The research anticipates a continued evolution in the market, with single-family homes – an increasingly popular part of the BTR movement since the pandemic, and the race for space - making up nearly a fifth (18%) of BTR stock in a decade from now in comparison to 12% today.
The new analysis was carried out to coincide with the 10-year anniversary of the Montague Review. This was a report commissioned in 2012 by then-Housing Minister – now very recently appointed Home Secretary – Grant Shapps to remove the barriers to long-term institutional investment into purpose-designed homes for rent. It was, in effect, the start of BTR in the UK, with Get Living’s transformation of the temporary Olympic Village in Stratford, East London, into a new BTR community the first scheme to get off the ground.
Now going under the name East Village, and still owned and operated by Get Living, the scheme is home to 7,000 residents, with further development plans in the pipeline to cater to growing demand.
The recommendations of the review, which were adopted by the government of the day, included more support for BTR in national planning policy and Local Plans, as well as the release of more land for development and the standardisation of tenants’ rights.
More than 10 years on, the BTR sector is in rude health, with £30 billion invested into it (as of Q3 2022) and 76,800 completed homes. What’s more, there are a further 163,400 in the planning and delivery pipeline. Although the sector is still only responsible for a small proportion of new housing delivery, this has been growing rapidly, with the number of completed BTR homes rising by 14% year-on-year in Q3 2022.
The sector has faced criticisms for being unaffordable and exclusive, but supporters point to the amenities and extras you get in a BTR home, while also suggesting the demographics are a lot broader than people think.
A shift to the regions
In the wake of the Montague review, developers and investors initially – and inevitably – zoned in on London, but since 2017 there has been a shift towards other major UK cities, led by Manchester, Birmingham and Leeds.
All of these cities are experiencing high population growth, along with a ‘thriving professional sector’, increasing the need to attract and retain graduates and expand their workforce.
Local authorities are increasingly joining the BTR party, now planning more effectively for the delivery of this type of home. Some 47% of local authorities now have BTR in their housing pipeline, according to research, against just a fifth (20%) five years ago.
Ian Fletcher, director of policy at the British Property Federation, said: “The Montague Review was a significant moment that gave birth to the Build to Rent sector as we know it today. Ten years on we can say the review achieved its core aim of unlocking long-term institutional investment into homes for rent, helping address the chronic shortage of quality housing in an and around town and city centres and serving as a catalyst for urban regeneration.”
He added: “The current market conditions underline that we must continue to diversify housing supply in order to drive economic growth, and the government must continue to look at how planning reform, more support for local authorities and the release of land for development can enable the sector to continue its upward trajectory.”
Jacqui Daly, director of residential research at Savills, said: “When the Montague Review was undertaken in 2012, UK housing delivery was at its lowest level since the post-war period, and uncertainty in the lending markets post-GFC was suppressing delivery from traditional housebuilders. There are some parallels with where we are today, with government suggesting it may abandon national housebuilding targets and rising interest rates set to cast a shadow over [the] for sale market.”
But she added that what is clear is the demand for high-quality, professionally managed homes for rent is only going to rise, ‘not only for the core demographic of graduates and young professionals but for single families, couples and individuals at all life stages’.
She said this underpins the projection that ‘we will see huge growth in the sector over the coming decade as institutional investors look at asset classes that can deliver sustainable returns and align with their ESG strategies’.
Rick de Blaby, chief executive of Get Living, said that when Get Living launched in 2013, a year after the publication of the Montague Review, the BTR sector barely existed in the UK.
“At East Village, we not only had to re-engineer the former Athlete's Village, but also to effectively write the business plan for BTR in the UK,” he said.
“BTR is now succeeding in its mission and has grown in the UK’s core cities and towns. At Get Living, the experience of operating our current 4,000 homes, with a further 6,500 in near term pipeline, gives us profound insight into what people want and aspire to have from their home, their neighbourhood, their amenity and the community within which they seek to belong.”
He added: “The responsibility for the entire BTR sector to deliver more homes, of high quality, within the reach of affordability, providing ambient well-being, with social and environmental value, in places that enable people to thrive, has never been more relevant, but in some respects is now more challenging.”
“Get Living and others in the sector want to play their part. It is incumbent on both the public and private sectors to work together, find alignment and work to resolve the barriers, so that the UK can address the on-going shortage of housing, so that everyone can have a home they deserve. For our part, we are driven by the need to innovate, to meet the demand and constantly improve the resident experience.”
He says the Savills research demonstrates there is huge growth in store for BTR and ‘we only have to look at the scale of the sector in the US to see what can be achieved’.
Alex Greaves, head of UK and European Living at M&G Real Estate, also commented: “The BPF’s findings highlight the coming of age of residential as a mainstream asset class and confirm the importance of BTR within the wider private rented sector.”
He added: “Over the last 10 years, institutional investment into BTR has made a significant contribution to UK housing numbers with further growth continuing year-on-year. It provides professionally managed homes across a wide range of locations, price points and age groups.
“From an investor perspective, BTR is highly defensive in terms of cash flows, provides consistent returns for investors and offers clear opportunities to create low-carbon homes and ESG-led rental communities. We continue to explore new investment opportunities across the UK and can only see the sector growing in strength over the next decade.”