In recent years, the UK’s housing market has seen a significant shift with the rise of Build-to-Rent (BTR) homes. These developments are designed to be rented out immediately upon completion, offering a modern solution to the country’s housing shortage. However, new findings from the British Property Federation (BPF) reveal that the sector faces considerable delays due to prolonged planning processes, despite its potential to alleviate housing woes.
The Planning Process
A detailed analysis conducted by the BPF in collaboration with Savills, a real estate services provider, has for the first time isolated planning trends within the BTR sector. The results are concerning: 40% of BTR sites that achieved detailed planning permission in the last year took over a year to clear this hurdle. This marks a significant increase from just 7% in 2014, indicating that the planning process has become a major bottleneck.
Despite the size and location of the schemes, the delay remains consistent, suggesting that the intricacies of the application process itself are to blame. This slowdown is not just a statistic; it represents a significant barrier to the delivery of new homes, affecting the sector’s ability to meet demand.
Record Highs and Lows
The analysis also sheds light on the sector’s achievements and challenges. On a positive note, the number of BTR homes with detailed permission reached a record 58,000 in Q4 2023, signaling strong future growth. However, the initiation of new projects has seen a decline, with starts falling to 12,500 units in the same period from a post-pandemic high of 25,000 units.
Despite these challenges, the sector celebrated a milestone with the completion of over 100,000 BTR homes in the UK, marking a 17% increase year on year. The growth is particularly pronounced outside of London, with regions experiencing a 23% increase in BTR homes under construction, significantly outpacing the capital’s 12% growth.
A Vision for the Future
The BPF has laid out its vision for the future in its 2024 manifesto, “Building Our Future.” The organisation calls for a partnership with the government to secure investor confidence and support the construction of 30,000 BTR homes annually. Ian Fletcher, director of policy at the BPF, emphasises the sector’s potential for rapid expansion, especially with the anticipated easing of interest rates. However, he also highlights the critical issue of planning delays as a structural challenge that must be addressed to achieve this growth.
Investor Insights
Guy Whittaker, head of UK Build to Rent Research at Savills, points out, “Investment into Build-to-Rent proved resilient in 2023, in spite of challenges around the cost of debt and continued material and labour-cost inflation. Investment continues to be directed towards development and the deals struck this year will ultimately deliver 12,000 much-needed homes for private renters. Investor appetite continues to grow, but the time taken to bring homes through the planning system, as our research demonstrates, remains a challenge. With schemes taking longer to work their way from application to permission, this reduces the number of ‘oven-ready’ sites, given investors are unlikely to take planning risk. Boosting the number of consented sites is therefore crucial to allow the sector to deliver on its huge growth potential”