Citra Living: All you need to know
What is Citra Living?
Citra Living is a fully owned subsidiary of Lloyds Banking Group. It was incorporated on 7 January 2021 as Slate Coaster Limited and changed its name on 22 February 2021 to Citra Living.
What does Citra Living do?
Citra Living has been set up as a stand-alone brand by Lloyds Banking Group to act as a professional residential landlord.
Why is Citra Living entering the private rented sector?
Lloyds Banking Group sees the residential rental sector as a growth market. Currently around one in five households in the UK rent privately and Lloyds Bank expects that demand to increase over the next five years.
There are two main market drivers for Citra Living: the continued growth and structural shift into the private rented sector and away from homeownership and changes in taxation and regulation in the private rented sector which are causing many traditional buy-to-let investor landlords to leave the sector.
What rental properties will Citra Living buy?
Initially, Citra Living will look to buy and rent out new build properties rather than existing on second-hand homes. Andy Hutchinson, Citra Living’s Managing Director, said that “ Citra Living was born out of the need to build additional good quality, accessible, affordable homes for the rental market, given the increasing demand within the private rental sector.”
This means that Citra Living will look to partner with housebuilders in order to source its rental property stock.
How big is Citra Living?
Citra Living is currently small, but it has big growth aspirations. It is starting with 45 apartments in Fletton Quays in Peterborough which will be available for renters from autumn of 2021. Citra Living hopes to have 400 properties by the end of 2021 and 800 by the end of 2022.
However, this is just the start. Citra Living has a target of reaching 10,000 properties by the end of 2025 and 50,000 by the end of 2030.
In August 2021 the Financial Times estimated that if Citra Living had 10,000 homes it would have a Balance Sheet worth around £4bn and its renters would generate it around £300m in pre-tac profits.
If Citra Living meets its targets it will be one of the largest residential landlords in the UK.
Citra Living gets funding boost from Lloyds Banking Group
On 6 December 2021 The Financial Times reported that incoming Lloyds Banking Group CEO Charlie Nunn is considering quadrupling the budget of Citra living from £250m to £1bn. The Financial Times suggest that the budget has not been finalised and could be increased further you can reading the full FT article here.
Which housebuilders is Citra Living working with?
On 2 August 2021 Citra Living announced a strategic partnership with Barratt Developments, one of the UK’s largest housebuilders. Commenting on the strategic partnership, David Thomas, Chief Executive Officer, Barratt Developments Plc said: “We are delighted to be launching this partnership with Citra Living and looking forward to working together to deliver high-quality sustainable homes for rent.”
We expect that Citra Living will be announcing more partnerships with other housebuilders in the coming months.
If Citra Living's budget is increased as we discuss above, it will need to work with additional large housebuilders in our view in order to deploy the capital at pace.
Is Citra Living good news for the housing market?
Yes and no. Yes - there is demand for additional good quality rental properties.
No – renting is very rarely a true lifestyle choice and whilst the COVID pandemic has changed our perception of where we want to live, it has not dented the homeownership aspirations of renters.
Around 80% of renters aged 16-34 years old want to own their own home and every home built for or purchased for the rental market is a home taken out of the housing market and unavailable for aspiring homeowners to buy.
According to mortgage lender Santander, the three largest barriers to homeownership are the deposit requirement; the size of mortgage available and the availability (supply) of housing. It is interesting therefore that Lloyds Bank, the largest mortgage lender in the UK, through Citra Living is actually putting up rather than taking down barriers to homeownership.
The other challenge is that housebuilding volumes are difficult to increase quickly, and therefore, if more homes are being built for the Private Rented Sector, it will reduce the supply of new homes available for homebuyers, putting them in direct competition with professional landlords like Citra Living.
Is renting with Citra Living better than owning?
Renting does provide more flexibility than owning, you are less tied to a particular property or area and aside from looking after the property (not causing damage to the property) you are not responsible for the structural upkeep of the building or the repair and maintenance of the building and any appliances/services provided such as a washing machine, boiler or cooker.
However, whilst rented properties offer the renter flexibility, they also offer the landlord flexibility. A renter does not have the security of tenure and can contractually be asked to leave the property through no fault of their own.
We believe that overall owning a home is better than renting one, and that is why we believe in the social good of homeownership.
The social good of homeownership
Buying a home allows the buyer a way to accumulate housing wealth and have the security of tenure. There is no landlord to ask you to leave through no fault of your own.
Whilst one could argue that monthly mortgage payments are similar to rent, mortgage payments allow you to accumulate housing wealth, whereas rental payments accumulate wealth for the landlord. If you are renting from Citra Living you are helping Citra Living and Lloyds Bank (the biggest mortgage lender in the UK) to accumulate more wealth
The wealth accumulated in a home can be used in later life to help fund retirement. Once the mortgage is paid off there is no rent to pay (although the homeowner has to maintain the home) and equity (wealth) stored up in the home can be released to fund a retirement or passed onto children or grandchildren to help them on their housing journeys.
If you own a home, you become a potential bank of mum and dad, but with Citra Living – Lloyds Bank remains the bank.
Building Societies vs Banks
It is interesting to note the difference between banks and building societies when it comes to housing.
Building Societies are set up to benefit their members and champion homeownership, many were created with the principal aim of helping people buy their own homes.
Banks are answerable primarily for the benefit of their shareholders rather than their customers and, in our view, Lloyds Bank through Citra Living sees an opportunity to grow profits and diversify its risks away from traditional lending.
Citra Living's rhetoric may champion helping to expand the availability, quality and affordability of homes across the UK, but we must not forget that Citra Living is actually competing against aspiring homeowners and is somewhat less cash strapped than your typical first-time buyer. By buying up homes that would be sold to first-time buyers there is a risk that Citra Living will make it harder for aspiring first-time buyers to get a foothold on the housing market, forcing them to live in the rented sector for longer. If they happen to be living in a Citra home they will be adding to the profits of one of the largest banks in the world rather than building up their own deposit and accumulating their own housing wealth.