Affordable housing to account for 23% of institution-owned rental homes by 2025

Meanwhile, the broader investor stock (including single family, multifamily, retirement and affordable) is set to increase by 104 per cent to 258,100 homes by the end of 2025.

Over the 10 years to the end of 2022, institutional investors poured £35bn into UK build-to-rent, peaking at £6.2bn in 2022. Research from the British Property Federation and Savills published earlier this week, found that there are now around a quarter of a million build-to-rent (BTR) homes either competed, under construction or in the planning pipeline, boosted by growth in regional cities.

Meanwhile, JLL’s report showed that private investors seeking diversification have deployed an estimated £4bn into affordable housing, accounting for 10 per cent of investment in rental housing.

The report said that while this is a small sub-sector, it is “gaining pace” as investors overcome barriers, becoming registered providers and establishing partnerships for growth. The number of for-profits has more than tripled in the past decade to reach 69 at the start of 2023.

Richard Petty, head of affordable housing at JLL, said that the UK is suffering from a “long-term, systemic undersupply of affordable housing” and that the sector needs to embrace investors in order to tackle this.

He said that demand will continue as rising rents paired with the cost of living crisis means more private renters will be seeking social housing.

Mr Petty said that the supply of new social housing has been exacerbated by sales of stock to tenants offsetting the development of new homes.

Some 987,198 new social homes have been completed over 20 years. However, over the same timeframe, 616,352 affordable homes were sold, mostly through tenant sales, such as via the Right to Buy. A net gain of 370,846 homes over this period equates to 18,542 homes per year, and just 5,592 low-cost rental.

Mr Petty said that at the same time, registered providers face conflicting pressures and demands on their investment, such as retrofitting, fire safety work, inflation, interest rates and dealing with damp and mould. So, it will “not be easy” for any social landlords to increase their development programmes, he added.

Therefore, Mr Petty said that “institutional capital” has a growing part to play in delivery.

He said: “We have seen a significant increase in institutional investment across all the living sectors, spanning PRS, multi-family, single family, specialist supported and mainstream affordable.

“The sector needs to embrace that and make the most of investors’ willingness to work in partnership. Together, we cannot let the impossible imbalance of supply and demand go on much longer without making the sort of changes to the model that will be necessary to deliver real increases in supply.”

Emma Rosser, research associate at JLL, said: “Investors are diversifying from city centre flats to a range of tenures and housing types. While there are challenges to entry, the scale of demand is higher than any other living sector, and the current pressure on household finances will only increase this.

“Institutions are responding to this call to action and have laid the foundations for long-term investment at scale, also supporting broader social impact goals.”

The UK affordable housing industry has consistently called for long-term government support to tackle the undersupply.

JLL said in the report that this is especially critical in this moment given the current "very high costs" for housing support and temporary accommodation.

The report said: “Recent partnerships, pairing operators and capital, provide the foundations for such growth.

“They also offer an opportunity for government investment, de-risking schemes, encouraging private investment, employment and housing. Together, this alignment could reap rewards for society and the economy.”