Rethinking UK Housing with Jason Hardman (CBRE)

SPEAKER_02 0:02

Welcome back to Pillow Talks Lessions. I'm Christian Lepinsky, joined as always by my co-host, Jessica Gilmian.

SPEAKER_01 0:08

Thank you, Christian. Today we're joined by Jason Hartman, who is head of the UK Living for CBMRE. Jason brings a unique perspective on how the UK's living sector is evolving across build-to-rent, co-living, and also student housing.

SPEAKER_02 0:25

Today we'll be exploring the evolution of housing models, how government policy is shaping development, and what the Renters Reform Bill means for operators and investors alike.

SPEAKER_01 0:35

Jason, thank you so much for coming on the Pillow Talk Sessions podcast. It's really good to see you again and have you as a guest. So thank you for that. Before we get into the nub of our questions and our conversation today, I'd love it if you could give us an uh an introduction of yourself and also CBRE and your role there as well. So over to you, Jason.

SPEAKER_00 1:00

Yeah, of course. Yeah, no, no, no, thank you. So I'm Jason Hardman, I'm an executive director of CBRE UK Business. Uh, my role is as head of the living sector for the UK advisory business. So what that means is that I work across all of our lines of business and services within the UK, um, working with clients to help them find solutions across all of the sort of subsectors from student to single family housing to strategic land to sort of the whole uh living spectrum, and that includes our capital markets activities, valuations, sales, and leasing and planning. So it's a very, very broad spectrum, but my principal role is to is to help sort of the business grow and obviously um help our clients find solutions in doing that.

SPEAKER_01 2:06

Brilliant. Thank you, Jason. That is a big role and an exciting time to be in the industry as well and to be be part of it. So we're really interested in hearing some of your thoughts today across the whole of the living. So so thank you for coming on.

SPEAKER_02 2:24

Yeah, absolutely. I gotta agree with uh Jessica on there. We have uh a lot of really interesting topics for your for you today, and I think we should just uh kick off to the first one because the first topic we want to discuss is you know the evolving housing models. Uh we just came back from uh the ARL uh annual conference, and there was lots of different talk going on. Um, but as we know that the the living sector is experiencing you know its biggest structural changes in decades. Um, you know, from your point of view, what shifts are the most urgent to move beyond the outdated box building approaches and create housing that reflects how the next generation wants to live?

SPEAKER_00 3:00

Um well, that's a great question to uh to start to start with. And yeah, I mean the the housing sector is you know is certainly evolving, but it's a bit of a sort of a big kind of oil tanker moving very, very slowly. I mean, what what I think about is if you kind of go back sort of a generation or so, 40 years or so, in terms of how people kind of live their lives, and you could break it down into some relatively sort of small segments of um of your kind of your adult life, and you know, I kind of say that's like the pre-family, or you come out of education, um, the perhaps you know the box bit that you're talking about is the family piece, um, and then you've got so when the sort of you if you're having offspring, they've flown the nest, or you're retiring, and you know, your um you know that post-work part, and and I think um to my mind, our sort of the way that we've approached housing should really reflect the changes in terms of how now, you know, when we're in sort of 20 sitting in 2025, those parts of our lives have evolved. Um and I'm not sure that our our approach to housing has quite evolved in you know in the in the same way. And I guess what I mean by that is if you again wind the clock back to 40 odd years ago, um, we had half the number of renters, so uh the the amount of um people who kind of um rented was you know was a broadly about 50 percent of from the from around about sort of you know um 82 or 83 or so. You know, we've now got more people going into um going going to university, so more people in sort of going into sort of PBSA, more people are probably living independently before they um start a family. Um we've got more households, um I think um then you possibly get into the box bit of your sort of family living, of course. That is a and will remain a key part of the of the of the housing market, and then of course we're living longer, and when you know people are flown, then when we're an empty nester or um our life after work is that much longer and we're that much healthier, we're that much more independent. So I think we need the the housing um to reflect those that change in structure. So I think what that what that means, for example, is and we've kind of seen that over the last kind of 20 years, is more housing for students. I know that is probably a mature part of sort of the living sector investment market where purpose-built student accommodation has really been really come to the has been a key part of it, um, and and it and is relatively uh mature now. But I'm not sure that our policies kind of cater adequately for it. There's there's lots of um, of course, there is lots of you know support for um for students in particular in some towns and cities, but you know, not everyone likes students, and we know that you know students sometimes behave in a particular way, but they do bring a significant um amount to you know to local economies, and planning for that appropriately, I think, is important. Um, you would have obviously heard, I'm sure, at the ARL last week, the conference last week, um, about things like co-living or micro-living. It kind of doesn't matter what you really kind of call it, but we probably had you know the rite of passage, I guess, of sometimes individuals sort of sharing houses with their with you know with with with their friends, you know, is quite a challenge now, particularly in places such as London, where you know we're seeing housing stock, um, the rented housing stock disappearing for all sorts of reasons, and I'm sure we can kind of come on, we'll come on to talk about those type of things, and but they still kind of want to live together, they want to be together. Young people, you know, generally speaking, kind of want to be sociable. So we do need to support and recognise that. I think it's quite interesting that in the paper that came out a couple of weeks ago about trying to accelerate development in London and changes to uh changes to policies, you know, there was no mention of or co-living was actually specifically uh specifically excluded from that in terms of you know some of the lowering of affordable housing potentially. I know it's all subject to consultation, and maybe that will kind of change. So, you know, there's quite a lot of things that we I think to reflect, you know, to and you could kind of go on and say, well, you know, we then uh you know need to, we've got high proportion of renters, so you know let's make sure that that is a recognised part of policy. I think it has had um, it's definitely been supported to a greater degree over the last the last 10 years, but it still has a still relatively you know low understanding, I think, from a uh from a politician's or a planning officer's uh perspective. Um box building, as I said, is kind of really, if you want, I'm not quite sure that's the right phrase, but sort of family living, of course, is still going to be you know the biggest share of the of the of the of the of the housing market. So you know, retains its sort of um its importance, you know, and then we go to well, when you kind of got a bit more free time and more independence, but perhaps you don't want such a big house or your box for to use your um term uh you know terminology, and and where and where do you go? And you know that um you know that part of the market I think is uh a nut that everyone is trying to crack in terms of providing sort of integrated integrated communities or just better or different um uh you know different types of housing offers or products for you know more older parts of the population?

SPEAKER_01 10:25

Thank you, Jason. That's a really great overview there. I have a question for you. Is there a particular sector within living that you're most excited about for its growth potential? And then is it which one do you think institutional capital is most, I guess, excited about or most keen to be part of?

SPEAKER_00 10:49

Yeah, well, I think I mean it it's kind of gone in um gone in ways. I think there's there's a there's many parts of the living sector or places where people live that the institute the institutional capital you know wants to contribute to. Um affordable housing absolutely. Um I think you know that um you know leaving that aside just you know just for a second, what we're seeing at the moment is a lot of institutional capital buying houses. Um and you know that is a um an easier thing to do at the moment because that is you know they're easier to they're easier to build, they're lower risk when it comes to to letting them, because you can do one kind of house at a time. I think that's really that is really really exciting at the current moment in time because the other thing that that does, particularly when we're in a period where you know sales rates for new homes are relatively um are you know have been have been slower than they've been um historically, is that that sort of that can sort of the investors buying houses called tend to call it single-family um housing, can really accelerate the rate of development, particularly on larger scale schemes. So, in terms of helping that um aim for the government to get to you know to increase house building, it's currently, to my mind, playing a very key part.

SPEAKER_02 12:46

So, Jason, the next thing that we wanted to talk about is you know government targets and housing quality. You know, the UK's government's pledge of 1.5 million new homes has raised questions about quality and location. You know, how should policymakers and developers balance the delivery targets, but also with the need for the sustainable high standard urban living?

SPEAKER_00 13:07

Yeah, and I think that the you know the challenge about um one and a half million homes is of course, you know, the need to move, um you know, the need the the need to move quickly in terms of you know that's a big ask for a uh for kind of a single uh you know single parliament. Um I think really, I mean the quality point to me is I think we've probably got um you know with legislation around building safety and you know changes in building regulations and uh um um you know design in in recent years, I I think we've probably got the framework now for the highest standards um that we've kind of ever been. Um I think I think the challenge is probably making sure that that is hardwired into planning because the building regulatory environment and planning don't necessarily you know run absolutely in parallel. Um and I think you know there is a the you know there is a piece that the in the the house building um sector were you know needs to adjust to those new regulations. So you know I'm not there will always be a kind of lag from when you know um new regulations come in and sort of the new products kind of come out, you know, actually, you know, you you you kind of start to see it. And I think but I think we certainly have seen across you know coming back to the single family housing point where institutional capital is also driving higher standards, particularly from a sustainability perspective and and demanding you know ever higher EPC um standards or um as um as well. Um I think there is still an education piece though from uh from a consumer um perspective because there's a bit of a mismatch between sort of value and cost with you know the customer not necessarily entirely valuing or attributing a value to all of the costs that might be attributable to achieving some of those sustainable aims. So you know there is a bit of a balance um uh which is you know which is which is challenging um at you know at the moment.

SPEAKER_01 15:55

With these targets, Jason, that the the government has set, what where do we where do the sort of regeneration and reuse of existing properties and existing uh uh schemes fit into that? And is there is there a way for making sure that that design and sustainability still fits in if we do go down regeneration routes and things?

SPEAKER_00 16:21

I think I think the regeneration of existing places is absolutely critical. I think we haven't seen, and it's been challenging from an economic perspective, um large-scale development really in towns and city centres since post-GFC. So you know what does regeneration bring to town centres? Well, it brings activity, it brings GDP, it and um and you know it creates you know a much better kind of in you know environment, it will attract you know commercial and retail occupies, restaurants, etc., leisure. So I think it's not you know, if the question is you know, you know, should we be thinking not just about sort of greenfield or sort of fringe or urban extensions and new towns? Yeah, the you know the urban sort of renewal is it is to my mind at you know absolutely critical.

SPEAKER_02 17:33

You know, with new regulations putting residents at the center, you know, how do you see the renters reform bill uh reshaping landlord-tenant relationships, you know, compared to last uh past legislation? And you know, what kind of opportunities does it create for operators to differentiate?

SPEAKER_00 17:48

Yeah, so it's the most significant piece of legislation and therefore change to the sort of landlord and tenant relationship from a housing perspective that we've had since the 1988 Housing Act. So it's really, really important, and there's obviously you know opportunities and there's obviously not say challenges with it, but it's a lot of change. I think one of the changes it has had is uh um there's you know there's barriers to entry, I think, from a um from a from a landlord's perspective, as well as kind of fiscal and financial um um measures, those are one thing, but the standards now that a landlord will have to fulfil can only be a good thing to be providing good quality housing and like a fair deal to um to to those who are occupying and those who are those who are renting. Um I do think that from a from an institutional perspective, from a professional landlord's perspective, you know, that therefore gives opportunities because you know they should in in theory, and we'll see what you know whether the it works out in in practice, and it should mean that you know tenants are and their customers are attracted to that, um and you know um and you know and renters will you know be moving towards those types of uh those types of products or those types of flats or those types of um of houses rather than sort of the the you know the lower quality. But of course, you know, there are going to be you know challenge challenges um in terms of um changes to operations, the end of periodic tenancies, um sorry, the end of fixed-term tenancies and movement to periodic tenancies, get it the right way around. Um I think one of the um you know that that has to be a balance because you know the landlord is there from a um you know to provide good quality housing, but expects you know, it isn't doing it there for you know for you know for free and for for love. So that so that that you know there has to be a balance in terms of some of the regulatory environment that's going to be put around it to ensure that it's you know it it doesn't go too far and isn't too onerous, and that you know we don't see you know some of the institutional landlords say, well, this is actually now too difficult. I don't think that is likely to happen, but there are of course things like you know where you know the management of increases in um in rents um uh um on an annual basis, you know, that's it's just gonna have to be a careful, careful balance. But I think on the whole, you know, it's a positive thing, and we want to be able to maintain high standards within our you know our rental stock in the UK.

SPEAKER_01 21:06

So this brings us, thank you, Jason, to a topic that we talk about quite a bit on this podcast, which is the hotelisation of the living sectors. And the and I guess what we mean by that is how a customer-centred approach, which you would typically see in the hotel sectors, is kind of infiltrating the living sectors, and we're and it's definitely talked about whether we see that always in practice, maybe not so much. But what are your thoughts on on that? The hotelization, the sort of the experience led, the service led provision of housing. Do you think that we're really seeing that? Is it adding value? Is it something that um is is of a high priority, or are there other things that are of a more of a priority? priority and I guess with the context of the renters reform bill in there as well.

SPEAKER_00 22:06

Yeah and I think um I think there's been a a lot of sort of noise I think certainly when um we first started off with the the professionalization of the of the rental sector there's a yeah the there was a lot of noise around sort of amenity in gyms and swimming pools and running tracks on roofs and uh and and that sort of thing but to me that's that's not what sort of the hotelisation is in it is which I can't say obviously um is about but I think um what it is about is about service and hotels take very very there's a broad spectrum of hotels isn't there so you can have your luxury five star six six star with you know with your swimming pool and your um you know your uh 24 hour kind of concierge and you know a very high service level where you really kind of want for nothing and of course there is a place for that and there it there will be a demand for that from a proportion of uh of the population of the renter population but that is going to be a you know a relatively small amount I think what you know coming back to the renters reform and and and you know the other legislation so um around quality um is it you know it's exactly that what do people want well they want somewhere safe and warm where you know if something's broken it gets fixed if they've got a problem they know they know who to ask um you know it doesn't have to be around well I need to belong and I want to belong to a you know community I want to be able to go to the gym in the same building kind of where I um you know where I live so you know I think it's you know the sort of the larger share of the market is going to be far more towards the sort of the budget end of the hotel um related kind of um uh sort of comparison and I think I think that's a good thing um because you know you know that does mean that you know people are uh trying to you know raise standards as I said before this is about raising the standard of our rental accommodation in in in the country so I don't you know the comparison to the hotel is is kind of fair but I don't think everyone should expect if it you know to be um you know for it to be sort of that that four or five star level it it should kind of you know you kind of get still get kind of what you pay for but there should be a you know a minimum standard it's clean it gets fixed you know it's safe and it's warm.

SPEAKER_02 25:15

And and on top of that you know I wonder uh what your view is on how technology can play a role in all that kind of service driven um you know things that we're we're discussing here and you know and how big of a role does that play I think tech is incredibly incredibly important um I think you know when we you you know we're privileged we get lots and lots of data particularly from our evaluation work and when we look at what you know operational costs when the breakdown of them the typically you know pretty much always you know the biggest cost is the human cost and salaries to kind of paying staff so you know at a at a time when yeah there's new legislation new things to get to you know um regulatory environment to get to grips with um you know it higher than longer term average you know inflation national insurance costs etc etc you know the ability to use tech around you know the management and you know and and finding out what the pro you know using ai or a bot to find out actually what the problem is and then to put it into uh to get you know to um put it into a system to get someone then to kind of come out just as as a as a simple example you know rather than a human doing it is you know is really really um you know is really really important and that it you know is gonna help and I think speed things up and you know some of the things that are that are that I've seen it's the kind of I'm sorry to say sometimes it's the human bit that actually lets the kind of the service or the management kind of down.

SPEAKER_00 27:03

That's the kind of the weak link in the chain so I'm not saying I'm not saying um uh tech is kind of be completely foolproof but but perhaps it takes that kind of element out so it it's absolutely you know it it I think it's only gonna gonna help to speed up where things have kind of gone wrong or we've give people an answer to give them confident that they're in a safe kind of environment and that kind of someone is looking out for them but there might not actually be a physically a physical person um person there but um but it but it helps you know someone to feel safe in in the environment you know where they're where they're living moving on Jason to challenges so we know that investors typically are okay with low returns as long as there's high security but the new the kind of the living sectors the living concepts do demand innovation and flexibility so how can operators and and capital providers adopt to de-risk some of these models but still have innovation in the sector? Yeah I think there has I think um from an investment perspective you know some of those um you know some of the innovations have you know come actually come from you know that you know come from that space I mean you look at things like um coming back to single family and you know that's you know adopting you know technology that's been created by people like Octopus on zero you know on on on zero bills you know um I can think of an investor that has has um put money into a into modern methods of construction I'm not talking about modular um because that has you know has had some um you know quite spectacular um um failure failures but you know in terms of trying to change or um how you know how we build buildings or um how we insulate buildings with different types of uh different types of m you know materials um so it is it you know it isn't that of course it is challenging and it isn't that it it kind of isn't happening but there's you know there's different types of pots of capital for different things I mean I I I guess you know the government has got a huge part to uh yeah part to play in in in this and you know the lights of homes england in uh and sort of the national housing bank when it's uh when it when it's up and running um I guess has got to try and help and support some of these um innovative you know behaviors and um and and and ideas and helping and it's not just about money but it's also to help you know accelerate um those um you know that you know that technology by helping people to get onto site quicker you know there is obviously you know a skills gap um etc so I it I think it is happening but it kind of just need these behaviors need to be recognized and encouraged.

SPEAKER_02 30:36

How do you think that investors can better evaluate risk in you know emerging living models like co-living or senior rental where you know the data and precedent you know are limited.

SPEAKER_00 30:46

Yeah it it it it it is limited it kind of does exist I mean our experience of co-living for example is that um the the occupational demand where it is is really really strong and actually I think they've probably performed um in London stronger than um some other parts of um of of sort of rental uh of of of rental living yeah of course and again it comes down to you know if I think how how has um you know some parts of the market kind of um accelerated and and others uh and and and others not well think about purpose built student uh whilst um yeah I didn't you know said at the start that it probably needs um in sort of formal recognition in you know some planning um you know in some planning locally you know at at times in the early days that kind of did um did work in did work in its ad advantage because you know we've got a whole sector which is built up the fact that actually um it didn't have its own use class um and you know it kind of had a slightly free reign from a or freer reign from a planning perspective in earlier earlier days um there's a the you know there's a bit of a um sort of jury is out from a um from a co-living perspective in terms of you know what exactly is the right planning use is it Sweet Generous is it C1 as a host you know hostile um but investors want certainty so providing you know clarity on and including it in things as I said at the start from um in terms of sort of uh you know where the GLA is potentially going to be um uh having some temporary measures to accelerate housing delivery um in London is kind of recognising those new models that they have a specific part to play in um in our housing supply because I'm I'm sure the sort of the one and a half million is coming back to your box analogy is is you know everyone's thinking well it's a one and a half million boxes as opposed to well you know being broken down in terms of you know does senior living or later living count does uh you know does a co-living home kind of count and and so it you know I think you know that's an important part to providing some you know some sense of security um the you know there's a level oh that's great and I think um you know um a lot of interesting things happening uh in the living sector especially in the UK but I got uh one more question for you Jason before we wrap up today's call um anything coming down from from you guys at CBRE anything our audience should listen or or look out for so I mean I think um what we're trying very hard to do um as a as a as a business and I think one thing that we feel you know passionate about is you know private and public um partnerships and um and I think you know a big part of that is not just sort of you know local authority sort of money from some normal day-to-day finances and a lot of them are quite challenging I think I think the whole of the local government pension fund reform is you know is something that we're um a lot of some of my colleagues are kind of knee deep in and you know working out you know how the sort of the pension pots are going to be put uh um together in terms of consolidation but also um you know we've been working with people like Greater Manchester Pension Fund or some of my colleagues have to you know to find you know local housing you know solutions um and sorry and supporting you know local um local um development I think that's going to be you know part of you know well a key part of helping to ensure that you know we build as many homes new homes in the right places um and of the right type um over um you know over future years you know that has a big part to play I don't think it's necessarily you know direct local authority sort of going back to kind of council homes but I think the you know local authority pension schemes going back to your point Jessica about you know they want it in you know modest returns but for secure income streams uh yeah providing low cost housing and I think we have to be quite innovative over what that means you know locally from you know the local authority pension scheme uh has to be um one of the you know potential solutions to to that kind of potential funding gap or the contribution that is required from a private perspective.

SPEAKER_01 36:17

It's so interesting Jason and complex as well thank you very much for for helping to uncomplex it for us as well today on the show. So thank you so much for joining us on the Pillow Talk sessions. It's been really good to have you on.

SPEAKER_00 36:35

That's great. No thank you very much for having me.

SPEAKER_02 36:38

And that wraps it up for today's episode of Pillow Talk Sessions. Thank you so much for joining us and to stay connected and never miss a conversation head over to Pillotalksessions.com to subscribe. You can also follow us on LinkedIn for more insights and interviews with leaders shaping the future of hospitality, multifamily living in community driven spaces. Pillow Talk Sessions is brought to you by Abode Worldwide, the strategic public relations agency for tech brands and tech enabled operators transforming the way we work, play and stay. Abode Worldwide creates category leaders and builds brand value across hospitality and modern rental living thanks again for tuning in and we'll see you next time on Pillow Talk Sessions