2022 Build to Rent growth slowed, but pipeline remains robust

New analysis shows inflation and labour shortages contributes to slowdown in Build to Rent growth in 2022, but the pipeline remains robust.

City of London from Tower Bridge, UK. The UK has seen a slowdown in Build to Rent in 2022, but the pipeline remains robust | BTR News
City of London from Tower Bridge. Image credit: Tristan Surtel, CC BY-SA 4.0 via Wikimedia Commons.

New analysis published today (8 February 2023) by the British Property Federation (BPF) shows a 12% increase in the total number of Build to Rent homes in planning, under construction or completed in 2022. This has increased from 212,916 to 242,548 units, but economic headwinds are stalling activity.

The analysis, conducted in collaboration with Savills at the end of Q4 2022 shows a slowdown in the growth of the Build to Rent sector, which has increased by an average of 28% per year since 2017. 

Build cost inflation, labour shortages, and wider economic uncertainty has contributed to the construction slowdown, which was pronounced in Q4 2022. Construction starts were 24% lower than the same period in 2021 (15,600 in 2022; 20,400 in 2021).  

“Investment appetite for Build to Rent was resilient in 2022 and resulted in £4.3bn of investment, a fourth consecutive record-breaking year. That said, it is clear that the sector is not immune to headwinds facing the construction industry, as shown by a Q4 slowdown in starts and completions.  

“With weaker home buyer demand, residential development activity is likely to be subdued in 2023. Build to Rent can offer an alternative exit strategy for developers looking to maintain sales rates and de-risk their pipelines. The Build to Rent sector can therefore play a key role in maintaining construction output and support housing delivery nationwide.”

Guy Whittaker, Associate, Savills

Despite current challenges the Build to Rent pipeline remains robust, with 113,379 units in planning – up 14% year-on-year. Regions are also set to see a significant increase in activity, with a 17% annual increase in units in planning. The expansion of the sector is further evidenced by the fact that 180 local authorities now have completed Build to Rent homes, or units in the pipeline, which is up by 29% on Q4 2021.  

“The Build to Rent market had continued to grow over the past twelve months, but we are seeing a slowdown in activity as inflation and an uncertain economic backdrop makes it more difficult to deliver. 

“In the long-term, we expect the sector to continue to expand as a vital component of overall housing delivery, but Government must be careful not to stymie its progress. The watering down of national housebuilding targets may mean there is less urgency around allocating land for residential development, and there is already evidence that the rent cap introduced in Scotland, and being debated in Bristol, is deterring investment. The Build to Rent sector has a major role to play in urban regeneration and levelling up and we cannot take its success for granted.” 

Ian Fletcher, Director of Policy, British Property Federation