The rental sector across the UK has grown hugely in recent years, with high house prices and affordability issues meaning many people - in particular young professionals, but also a growing number of family, middle-aged and older renters - have turned to renting for the long-term.
Nowhere is this more the case than London, which has witnessed the size of its private rented sector increase from 22% of households to 27% over the last ten years - putting renting on a par with owner-occupiers in the capital.
In this Q&A, we speak with Badi's Steven Hiltermann to explore the growth of London's rental market, the possible effects of Brexit on this growing sector and whether AI-led rental platforms such as Badi are the future for landlords and investors.
What has made London Badi’s fastest-growing city since 2018?
For a start, London already has one of the largest rental markets in Europe which typically sees high demand and low supply of property.
In London particularly, we’ve seen a steady decline in homes being bought and sold as landlords hold on to property looking for a greater return. It’s forced them to look at different ways to generate higher profitability on their properties.
One way of doing this is to look at your asset base not by property, but by room available to rent. For landlords holding onto their real estate for longer, this makes a lot of sense financially. Renting by room generates a better ROI.
In addition, PropTech is a booming trend in urban cities like London, which is particularly tech-led and digital-savvy with a higher AI adoption rate than most places in Europe. This is why solutions like Badi resonate well as we use AI algorithms to match people based on their personalities.
In the rental market, trust is built by making consistently successful recommendations. AI has helped us do this more quickly and more often, further earning the trust of our users.
Will this be affected by Brexit, which could make it more difficult for EU nationals to live and work freely in the UK?
We’ve already started to see Brexit uncertainty impact the rental market. While declines have been seen in house sales, we expect to continue to see a more active rental market as people play it safe before buying or selling property.
Additionally, we can expect to see an increase in people renting rooms in their houses to supplement incomes, again heightening the demand for room-rental solutions like Badi.
Despite Brexit, London is still proving to be hugely sought-after as a location to rent property, particularly for the younger professionals who look to big urban centres for work and a busy, social lifestyle. In fact, across our platform we see demand increasing for London rentals, from within the UK and from other European cities.
Talk us through how Badi actually works – where does the AI element come into play?
Badi uses AI to match the right flatmate to the right house share. When you join the platform, we ask you what you like to do in your spare time, what music you listen to, if you are a night owl or an early bird and target your search results with people you will likely get on with.
This differs from other platforms such as SpareRoom, where you would only be able to search based on room criteria. You might well want a double room with an en-suite, however we use AI to make sure you can get great housemates as well. Further to that, you can skip the hassle of trying to arrange viewings for your perfect house share from wherever you are as you can book a room just as quickly as you would book a hotel in a safe and secure environment. Badi offers guarantees to both listers and seekers.
Are systems like Badi the future for landlords and investors, to generate bigger returns than the traditional rental market?
Definitely, if people enjoy their house shares they are more likely to stick around. Matching people based on lifestyle and personality makes friendship and camaraderie more likely, thus creating longer-standing tenancies. For landlords, a stable, happy house share will be far more profitable and far less hassle than a group of constantly changing tenants.
Is there a minimum and maximum let? With Airbnb and other short-let platforms facing greater regulation, is this something that could impact Badi and other rental platform disruptors?
Airbnb is facing greater regulation around longer lets as after a certain period (31 days) a stay is no longer considered a holiday and landlords are required to have a landlord or lodger agreement as opposed to simply collecting cash from a guest. Badi is a platform for longer-term lets with the minimum stay being one month.
Despite impressive figures, Badi isn’t as well-known or as high-profile in Britain as sites like Airbnb and Booking.com – why do you think this is? And how could Badi improve its brand awareness?
We offer something quite different to our users. We provide people with access to much longer-term accommodation as opposed to holiday breaks, which is where both Airbnb and Booking.com play.
We’re also a younger company, Badi has only just celebrated its 5th birthday, roughly half that of Airbnb and Booking.com, so it’s not possible to make a direct comparison. Nonetheless, we are bigger than Airbnb was at this stage and we’re growing fast. We’ve just achieved an average YOY growth of 450% from 2015-2019 and we’re excited about our future growth plans.
With climate issues on everyone’s mind, has there been a trend for people wanting more sustainable, eco-friendly rental experiences?
It’s definitely a growing trend and a solution for sustainable renting and living is exactly what Badi is working towards.
It’s also worth thinking about the type of housing we’re making available for people. While creating new spaces is necessary to meet demand, it’s time, energy and resource intensive. It’s important not to overlook underutilised spaces that could quickly be converted to top-quality living spaces.
In London alone, there are roughly 730,000 under-occupied properties according to the English Housing Survey, however only 8% of those spaces lie within the rental market. Often it’s faster and more sustainable to update spaces that already exist.
Tell us about your plans to launch in the US this year…
We are bringing Badi to New York very shortly which will be exciting not only for us but for New Yorkers as well! Much like in London, rental prices are some of the most expensive in the world and demand is high. We will be unlocking empty spaces in need of happy co-livers in the US very soon.
*Steven Hiltermann is the UK general manager of Badi, a Barcelona-based rental platform which has offices and operations throughout Europe