Build to Rent continues to grow at pace and is set to play a key role in Labour’s housing delivery plans
Overview
The first quarter of 2025 saw the highest level of Q1 investment since 2022 despite following on from a bumper Q4. A further 17,300 Built to Rent (BTR) homes completed in the year to Q1 2025, as BTR continues to contribute significantly to UK housing delivery.
There are challenges to future supply; however, that must be overcome, particularly in the form of schemes facing building safety delays. This represents a substantial threat to current housing delivery and puts Government housing targets at risk.
Despite recent growth, BTR still only makes up 2% of the UK Private Rented Sector. Its footprint is greater in some major cities, such as Manchester, where its share has reached a fifth, but this is still low when compared to other countries, such as the US.
We expect that as the Private Rented Sector (PRS) continues to professionalise, BTR will further expand its market share, propelled by new market entrants and a more diverse range of viable locations.
The strong rental growth witnessed across the country in recent years has strengthened investor bids and unlocked new markets – 99% of Local Authorities across Great Britain saw rents grow faster than house prices in the three years to November 2024.
A greater share of new homes delivery
The BTR sector has grown to over 127,000 operational homes across the UK, with delivery accelerating significantly in recent years.
In 2024, 18,000 BTR homes completed. This meant BTR delivery in 2024 accounted for 8% of new-build completions across England and Wales, up from 5% in 2019.
Forward funds will be crucial in increasing delivery further and Q1's rise in forward funds, including Hill and Peabody's sale at Dagenham Green to Goodstone Living, signal a more positive outlook for development.
The Labour Government's target of 300,000 homes annually by the late 2020s, reaffirmed by the Office for Budget Responsibility in March, is only achievable through a more proactive mixed-tenure approach to housing delivery.
BTR is key to delivery in some markets
BTR has become a crucial component of housing strategies for many Local Authorities, driving urban regeneration and supporting new transport infrastructure.
The Elizabeth Line has supported BTR supply in places like Newham, Ealing, and Reading, which have seen over 30% of five-year delivery from the sector around new stations.
BTR developments can also kickstart regeneration in underutilised urban areas. BTR accounted for over a third of new build delivery since 2019 in Brent and Newham, catalysing growth around Wembley Park and Stratford.
Early footfall creates business investment opportunities, and developers benefit from an early cash injection to support delivery of future phases and placemaking.
BTR growing its share of PRS stock
The UK PRS is undergoing significant professionalisation, leading to an increase in BTR market share.
Currently, BTR accounts for 2% of the UK PRS, with higher percentages in urban areas. In Manchester, nearly 25% of PRS stock is now BTR. Despite this growth, BTR's footprint is lower compared to international peers, especially in the United States, where BTR is more established. For instance, 43% of renter households in Detroit and 74% in Charleston reside in Multifamily.
BTR's market share is expanding due to new build delivery of BTR, combined with divestment from individual Buy to Let landlords, resulting in BTR growth against a stagnant PRS. We anticipate BTR will continue to increase its share across various locations, driven by new market entrants and a broader range of product.
UK BTR Investment
The first quarter of 2025 saw over £800m invested in UK BTR, with more than £500m deployed into development of Multifamily schemes in urban locations, reversing the recent trend of more limited activity for forward funding large-scale developments.
For the fourth quarter in a row, more investment has come from international capital than domestic. International investors are increasingly targeting the UK PRS, with lack of supply, affordability constraints and long-term demand driving returns.
This quarter saw Legal & General partner with Japanese developer Nomura to deliver over 1,000 high-quality UK rental homes. The joint venture (JV) has acquired its first Central London plot in Herne Hill in Lambeth, where it will develop more than 200 homes. This comes as CompassRock has entered the Bristol market, purchasing 295 apartments at Stafford Yard. This marks the city's first BTR transaction since 2022.
UK BTR Development
The UK's BTR stock now stands at over 127,000 completed homes, up by 16% compared with Q1 2024. There are a further 50,000 homes under construction, as well as 110,000 homes in the planning pipeline, including in the pre-application stage. The total size of the sector now stands at 287,000 homes, up 5% compared to Q1 2024.
Supportive planning policy is needed to boost delivery of new homes for rent. The revised NPPF increased housing targets for many Local Authorities, increasing the pressure to grant planning consents and boost housing delivery in the coming years.
The UK's largest regional cities granted the most consents in 2023/2024. Manchester, Leeds and Birmingham consented over 2,000, 4,000 and 7,000 BTR homes, respectively. In London, Greenwich and Ealing, each consented over 2,000 BTR homes.
While annual BTR starts in 2024 were 22% lower than the 2018–19 average, the wave of consents coming through the system can help starts recover once wider development market challenges alleviate.
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