Bridging the Gap: Supply Shortfalls and Soaring Demand in the UK Build-to-Rent Sector

The Rise of Build to Rent 

In late May 2025, Deputy Prime Minister and Secretary of State for Housing, Communities and Local Government, Angela Rayner, urged attendees at the UK Real Estate and Infrastructure Forum to "build, build, build." The BtR sector has emerged as one of the most dynamic and rapidly expanding components of the UK housing market. Fueled by shifting lifestyle patterns, a desire for flexibility, and increasing barriers to home ownership, BtR offers an attractive alternative to traditional private renting. With institutional investors drawn to the long-term returns and stable occupancy rates offered by professionally managed rental housing, BtR schemes have proliferated in city centers, commuter belts, and regeneration areas. Younger renters, in particular, are embracing the lifestyle offered by BtR developments—modern units, shared amenities, integrated services, and an emphasis on community living. 

The Supply–Demand Imbalance 

Yet, as demand soars, the sector is facing mounting challenges—most notably, a persistent supply shortfall that threatens to stall momentum just as BtR enters a crucial phase of maturity. Several factors are contributing to this:  

• Cost of Capital: High interest rates make debt funding less attractive, reducing the pool of available capital for new developments. 
• Construction Costs: Fueled by inflation, labor shortages, and supply chain disruptions, escalating construction costs have rendered many schemes financially unviable without public or private subsidy.
• Planning System: The planning system is widely regarded as slow and unpredictable, with protracted approval processes and inconsistent interpretations of local policy creating uncertainty for developers and investors. 
• Regulatory Changes: An evolving regulatory landscape has further impacted project viability and development programs, including affordable housing quotas and environmental requirements. Perhaps most prominently, the Building Safety Act has introduced additional delays and costs, particularly for high-rise developments. 
• Taxation Changes: The abolition of multiple dwellings relief for Stamp Duty Land Tax and increased surcharges for non-UK residents have negatively affected investment appraisals, especially outside London and the South East.
• Political Instability: Recent years have seen considerable volatility, including Brexit, abrupt policy changes that have deterred both domestic and international investors. 

Policy Reform and Industry Collaboration 

Addressing the supply–demand gap in BtR will require systemic change as well as project-level ingenuity. There is growing recognition that national policy must evolve to better support the sector's unique characteristics. For example, the introduction of a clear planning use class for BtR could help local authorities differentiate such schemes from traditional housing and apply appropriate guidance. 

There is also scope for greater alignment between housing and infrastructure policy. As BtR developments are often located in regeneration areas, close coordination with transport, schools, and community service planning is essential to ensure long-term viability and public support. 

While the UK government has announced £600 million to recruit an extra 60,000 construction workers by 2029, further action is required to address the construction pipeline blockage largely caused by the Building Safety Regulator ("BSR"). According to the British Property Federation ("BPF"), BtR completions have outpaced starts for the fifth consecutive quarter, leading to a 14% drop in homes under construction with the BSR being a major factor in this slowdown. 

Central government could do more to encourage local authorities to embrace BtR—not only as a means of meeting housing targets, but as a vehicle for economic development, place-making, and social cohesion. The use of public land for BtR projects, especially where linked to employment hubs or universities, is an area ripe for expansion. While more local authorities are including BtR in their pipelines and consented homes have risen 13% over the past 12 months, detailed planning applications have fallen 16% since the previous quarter, according to the BPF, demonstrating that more works needs to be done to secure long-term supply. 

Looking Ahead: An Opportunity for Investors and Government Alike 

Despite the challenges facing the sector, the underlying fundamentals of BtR remain strong. Demographic pressures, ongoing urbanization, and evolving consumer preferences continue to drive sustained and increasing demand for high-quality rental accommodation. Recognizing this, the government has pledged £3 billion in support for small to medium enterprises and the BtR sector, facilitating access to more affordable lending. 

Nevertheless, in order to fully realize this demand, it is essential that legal, planning, and financial obstacles are tackled in a coordinated and proactive manner. Addressing these barriers with both urgency and innovative solutions will be critical to unlocking the sector's full potential and ensuring its continued growth. 

Looking to the future, BtR offers a compelling opportunity for institutional investors. The sector delivers predictable, inflation-linked returns, responds to demographic and lifestyle trends, and supports broader public policy objectives—from housing delivery to urban regeneration and climate targets.