There is a growing clamour in the UK for more provision of rented property, whether provided as social housing or private rented accommodation, and the emerging mantra is that it should be accompanied by a ‘high-quality management regime’.
The high-quality criterion is emphasised in the recently launched £200m ‘build to rent’ fund, while at the same time universal credit and welfare reform places greater risk on housing providers in terms of rent collection and arrears.
What this all adds up to is that both the public and private sectors will have to embrace the latest in web and internet technology to ensure the efficient management of their housing portfolios, and that brand quality will differentiate the good from the bad.
The loss of rented housing came about largely as a result of the Thatcher government’s ‘right to buy’ programme in the 1980s which saw home ownership as the cure for the country’s social ills. Almost two million homes were transferred from public to private ownership during that period.
However, housing supply has not kept pace with demand and as a result, there are almost 1.8 million households on English local authority housing registers. Those who would want to own their own homes cannot afford to because house prices have escalated to such a degree that the average age of a first-time buyer, which fell to about 25 in the 1980s, has now reached 37 and the National Housing Federation has warned that it could soon reach 43.
Into this vacuum has come the private rented sector which has grown rapidly in recent years and now has 3.6 million households compared with some two million in the early 1980s. The sector is very diverse, from students and young professionals to families who are making a long-term commitment to the private rented sector.
The problem is that unlike some other countries, there is no large-scale institutional investment in that sector, so the government commissioned the Montague Report which was published last August and proposed a range of measures. In response, the government has moved on some of the recommendations with the launch of the £200 million ‘build to rent’ fund and the £10 billion debt guarantee scheme that will support the delivery of new homes purpose-built for private rent and for additional affordable housing.
On the assumption that the incentives are attractive enough to bring in private institutional investment, then there are opportunities for far-sighted housing IT providers to take advantage of the significant increase in the supply of large-scale private rented housing.
Significantly, moves in this direction have already come about as a result of the reduced government grant for affordable housing. Because of this, some housing providers are beginning to look at creating subsidiaries financed by institutional investment which will buy or develop homes for let to young professionals at market rents. The income from the private rented division will then create cross-subsidy for affordable homes.
One such housing provider is Thames Valley Housing which last year launched its private rented sector subsidiary, Fizzy. The plan is for a £200 million property portfolio, with Thames Valley investing £30 million alongside debt and equity investors. They’re well on their way and in January 2013, Fizzy attracted £40 million of debt financing from Macquarie Capital. The buzz is around its management skills and the importance it attaches to the quality of its brand.
Key to that is gaining a competitive advantage in the level and quality of service Fizzy offers. One fundamental aspect of this is how Fizzy keeps in touch with its tenants and provides them with a level of service that they would expect to receive in the private sector. This cannot be achieved by using conventional property management technology which is traditionally designed to manage property; today’s tenant is looking for contemporary service delivery.
The differentiation is achieved by creating a technology-enabled brand that appeals to young tenants or ‘renty somethings’ as they are sometimes known. Fizzy gets straight to the point on its website declaring, “We believe renters deserve a better deal” and it provides this by its ease of access for prospective tenants.
The online registration process is user friendly and is designed to appeal to savvy tenants who are likely to have already experienced a high level of customer service within the current generation of student accommodation facilities.
From the moment a prospective tenant shows interest in a flat, Pex’s web-based technology transforms the customer experience. An Assured Shorthold Tenancy agreement is created together with optional services that are akin to booking flights online, so if you want a furniture pack or broadband, this is all available through Fizzy on their booking site. At the same time, all the credit-referencing checks are being undertaken so that what could normally take three weeks is undertaken in perhaps a couple of days.
Once the tenant has moved in (and of course, the tenant furniture pack is there and installed by the time they move in) then the customer portal provides access to numerous services, from checking their account or changing their broadband package to reporting a repair. Or they can see “Bob” the property manager face to face, as Bob is based on site.
Jayne Hilditch, corporate services director at Thames Valley Housing, said, “The success of housing providers’ forays into the private rented sector will be dependent on providers living up to the expectations of young professionals. We need to understand their expectations and aspirations, and deliver on them.
“And from the point of view of investors, they need to be confident that properties are being well managed and that operationally, the efficiencies that can be achieved by the use of web technology are being leveraged. They are looking for returns and risk levels that are attractive and compare with other forms of investment.”
As the private rented sector moves forward with its online service delivery, the path is being prepared for the social housing sector. With the introduction of universal credit, there will be a growing number of social housing customers coming online and looking for a similar service model. It won’t happen overnight, but digital exclusion is real and it’s coming.
Furthermore, a recent report from the Moody’s credit rating service (covered in the January issue) suggested that with universal credit, housing providers face financial risks in terms of rent collection which could be alleviated by much improved systems of communicating with tenants.
Whether public or private, it is clear that there are opportunities for technology providers to step up to the mark and ensure that tenants have access to internet-based services in the way that is standard now in most walks of life.
Philip Evans is managing director of Pex Software.