Build to rent and the affordable private rent discount
Affordable private rent is let and managed by the build to rent operator rather than transferred to a registered provider, and it is held in place by a covenant on the whole scheme.
Build to rent schemes deliver their affordable housing as affordable private rent, which is a discounted market rent product let and managed by the same operator that runs the market homes. That is the structural difference from conventional affordable housing, where the units are usually transferred to a registered provider and let through the council's housing register. Build to rent affordable private rent sits inside the same building, under the same management, and it is held in place by a covenant on the whole scheme rather than by a transfer.
National planning practice guidance on build to rent sets out the expected proportions and the discount, and the London Plan adds its own criteria for schemes in the capital. Both work on the same logic: the concession on tenure is given in exchange for a long term commitment to keep the homes in rent.
What distinguishes build to rent in policy
The Framework's glossary treats build to rent as purpose built housing, typically rented out in its entirety, which can sit within a wider multi-tenure development on the same or an adjoining site. The defining features are single ownership, professional management, and longer tenancies than the assured shorthold market has traditionally offered.
Those features matter to a planning authority for a practical reason. A scheme that can be broken up and sold off unit by unit delivers nothing durable, so the policy concession depends on it staying whole.
Local plan policies vary in how they treat the model. Some authorities have a specific build to rent policy, some apply their general affordable housing policy with adjustments, and a few have nothing at all, which leaves the guidance and viability evidence doing the work. Establish which of the three you are dealing with before designing the tenure mix.
The affordable private rent product
National guidance expects affordable private rent homes to make up at least 20 per cent of the homes in a build to rent scheme, at a rent discount of at least 20 per cent relative to local market rents, inclusive of any service charge.
Two features follow from that inclusive wording. The discount is measured against a market rent for an equivalent home in the same scheme or locality, and the service charge cannot be added on top to claw back the reduction. A scheme quoting a 20 per cent discount on rent and then levying a separate amenity charge has not delivered the product.
The homes are let by the operator rather than allocated through a housing register, and nomination rights and local connection tests are not usually applied. Authorities sometimes ask for them anyway, and the answer is that the product depends on the operator managing a single stock of homes on consistent terms.
Distribution across the building is normally expected to be reasonably even, so that the affordable homes are not all in the least attractive core with a separate entrance. Officers look for the unit schedule to show which homes are which, by size and by floor.
How the discount is set and tested
The discount is the negotiation. Three questions come up every time.
- What the market rent comparator is, and whether it is drawn from the scheme itself, from the immediate area, or from a wider market
- Whether the discount is applied uniformly or varied by unit size, since a flat percentage produces very different affordability outcomes for a studio and a three bedroom flat
- How rents will be reviewed over the covenant period, and whether the discount is maintained in percentage terms or fixed at the opening level
Some authorities ask for a proportion of the affordable homes at a deeper discount, to reach households that a 20 per cent reduction does not help. Where local incomes evidence supports that, it is a reasonable ask, and it is a matter for negotiation alongside the rest of the package. The mechanics resemble the tenure discussion on conventional schemes described in the note on affordable housing tenure split and how it is negotiated.
Where the proposed proportion falls below policy, the evidence has to come from a Viability Assessment prepared to the recognised methodology, and authorities will normally require it to be published and to carry a review mechanism.
The unified ownership covenant
The covenant is what makes the model work in planning terms. National guidance points to a period of at least 15 years during which the homes are kept as build to rent under unified ownership and management, and the section 106 agreement carries the obligation.
Drafting points that matter more than they look:
- Define the covenant period start, which is normally first occupation of the final unit rather than the date of the agreement.
- Define the scheme covered, so that a later phase on adjoining land is either in or out with no ambiguity.
- Permit disposal of the whole scheme to another operator on the same terms, since prohibiting sale outright makes the asset unfundable.
- Deal with individual disposals, which is the event the covenant exists to prevent.
- Address mortgagee protection, because a lender will need a route to enforce its security without the obligation making the building unsaleable.
Lenders read these clauses closely, and a covenant drafted without a mortgagee exclusion has stopped more build to rent schemes than any planning policy has.
Clawback where the covenant is broken
If the homes leave the build to rent model within the covenant period, the affordable housing concession has to be made good. The usual mechanism is a payment calculated as the difference between what the scheme delivered and what conventional affordable housing policy would have required, sometimes indexed.
| Event | Typical consequence |
|---|---|
| Sale of the whole scheme to another build to rent operator on the same terms | Permitted, with the covenant binding the buyer |
| Sale of individual units within the covenant period | Clawback payment triggered |
| Conversion of affordable private rent homes to market rent | Clawback on those units |
| Covenant period expires | Obligations fall away unless the agreement provides otherwise |
Negotiate the clawback formula with the same care as the discount. A formula tied to values at the date of breach behaves very differently from one fixed at the date of permission, and on a long covenant the difference is substantial.
Management standards and tenancies
Authorities increasingly attach management commitments to build to rent consents, and most operators are content with them because they describe what a professional operator does anyway.
Common requirements include tenancies of three years or more available at the tenant's option with a break clause, on-site or locally based management, published charges with no hidden fees, a complaints procedure, and no requirement for large deposits that would defeat the discount. Where a scheme is aimed at a particular market such as student or older people's housing, the tenancy structure will differ and the policy fit needs setting out rather than assuming.
The affordable homes should be managed on the same terms as the market homes. Separate bin stores, separate entrances and different repair standards are the issues that generate objections and, in some cases, refusals.
Evidencing the model in the application
Five documents carry the case. A unit schedule identifying every home by size, floor and tenure. A statement of the proposed rents and the market comparators behind them. The management approach. The heads of terms for the covenant and clawback. And, where policy compliance is not achieved, the viability evidence.
An Affordable Housing Statement pulls those together and states plainly which policy is being applied and how the scheme meets it. Where a scheme sits alongside conventional affordable products, the distinction between them needs setting out, as does the interaction with any discounted sale product of the kind covered in the note on how the first homes discount and obligation work.
PlanScope drafts affordable housing and viability documents structured to UK planning policy, with figures you supply and gaps flagged rather than filled with assumptions. Councils usually expect a suitably qualified author for viability work and professional review is strongly advised.
This is general guidance, not legal advice, and policy on build to rent varies between authorities. Check the adopted local plan and the current national guidance, or take advice from a qualified professional, before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
What is affordable private rent?
A discounted market rent product delivered within a build to rent scheme, let and managed by the same operator as the market homes. National guidance expects at least 20 per cent of homes in a build to rent scheme to be affordable private rent, at a discount of at least 20 per cent against local market rents, inclusive of service charges.
Does the service charge count towards the discount?
Yes. The guidance expresses the discount as inclusive of any service charge, so a scheme cannot reduce headline rent by 20 per cent and then add a separate amenity or service charge that recovers the reduction. Set out the rent and all charges together in the application so the officer can see the total cost to a tenant.
How long is the build to rent covenant?
National guidance points to at least 15 years of unified ownership and management, secured through the section 106 agreement. Define when the period starts, usually at first occupation of the final unit, and permit disposal of the whole scheme to another operator on the same terms so that the asset remains fundable.
What happens if units are sold off individually?
That is the event the covenant exists to prevent, and it triggers clawback. The payment is normally calculated as the difference between what the scheme delivered and what conventional affordable housing policy would have required. Whether the formula is tied to values at permission or at the date of breach makes a substantial difference over a long covenant.
Do nomination rights apply to affordable private rent homes?
Not usually. The homes are let by the operator rather than allocated through the council's housing register, and local connection tests are not normally applied, because the product depends on a single stock managed on consistent terms. Authorities sometimes ask, and the point is worth settling in the heads of terms rather than later.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.