UK BTR May Already Be Through Its Darkest Hour

For a sector enjoying rent increases of 5% to 10% annually for the last few years, UK build-to-rent has been markedly gloomy of late.

The causes: regulation causing huge delays in new development and high interest rates deterring investors. 

Those problems are not about to disappear overnight. But the sector is poised for a period of renewed expansion as the sun starts to appear from behind the clouds.

“Some of us have been through three or four cycles, and this is pretty difficult right now, but honestly, I think it will get better,” Grainger Director of Land and Development Mike Keaveney told an audience of more than 350 delegates at Bisnow’s Build-To-Rent Annual Conference, held on level 46 of Canary Wharf Group’s One Canada Square building.

Keaveney and other speakers have been buoyed by additional funding put forward by the government for housing development and affordable housing. Hopes are also high that current regulation stymying development will be tweaked — and that capital is waiting to invest in the sector, with appetite to buy and build both in London and beyond. 

As the conference was kicking off on 11 June, Chancellor of the Exchequer Rachel Reeves announced the government had allocated £39B for affordable housing over the coming decade. Homes England will also lend £4.8B to housing developers at below-market interest rates, with a view to bringing more private investment into the sector. 

“I think the most interesting thing for us all to look at is the £4.8B that they've said that Homes England is getting under the banner of financial transactions, and that's really about driving private investment into the housing industry,” Thriving Investments CEO Cath Webster said.

“That's the small print to read,” she added.

The £39B allocation was a third higher than Webster was anticipating, while Keaveney said more capital for affordable housing providers helped the open-market sector as well: Since BTR developers need to build affordable homes as part of their planning consent, the funding will give affordable providers greater ability to buy them. Many such homes in London have gone unsold of late. 

Panellists also discussed Building Safety Act regulation, which has been blamed for holding up development. Keaveney said the policy had been a “disaster,” so much so that the government is well aware that change is needed, and it could be forthcoming quickly.

“I think that they'll sort out the building safety regulator sooner rather than later,” he said, adding that his solution would be to get rid of the Gateway 2 section of the Building Safety Act’s regulatory approval process.

Developers are making sure they are Gateway 3-compliant anyway. If they aren’t, they might spend £150M on a building they can’t rent out, making Gateway 2 obsolete and a blockage in the process, he said. 

Uncertainty about this regulation is the main barrier to capital coming to the UK to fund new development, panellists said. Anything that provides clarity on building timelines would unlock billions of pounds in global investment. Living sectors are top of the hit list for investors, and the UK’s imbalance between supply and demand makes it particularly attractive.

There is a lot of interest in buying existing assets, Apache Capital Partners Multifamily Acquisitions Director Ashley Perry said, particularly given high development costs and the possibility of buying stabilised assets below replacement cost. 

That is marrying up well with the generation of developers and owners looking to sell completed schemes. But there’s a catch. A lot of the interest is coming from value-add investors that want to buy at prices vendors can’t yet stomach. For the market in standing assets to really take off, core investors need to come back in force. 

Land prices in London make the UK capital unviable in terms of new development for some. In 2024 and at the start of 2025, more investment went to the UK regions. 

But for others, a high barrier to entry means that if you can build there, London offers the best prospects by far. 

“I think yields have moved out way further in London than the regions, but the tenant demand is still there,” Legal & General Head of Residential Dan Batterton said, pointing to research showing two-thirds of London boroughs had no new development starts of any form in the last quarter. 

“So if you're brave and start building today, when you're built in three, four years' time, you are the only show in town,” he said.