Build-to-rent sector set to exceed 250,000 homes, driven by growth outside London

Growth in London vs other areas

The impact of build-cost inflation and economic uncertainty was more pronounced in London.

In the capital, where high land values mean schemes are typically larger and more capital intensive, construction starts totalled just 836 units. This represented an 80 per cent fall year-on-year from 4,415 in the first half of 2022.

Starts in areas outside London have been more resilient, with more than 3,100 starts in the second quarter compared to just 236 in London.

For BTR homes completed, in the pipeline or under construction, the regional market has grown faster than London, rising by 13 per cent compared to the capital’s 10 per cent increase.

Completions reached 42,000 in London while the figure hit 46,000 in other areas. The year-on-year increase was double in areas outside London (17 per cent) compared to London (eight per cent).

Despite slowing completions, the research showed that there remains a construction pipeline in London of around 15,600 homes and in other regions of about 3,880 homes.

In the second quarter there was a rise of around 1,200 units under construction in the capital, while other areas saw an additional 3,200 units now under construction.

The high number of historic starts in London and the increasing starts in areas outside London has kept the number of homes under construction at around 53,000.

Both London and other areas grew their BTR planning pipeline by 13 per cent year-on-year to reach 38,100 in London and 73,700 in other regions, in the second quarter.

The number of homes in long-term planning has increased by 40 per cent since the second quarter of last year.

Meanwhile, outside of England, the BTR pipeline has continued to grow in Scotland, where the number of homes planned and completed increased by 60 per cent and 33 per cent year-on-year, respectively.

In Wales the total pipeline has grown by 13 per cent after a strong first quarter this year with its first three schemes completing.

Single-family housing

Within the BTR sector, single-family housing continues to expand strongly with 28,000 units completed or in the pipeline. This makes up 12 per cent of the BTR sector.

Of these, 9,600 are completed, 9,100 units are under construction, and 9,200 are in the planning pipeline.

The growth of single-family housing has seen BTR expand into new markets across the country. The number of local authorities with BTR in their planning pipeline has risen to 200, encompassing over half of all UK local authorities.

This is an additional 14 local authorities in the past quarter.

Ian Fletcher, director of policy at the BPF, said: “Build-to-rent is continuing to expand but the sector is not immune to the current economic uncertainty and cost inflation.

“At the current time it is very challenging to deliver large-scale capital-intensive schemes, particularly in London, but there are fewer obstacles to the delivery of smaller developments in regional cities and single-family housing, both which continue to grow as a proportion of housing supply in UK cities.”

Jacqui Daly, director, residential research and consultancy at Savills, said: “With interest rates now expected to stay higher for longer, demand for new homes for sale is likely to be weaker, which will constrain housing delivery.

“Build-to-rent will have a key role to play in maintaining overall housing supply, and in the last quarter we have seen examples of major house builders agreeing to deliver a pipeline of rented homes, which has boosted the pipeline.

“The continued diversification of the profile of BTR deliverers is critical to its continued growth.”