Is L&Q being over-ambitious with its 25,000 PRS target?

The 4th of July was fittingly chosen as the launch date for L&Q @ The Residence. The housing association’s latest private rented sector (PRS) scheme offers views over the new US Embassy in the Nine Elms area of London.

Over an American-style breakfast of pancakes and coffee on the new development’s private roof terrace, L&Q’s senior team revealed how it plans to deliver on its ambitious target to develop 25,000 rented homes over the next 10 years.

The goal raised a few eyebrows when it was announced in January, not least because to realise its ambitions, L&Q will have to put its foot on the accelerator and expand its geographical reach.

L&Q’s PRS and commercial director Lukman Ahmed claims the 25,000 figure is “realistic” but admits he would settle for less.

“It’s a long-term target,” he tells Property Week. “We have to get the land, we have to get planning and we have to build it. Anything between 15,000 and 25,000 I’d be happy with.”

Another senior member of staff at L&Q adds: “Even if we did half it would be massive.”

So far, the housing association is on track to deliver 700 homes for market rent next year, claims Ahmed. It will ramp that up to 1,000 units a year and “then accelerate that to between 2,000 and 3,000 units a year”, he says.

Several barriers

Others in the industry believe that hitting the target will be challenging, however.

“I can see several barriers,” says Iain Murray, managing director of BTR consultancy LIV Consult.

“[There’s] capacity of construction, finance risk and competition. Given the current planning process and the realities of construction procurement, they’ll need a monumental team to succeed.”

It’s a long-term target. We have to get the land, we have to get planning and we have to build it - Lukman Ahmed, L&Q

If it is to get near its target, L&Q will have to look beyond its traditional London heartlands. Its scheme at Barking Riverside is set to deliver up to 3,000 units, but that will be an “exception”, Ahmed says.

Most London sites will deliver between 50 and 250 units.

For larger schemes, L&Q will look to the land it acquired as a result of its £505m purchase of Gallagher Estates in February. The deal gave L&Q land for 42,500 new homes outside the capital, across the south and the south Midlands. Ahmed says the focus for PRS is likely to be on Cambridge, Oxford, Milton Keynes and Reading.

So, L&Qs’s PRS plans - they want to build 25,000 units in 10 years. Lots of land through Gallagher Estates acquisition. Is it achievable?

— Samuel Horti (@SamuelHorti) July 4, 2017

He is also confident that L&Q will be able to compete with the leading BTR developers. L&Q’s ability to deliver practically every type of tenure means that it can be flexible on schemes in ways others can’t be, which can prove useful in the planning system, he argues. “We can adapt to planning requirements where others will struggle,” he says.

Ahmed also points to the housing association’s record so far as a reason for optimism: it currently has 1,600 PRS units across London and one of the largest new-build pipelines in the country, with more than 3,000 units in development or planning. “Coming from a standing start in 2012-13 to nearly 2,000 units is quite a jump,” he says.

He’s right, but to go from here to 25,000 is an even greater leap. L&Q is as well placed as any to reach such an ambitious target, but many hurdles lie in its path.

Want to find out about PRS? Book your place for RESI 2017 now

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