Lloyds is the latest familiar High Street name to announce plans to expand into the private rental sector.
The banking group’s landlord scheme, referred to as Project Generation, involves buying and renting out properties to individuals and families throughout the UK. They intend to have their first tenants moved in by the end of the year.
Low interest rates have hit the banking sector hard in recent months and it’s believed the landlord initiative is a bid to find alternative income to boost profits – in the form of high rental yields and capital appreciation.
According to a recent report in the Financial Times newspaper, senior management at the bank want to become major players in an industry which is regarded by many as ‘fragmented.’ They also believe they can provide a more professional, and quality service than that which currently exists in much of the private rental sector.
The paper reported a Lloyds spokesman saying: “As we stated in our full-year results and our strategic review last week, we are committed to broadening access to home ownership and exploring opportunities to increase our support to the UK rental sector.”
An opportunity to ‘cross-sell’ products
Lloyds, which owns other well-known financial brands such as the Halifax, Bank of Scotland and Scottish Widows, plans on cross-selling loans and insurance to its tenants.
The company isn’t completely unfamiliar with the housing market, having previously funded small developments. Many of its mortgage clients are also some of the UK’s largest housing developers.
Following in John Lewis’ footsteps
The Lloyds move is following in the footsteps of retail giant John Lewis who announced their intention to become private landlords last October. Again, this was in response to low profits – this time in the failing physical retail sector.
And, like Lloyds, they also have a form of cross-selling in mind where they will furnish the properties with John Lewis products and locate them near existing Waitrose stores (which they also own). The idea is renters will then shop at the supermarket too.
Unions concerned for bank’s reputation
The Lloyds move hasn’t got everyone’s approval within the company. Independent banking union BTU, which represents many of the bank’s staff, say the landlord move could prove disastrous for Lloyd’s reputation if tenants had unpleasant experiences with those managing the rental properties.
Room for expansion in UK property
Around 5.4m homes in the UK were recorded as privately rented last year. And that figure is only expected to increase over time – despite the government’s new homes’ funding initiatives.
The current biggest provider of private rental property in the UK at the moment is Grainger. It recorded a 45% growth in its rental income in 2019, bringing the figure to £63.5m, with a 30% rise in pre-tax profits sitting at £131.3m.
The group has developments in Bristol, Manchester and Sheffield. It also has a large presence in London, with a joint venture with Transport for London to create 3,000 new rental homes. It altered its business strategy in 2016 to build on its private rental portfolio, more than doubling its rental stock between then and 2019.
