a result of existing frameworks and partnerships, what it has already done in terms of its property portfolio and how the market functions, it will need to go through extensive consultation, and make a number of decisions about what a future model could look like.
EG considers how it could develop its PRS strategy.
1. A continuation of the property partnerships framework?
A 12-month selection process saw 13 developers appointed in early 2016 to a bidding panel that would have access to 300 acres of TfL sites in its first tranche of land disposals. Those sites – and future sites – could be brought forward through this existing panel for PRS rather than private sale.
While it would save retendering and a new selection process, this hits the immediate problem of the panel not really including bespoke rental developers, as this wasn’t a requirement at the time the panel was set up.
While its three housing associations and some of the private companies are moving into the sector, it would present issues around fairness and efficiency, not to mention selection of the best possible partners.
2. A new PRS framework?
An entirely new framework could be created that is solely pitched at the PRS. This would not only lay out clearly how TfL would want a model to operate – for instance, clearly defining the share each partner takes in ownership, the percentage and type of affordable accommodation – it would also be able to make a completely new selection of sites.
The original panel included 50 sites, two-thirds of which are in zones 1 and 2, but TfL actually owns thousands of others – notably in the outer boroughs – where land values and viability could be more appropriate for the PRS.
3. A single PRS partner?
Alternatively, TfL could develop out sites – or parts of sites – with just one partner. While this may seem monopolistic at first, it would allow a far more holistic approach to the management, operation and branding of blocks.
Owning multiple blocks with different management companies (which each have their own operational approaches and styles, not to mention price points and business models) could be extremely difficult – not to mention expensive.
A single partnership would allow the creation of a single management company and subsequently deliver cost savings across the portfolio.
Of course, the initial selection process would be very heavily scrutinised.
4. A TfL PRS management company?
In this vein, TfL will also need to decide what its own management company will look like, or if it will even have one. Its extensive property team is, for the moment, geared heavily towards development and not management, so it would need new expertise.
This could be left to a private sector partner – especially as TfL would probably be taking a 49% share (or below) in any future company, to keep it off government books. But this would put TfL at the mercy of reputational risks and the business decisions of that partner.
5. Putting PRS on bigger sites?
TfL could easily include a build-to-rent option as part of larger schemes such as Earls Court, and is actively exploring a rental element as part of Limmo.
The advantage is that for larger schemes with a reliance on private sale, a PRS element early on, alongside affordable housing, would massively accelerate delivery, especially in the currently lacklustre private sales market.
6. Mayoral involvement and the public sector?
What TfL’s recent development pipeline has shown is its vulnerability to political intervention.
Just after the appointment of the original property panel, Sadiq Khan’s election as mayor saw existing development plans torn up to meet his policy pledges around affordable housing. Interference in any new company could deter partnerships.
Likewise, could changes to the way the public sector borrows and owns assets in the next few years, which seems likely, have an effect?
TfL’s PRS strategy could include a hybrid of these options, but the way build to rent fits into its portfolio in the future is a critical decision.
Main image: © Nicholas Bailey/REX/Shutterstock
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