JLL identify rapid growth of SFH BTR in new report

JLL release their Single Family Report, which outlines the rapid growth of single-family housing Build to Rent compared to the multifamily sector.

Casa by Moda single-family Build to Rent housing | BTR News
Casa by Moda single-family Build to Rent housing.

JLL identify in the latest report that the single-family housing market will rise tenfold to 95,000 homes by 2028 if investors are able to achieve stated ambitions and maintain the forecast pace of growth.

The report further estimates some 9,400 institutional single-family rental homes across the country at the end of 2022.

A further 11,900 homes are currently in development, having received planning consent and investor backing.

Earlier in the year, single-family housing experienced record levels of investment in Q1 2023, JLL found.

Active investors currently plan to build portfolios of over £12bn, whilst specialist platform targets and developer portfolios aim to deliver 75,000 single-family rental homes in the UK.

Investor commitments and developer pipelines would see this rise to over 50,000 homes by the end of 2025.

This would also reflect growth at twice the rate of multifamily, which took six years to achieve this scale.

“Economic uncertainty, rising interest rates and regulatory changes are feeding turbulence into the UK’s housing and rental sectors. Faltering demand for new build housing from would be owners has led to increased rental demand at a time when private landlords are leaving the market. As sales and rental markets shift to new equilibriums, conditions are ripe for institutional investors to step in and play a key role in meeting increased demand, and for housebuilders to pivot from their traditional ‘two channel’ delivery models, to a three-channel approach, which allocates a meaningful percentage of their development pipeline to the investment market.”

Jonathan Smith, Senior Director for living capital markets, JLL

Alongside this, single-family rental would account for 29% of some 170,000 private Build to Rent homes in 2025; up from 11% of 82,100 homes in 2022.

Since 2015, institutions have invested £2.8bn in single-family Build to Rent, including direct real estate investment and corporate mergers and acquisitions, making the UK the most active market in Europe, and second globally behind the US.

Within Europe, the UK has one of the highest levels of households in houses – at 80% of housing stock, second to Ireland.

This shows that over the past two decades, the number of renters has doubled.

There are currently 5.2 million renting households, of which 3 million are in rental houses, according to JLL’s analysis of national housing surveys.

Institutional single-family Build to Rent homes currently accounts for 0.3% of the UK’s rental houses.

“The wall of capital targeting UK living is turning to single-family rental for diversity and scale. Ambitious plans will see rapid growth outpacing the established multifamily model, following the trajectory of expansion in the US. Housing policy, taxes and government incentives have consistently relied on homebuyers and debt to fund new supply, but we are entering an era where investors will be essential to any meaningful gains.”

Emma Rosser, Associate Director for living research, JLL

Comparably, the UK multifamily market has attracted £28bn over the same period, which has seen the market rise to 3.1% of rented flats.

However, the rate of new multifamily home completions slowed last year, to 10,900.

The forecast would see single-family exceed those annual levels next year.

Single-family rental homes benefit from more low-risk, more manageable construction processes and costs, adding attraction for investors as opposed to multifamily.

This also offers an opportunity for developers and housebuilders following the end of Help to Buy, as mortgage rates climb.

Because of this, many companies are increasingly incorporating single-family rental within their sales strategies.

As a result, redirecting 10% to 30% of the top five housebuilder land banks to investors could add anywhere between 40,000 and 120,000 homes to the sector.