My Landlord Lloyds: Banks become landlords in new “build to rent” sector

October 1, 2021

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2 min read

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What's going on here?

Lloyds Bank has announced its plans to buy 50,000 properties by 2030 which will be rented out to tenants.

What does this mean?

Lloyds Bank has launched a new brand called Citra Living in an attempt to dip its toes into the buy-to-rent sector. Citra Living was launched in July 2021 and has recently announced its plan to become one of the UK’s largest private landlords. The company will purchase new and existing properties with the sole intention of renting them out to tenants. 

Citra Living aims to have acquired 10,000 properties by the end of 2025, and 50,000 properties by 2030. This would put the company way ahead of the UK’s current largest private landlord Grainger, which has 9,100 properties. Citra Living has stated that it will consider using mergers and acquisitions to acquire more properties. This means that it might purchase existing companies that have a portfolio of rental properties, or join forces with such companies, in order to acquire their properties.

What's the big picture effect?

Over the past decade, interest rates have reached historic lows. This has had a negative impact on the profitability of banks. When interest rates are low, they get a lower return on their investments and thus make less money. Banks such as Lloyds, therefore, have been exploring new ways of making money. Other companies in the financial sector have also incorporated real estate and private rental properties into their business plans, for example Legal & General and M&G. 

The buy-to-rent sector is rapidly expanding. The Financial Times reported that investment in the build-to-rent sector hit £3.5bn last year. It has also been predicted that, if Citra Living achieves its aim to acquire 50,000 properties by 2030, it could make a pre-tax profit of £300m with a portfolio of properties worth £4bn. Lloyds Bank hopes that this endeavour will also help to boost sales of their more traditional services as they can offer rental deposit loans and insurance to their new tenants. 

It is hoped that the increase in corporate private landlords will be a good thing for tenants. It may result in better quality housing and a more professional, streamlined service. Citra Living’s managing director also noted that the project will help to address the demand for rental properties, which is currently on the rise. 

There are concerns that Lloyds’ reputation will take a hit if Citra Living fails to reach its targets, or fails to provide a high quality service to its tenants. Nevertheless, this shows an important step forward for banks looking to expand into new sectors.

Report written by Catrin Trefor

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