The Build to Rent (BTR) sector in England has experienced significant evolution over the last decade, transitioning from a niche within the industry to a major player in the housing market. This transformation has been driven by a series of strategic policy initiatives and booming institutional interest. Pensions funds, REIT’s and private equity funds are falling over themselves to find BTR projects to acquire as they see the stability of rental growth and house prices as an unbeatable dual income stream that is predictable and over time very consistent.
Key Policy Milestones
- 2013 Montague Review: A pivotal moment for the sector, this review recommended fiscal and planning incentives to attract institutional investment into purpose-built rental housing. It laid the foundation for Build to Rent as a distinct asset class.
- 2016 Housing and Planning Act: This legislation simplified planning processes for Build to Rent developments, marking a critical shift in governmental support and recognition of the sector.
- Local Authority Planning Frameworks: Many councils began tailoring their planning policies to accommodate Build to Rent projects, acknowledging their unique characteristics compared to traditional residential developments. However, industry advocates highlight that planning policies still require significant refinement to better address the specific needs of Build to Rent.
Surge in Investment
In 2023, the sector attracted a staggering £4.5 billion in institutional investment, driven by:
- Stability and Inflation-Linked Returns: The long-term nature of rental income provides predictable and stable returns, less sensitive to market fluctuations than sales-dependent development profits.
- ESG Alignment: Build to Rent projects often incorporate sustainable and socially conscious design principles, aligning with institutional investors’ environmental, social, and governance goals.
- Dual Revenue Streams: Properties generate consistent rental income and tend to appreciate over time, offering both immediate and long-term financial benefits.
Government Support and Future Growth
Labour’s Autumn Budget should amplify the sector’s growth:
- £3bn in Housing Guarantees: This funding aims to support Build to Rent developers and SMEs, bolstering the pipeline of projects.
- £500m Boost to the Affordable Homes Programme (AHP): By incentivising mixed-tenure projects, the government encourages collaboration between Build to Rent operators and social housing providers, fostering joint ventures that integrate affordable rental homes.
Outlook
The Build to Rent sector is firmly positioned as a cornerstone of England’s residential market. With ongoing policy support, substantial institutional backing, and a focus on long-term, stable returns, it is expected to continue its upward trajectory, addressing housing demand while meeting investors’ financial and sustainability objectives.
This should give individual investors confidence, if those large scale institutional investors view the future of the UK housing market as such an attractive proposition with all of their analysts and data science shouldn’t the rest of us too?
