03 October 2022

Refurbishing the Buy-to-let sector

By Andy Valvona, National Account Manager, CHL Mortgages

The supply of new homes continues to be an ongoing concern for potential homeowners, renters, landlords and pretty much everyone in and around the housing market. This was evident in recent government data which outlined that only 181,810 new homes were completed across the UK in 2021, 40% below the well-documented target of 300,000 new homes per year and a shortfall of 118,190 - the highest number since 2007.

With demand remaining high for good quality housing stock from both a homeownership and - more predominantly at the moment - rental perspective, this supply gap continues to put pressure on the government to find solutions to this pressing issue. An issue which has certainly not escaped the attention of the lending community.

In recent times, we’ve seen a variety of innovative and flexible solutions emerge from self-build through to build to rent. The pace of new builds or lack of – especially over the course of the pandemic – has also led to a rise in the number of conversions from commercial properties into residential ones and in terms of the transformation of empty or run-down properties from homeowners, landlords and developers. Specialist lenders have been the real driving force behind many of these changes in use and in the upgrading of such properties through the provision of an array of responsible and competitive options.

The green mortgage agenda is also driving change, especially when it comes to meeting the demands of landlords who are looking to improve the energy efficiency of their buy-to-let properties in a bid to meet the UK Governments’ proposal for rented properties with new tenants to have a minimum EPC rating of C or higher from April 2025.

In order to evolve and adapt, it’s vital to understand these ever-changing demands. Listening to, and acting on, intermediary feedback and their landlord clients has led us to recently design and develop a buy-to-let refurbishment range which offers a single, one-stop solution to help remove uncertainty around funding refurbishments supported by a simple process. This consists of three products: Light Refurbishment, Cosmetic Improvement and EPC Improvement. The first two products are designed to increase the future asset/rental value of the property, with the latter specifically designed to improve the energy efficiency of the property. The aim being to provide an additional and viable option to alternative forms of finance such a ‘bridging and refurb in term’ solution whilst helping to reduce administrative burdens and save on multiple product, inspection and legal fees.

The challenges of addressing this housing supply gap are evident and far reaching. There are certainly no short-term fixes but, as a lending community, we have a certain responsibility to evolve, adapt and provide landlords with options which can help them create better quality and more energy efficient homes from existing housing stock, much of which is currently underutilised. Especially in light of impending legislation, fluctuating market dynamics and shifts in tenant profiles.

Again, this is a process which will take time, but appetite is certainly there amongst landlords to make the necessary improvements to ensure that they can deliver the standards to meet the needs of a growing number of tenants who may well be looking to rent for longer.

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