In the West Midlands, Evenbrook has negotiated a novel section 106 planning agreement with the local authority.
“It’s a consent for 155 new flats to rent with no allocation for social housing,” says Evenbrook director John Coles. “Of these, 40 units will be let at intermediate rent – 80% of the market rate – for 21 years before going back to market rent.
“We will continue to own the units and will let them, select the tenants and manage the property. It’s a pragmatic approach by Birmingham City Council.”
The development, in Handsworth Wood, will be on a site owned by Evenbrook that already houses 377 rented flats. Evenbrook argued that the council should take a
“realistic approach” to the section 106 planning obligations attached to the project.
“We said to the council: ‘We won’t bother putting in a housing application if you insist we have some affordable housing in the hands of a registered social landlord, managed by somebody else, tenants selected by somebody else, owned by somebody else’, says Coles. “Practically, that just does not work.”
The project will be the company’s first large build-to-let scheme and its first investment in the private rented sector since 2001. “The market got too hot at that stage,” says Coles.
Set up in 1994, Evenbrook bought most of its stock in that decade. It has avoided pricey city centres to focus on the suburbs of Birmingham and Wolverhampton in the West Midlands, plus properties in Bristol, Lowestoft, Manchester, Nottingham, Reading and Lewisham in London.
“Our rents are at what I would call affordable; we’re for the in-betweens,” says Coles. That said, Evenbrook’s income yields are much higher than those in central London, at 8-9%. “That 8% is a running yield of the income, but is gross and will drop to 5.5-6% net,” he notes.
“Any direct investment in build-to-let will more than likely be in the West Midlands area,” Coles adds. “ Our main offices are there and we employ a lot of direct labour – we do our own gardening, cleaning, and refurbishment of flats when tenants leave. To manage your stock properly you need to have it clustered.”