The UK housing market is undergoing a quiet but powerful transformation, fueled not by individual homeowners or mom-and-pop landlords, but by a new breed of corporate giants. Backed by billions in private equity, these mega-landlords are reshaping the rental landscape, one apartment complex at a time. And their impact is being felt most acutely in the booming “build-to-rent” (BTR) sector.
According to a recent report by the Common Wealth think tank, BTR developments now account for a staggering one in five new homes built in the UK – and nearly 30% in London. The sector, which constructs housing stock specifically for the rental market, has become a magnet for institutional investors seeking steady returns. But as BTR redraws the housing map, concerns are mounting about its implications for affordability, accessibility, and the very notion of home.
The Changing Face of Rental Housing
The UK’s £100 billion BTR market is a far cry from the traditional image of the private rental sector, long characterized by individual landlords letting out a property or two. Instead, it is increasingly dominated by large-scale developments owned and operated by a single corporate entity. As the Common Wealth report reveals, four of the top five BTR operators are backed by private equity funds, many based overseas.
This influx of institutional capital has supercharged the sector’s growth. BTR housing stock surged to 105,000 homes by the end of 2023, up from a mere 20,000 in 2015. And with a pipeline of over 200,000 additional units in planning or under construction, that growth shows no signs of slowing.
A Focus on High-End Renters
But as BTR reshapes the rental market, it is also reshaping the demographics of who rents. The Common Wealth analysis found that nearly 90% of BTR properties are occupied by couples, flatshares, or single individuals – a stark contrast to the wider private rental sector, where one in four households are families. BTR units also skew heavily toward higher-income renters, with households earning over £68,000 per year significantly overrepresented compared to the market average.
“Housing in the sector also skews toward households on above-average and higher incomes, with industry data showing households in BTR are much more likely to be on incomes of over £68,000 a year than the average for the private rental sector.”
– Common Wealth report
This focus on higher-end, childless renters is no accident. BTR developers are deliberately targeting a sweet spot of young professionals and empty nesters with disposable income and a preference for amenity-rich urban living. But in doing so, they risk exacerbating the housing squeeze on lower-income and family households.
Implications for Affordability and Access
The BTR boom comes at a time when the UK is grappling with an acute housing crisis, characterized by a chronic shortage of affordable homes. With house prices and rents soaring while wages stagnate, millions are struggling to secure decent housing within their means. Against this backdrop, the rise of BTR as a major force in the market raises critical questions about its impact on overall affordability and access.
On one hand, proponents argue that BTR is helping to boost overall housing supply, which is desperately needed. By tapping institutional capital to finance large-scale developments, BTR can potentially deliver new homes more quickly and efficiently than the traditional house-building model. And by focusing on rental rather than for-sale units, it can cater to the growing cohort of long-term renters.
But critics counter that BTR’s impact on supply is overstated, and that its units are often priced out of reach for average renters. There are also concerns that the corporate landlord model, with its emphasis on profit maximization, could lead to rent hikes, evictions, and a loss of community control over housing.
A Question of Balance
As policymakers grapple with these issues, the key question is one of balance. Few would argue against the need for more investment and innovation in the housing sector. But there are valid concerns about an overreliance on private equity-backed mega-landlords to solve the housing crisis.
The Labour government has signaled its intent to partner with BTR developers to help meet its ambitious house-building targets. But as it does so, it will need to strike a careful balance between harnessing institutional capital and ensuring that the benefits of development are widely shared. This could involve measures to mandate a certain proportion of affordable units in BTR schemes, to give tenants greater security and rights, and to empower local authorities to shape development in their areas.
Ultimately, the rise of BTR reflects a housing system in flux, as the old certainties of homeownership give way to a new era of renting. Managed well, this shift could open up new avenues to deliver the homes the country desperately needs. But left unchecked, it risks entrenching a two-tier rental market, with corporate landlords catering to the affluent while everyone else is left scrambling for scraps. As the BTR juggernaut rolls on, the stakes for getting this balance right could hardly be higher.
