Elisabeth Kohlbach, co-founder of leading AI-driven property investment firm Skwire, outlines how landlords and investors in the PRS must adapt in the wake of COVID-19.
This year has been difficult for landlords and investors in the private rented sector (PRS). Lockdowns and uncertainty have stalled the market, widespread financial strain has put the reliability of rent revenues in doubt, while rapidly evolving tenant preferences have radically changed requirements around rental homes.
However, there is cause for optimism as the sector looks ahead to 2021. By adapting to new ways of working, landlords and investors can become more resilient against the challenges they have faced this year. Flexible and tech-savvy operators able to offer homes in locations and configurations that match newly changed tenant preferences will be best-placed to bounce back from the adverse effects of COVID-19 and will lead the way in the post-pandemic era.
Greater flexibility
Competition in an increasingly saturated market has heightened the need for landlords to differentiate their offerings from others. This includes catering to tenants’ demand for flexibility – or stability, as the case may be – by offering more customisable lease terms. Granting the option of different lease lengths, bundling packages and levels of customisability plays to the strength of renting over buying: a five-year term with license to redecorate and keep a dog allows tenants to put down roots, while a shorter ‘subscription’-style lease with utilities pre-arranged and furnished to taste could suit tenants with a project-based job or those looking to try out a new area.
After all, tenants are not motivated by cheap rent alone. In fact, a recent survey found that more than a quarter of people rent because it suits their lifestyle. Furthermore, this figure increases to almost half of respondents aged 18 to 24, a group traditionally thought of as tenants by financial necessity.[1] Landlords must therefore ensure they offer the flexibility that ‘settling down’ does not, which is a key selling-point for increasing numbers of tenants.
With homeownership evidently a less urgent priority than in previous generations, landlords should capitalise on the opportunity to attract tenants by empowering them to make rental properties their own. Allowing decorating and pets, for example, are small steps that can make tenants feel at home. This is often considered a contentious issue, with more than a fifth of tenants highlighting their inability to decorate as the worst thing about the renting experience.[2]
However, open communication between landlords and tenants can facilitate more flexible and mutually beneficial arrangements. And with 1 in 5 tenants happy to pay higher rates for the ability to make a home of their rental properties,[3] landlords who offer greater freedom of expression will be rewarded with higher and more stable yields.
Enhanced property management
On average, more than 25% of household income is spent on rent, up from 10% in the 1980s, but not all tenants receive value for money. An estimated 14% of PRS properties currently fail safety standards, with a further 25% classed as ‘non-decent’, meaning technically safe but still suffering from disrepair or poor heating.[4] Landlords must invest in property maintenance, and, in particular, in the technology which makes maintenance easier.
‘Smart homes’ can make life simpler for both landlords and tenants. Intelligent maintenance systems, for example, can monitor household utilities in real time, ensuring that issues such as boiler leaks are identified immediately rather than on the next maintenance visit. Moreover, landlords can leverage Internet of Things technology to collect data on room occupancy, which can inform real-time adjustments to heating and lighting by AI-driven facilities management systems.
With the majority of PRS properties in the UK ranked in band D or below for energy efficiency,[5] the sustainability credentials of smart homes will also help improve retention rates of increasingly environmentally conscious tenants. As tenants place more value on eco-friendly homes, landlords will see increased yields from properties with are proven to protect the planet.
Finally, it should be no surprise that reliable connectivity is now essential in PRS properties. Even before COVID-19 prompted a shift towards working from home, connectivity solutions such as superfast broadband were no longer just nice-to-haves for tenants. Landlords must ensure their offerings are equipped with connectivity technology fit for 2021.
Post-pandemic positivity
Landlords must be more attentive to tenants’ needs than ever before in the wake of COVID-19, but this new way of working is readily achievable. By embracing flexibility and technology, landlords can help to meet the needs of a new generation of renters, ensuring that their portfolio is more resilient during COVID-19 and beyond.
Author Bio:
With a background in product and project management, Elisabeth is experienced in leading high-growth teams empowered by technology. After overseeing the expansion of serviced apartments group Duschel, she introduced and scaled data science-led operations at a fashion and furniture search engine, before creating Skwire to apply similar concepts to the property industry. She holds qualifications from the University of Vienna (LLM), the University of Nottingham (JD), and the London Business School (MBA).
[1] https://www.buyassociation.co.uk/2020/10/08/does-generation-rent-want-to-become-generation-buy/
[2] https://www.insightdiy.co.uk/news/one-in-five-tenants-would-pay-more-rent-if-allowed-to-decorate/6572.htm
[3] Ibid
[4] https://www.generationrent.org/about_renting#:~:text=%F0%9F%8F%98%EF%B8%8F%F0%9F%8F%A0%20In%202018%2C%20five,London%20that%20figure%20is%2029%25.&text=%F0%9F%92%B7%20The%20rent%20on%20the,is%20%C2%A3675%20per%20month.
[5] https://www.ons.gov.uk/economy/inflationandpriceindices/articles/ukprivaterentedsector/2018#improving-statistics-on-the-private-rented-sector
