Lloyds Banking Group has officially entered the private rental market with the launch of its home rental business ‘Citra Living’.
The high street bank intends to acquire around 400 properties by the end of this year, with a vision to more than double this figure by the end of 2022.
Andy Hutchinson, who has spent the past 11 years managing Lloyds’ deposit liabilities and liquidity transfer pricing, will lead the new venture.
The business’ focus is on “good quality newly built properties”, according to the bank.
Its first development to complete will be Fletton Quays in Peterborough, where 45 apartments will be available for renters “over the coming weeks”, the bank said.
Lloyds cited the disruptive impact of “many” traditional private landlords exiting the rental market and property supply as a reason for its private rental debut.
Recent research by Nottingham Building Society found tax changes, increasing regulation, and the pandemic-induced decline in rental prices has meant a fifth (20 per cent) of UK landlords are now considering selling all - or at least part - of their portfolios.
“The buy-to-let market has become a difficult area to make cost effective over the years,” said Karen Noye, mortgage expert at Quilter.
“But these issues will not face the institutional investors which will likely only be looking to make small margins as they can operate at a scale, take on more risk and take a longer-term view than most private landlords.”
Noye added: “A cynical view could be that there is an expectation that there will be a number of mortgage defaults on the horizon and entering the buy-to-let market offers an opportunity to capitalise.
"If borrowers default, big institutional investors could hive off repossessed homes into the rental market and start earning money from them quicker than they could have previously.”
Lloyds is not the only big company to edge onto the private letting scene of late. According to The Sunday Times, John Lewis plans to build 10,000 homes over the next decade, with the majority (7,000) set to become rental homes.
The employee-owned retailer made a loss of £518m for the year ended January 2021, compared to a £108m profit in the previous year.
Similarly, Lloyds saw its profits more than halve between 2019 and 2020, from £3bn to £1.4bn.
Hutchinson told the Financial Times the bank’s move to become a major landlord was a “natural extension” of its existing businesses and “will benefit shareholders as well as customers”.
He added the bank intends to build the bulk of its portfolio through partnerships. Through these, he said the bank “can bring incremental [housing] stock to the market.”
But he assured the bank did not “want to hoover up properties owner-occupiers would want to buy”.
Since 2018, Lloyds has provided £40bn in mortgages to first-time buyers.
Martin Stewart, chief executive at London Money, believes Lloyds’ rental market entry is a sign of the times.
He continued: “We’ll soon forget how the buy-to-let market was dominated by amateurs discussing over dinner how easy it was to make their money.
“We are heading toward a more corporate dominated sector where the landlords will be more visible and accountable.
“The pandemic may well have expedited this change. This doesn’t mean the end of buy-to-let for the individual but, coupled with the move by John Lewis this week, it could mean that everyone will need to work a little harder in order to be competitive.”
For Carl Shave, director of Just Mortgages, the fact Lloyds’ brand Halifax is the UK’s biggest mortgage lender “is likely one reason why the name has been brought to the fore”.
Shave said Lloyds’ entry “perhaps flies in the face of the government’s focus on helping first time buyers”.
He added: “How ironic it will feel to those tenants that find out that their landlord is the bank who turned them down for a mortgage”.
ruby.hinchliffe@ft.com
