Build to Rent continues at slower pace despite growth

The latest research carried out by the British Property Federation (BPF) shows that the total number of Build to Rent homes in planning, under construction, or completed continues to increase year-on-year, but the pace of growth has slowed from a long-term average of 28% to 9%.

Edinburgh, Scotland. 71% of Build to Rent homes in Scotland are in the planning stage | BTR News
Edinburgh, Scotland. 71% of Build to Rent homes in Scotland are in the planning stage.

Despite overall growth, BPF has discovered that the universal economical challenges that the sector has faced has slowed its progression.

However, analysis conducted by Savills shows that the regional Build to Rent market has grown at double the pace of London alone in the last year (12% vs. 6%). 

Build to Rent has continued to expand across the UK in the last quarter, with 186 (49%) of all local authorities having Build to Rent in their planning pipeline.

“Build-to-Rent is a critical part of meeting housing need in the UK and it is positive to see that the sector is continuing to grow in the face of several macroeconomic and sector-wide challenges. The planning pipeline continues to be robust, but there is an urgent need to deliver more of those homes, to alleviate pressures on renters. Regional growth in Build to Rent is promising as the sector continues to expand beyond the traditional urban locations to secondary cities and towns.”

Ian Fletcher, Director of Policy, British Property Federation (BPF)

BPF and Savills also found that nationwide, over two-thirds (68%) of Build to Rent is in planning, remaining relatively consistent year-on-year.

This comprises 45% of all Build to Rent homes in England, rising to 71% in Scotland.

However, recently introduced rent controls in Scotland negatively affected investor confidence in the Scottish market, which could result in fewer homes proceeding from planning to construction in the coming months.

Moreover, the regional planning pipeline is much stronger than London’s; increasing 4% quarter-on-quarter and 11% year-on-year to 78,175 homes.

“After four consecutive years of record-breaking investment, it’s no surprise that the latest quarter’s data shows the number of homes under construction still at an all-time high, at just shy of 49,500 homes. This growth looks set to continue: our recent survey of the European investment community found that by 2025, half of all investors – up from 37% today – expect over 25% of their assets under management to be allocated to the ‘living’ sector. The geographical reach of Build to Rent has also continued to grow: a quarter of local authorities currently have homes under construction, compared to 10% in 2017. This has been supported by the emergence of single-family rental which enjoyed a record quarter in Q1 2023, with nearly £500m invested.”

Guy Whittaker, Associate, Savills

While several of the challenges that have impacted the construction sector during 2022 have continued into 2023, Build to Rent continues to make undisputed progress in helping to meet housing needs.

New starts in the market have slowed in the last quarter, primarily in the regions where over 33,880 units are already under construction. 

Broader challenges with the UK planning system including changes to government policy and resourcing at local authority level can make securing permission protracted and coupled with build cost inflation, rising interest rates, and labour shortages, could also contribute to an under delivery of new homes.