Rising costs blamed as build-to-rent construction falls 11% in London

News21.01.254.00 PM by James Riding

Build-to-rent providers have blamed high costs, skills shortages and planning delays as construction in London fell 11% last year.

Block of flats under construction, with two cranes next to the tower

In the third quarter of 2024, 15,500 build-to-rent homes were under construction in London (picture: Alamy)

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Build-to-rent providers have blamed high costs, skills shortages and planning delays as construction in London fell 11% last year #UKhousing

A report by trade body BusinessLDN, shared first with Inside Housing, urged politicians to ensure “the right investment incentives are in place” as it becomes increasingly difficult to make projects financially viable.

The report highlighted the latest figures from Savills and the British Property Federation, which reported 15,526 purpose-built rental homes were under construction in the capital in the third quarter of 2024, down from 17,441 in the third quarter of 2023.

By contrast, build-to-rent completions in London rose 13% in the same period, to 51,516. However, other figures illustrated stagnation in the sector.

The report, supported by the British Property Federation, valuation company PriceHubble and the Association for Rental Living membership organisation, blamed a backdrop of high borrowing and delivery costs, construction skills shortages and insufficient capacity within local authority planning teams.

It also noted that a stamp duty tax break for investors buying several homes at once came to an end last summer.

Using data from nine build-to-rent providers and 32 schemes in London, the report found that the build-to-rent sector caters to a profile of ages and household types largely similar to the wider private rented sector (PRS). Half of build-to-rent tenants are aged 25-34, compared with 48% of the PRS.

However, build-to-rent tenants were much more likely to be students (31%, compared with 9% of the PRS) and more likely to be in the upper end of the income range. A total of 17% of build-to-rent tenants earn between £68,000 and £95,000 a year, compared with 11% of tenants in the PRS.

The report suggested that the disproportionately high number of students living in build-to-rent in London could reflect both a lack of purpose-built student accommodation and the appeal of amenities in build-to-rent developments to international students.

Stephanie Pollitt, programme director for housing at BusinessLDN, said the drop in build-to-rent homes under construction over the past year “should be a cause of concern for all levels of government”.

She said: “The current Spending Review is an opportunity to ensure that the government is enabling housing developments of all types, including through a more ambitious Affordable Homes Programme.

“Policymakers should also work together with the build-to-rent sector to mitigate spiralling delivery costs, ensure the right investment incentives are in place and accelerate delivery of much-vaunted planning reforms.”

Theo Plowman, assistant director for real estate at the British Property Foundation, said: “Build-to-rent is essential for middle-income households, offering safe, high-quality and secure accommodation.

“It is therefore deeply concerning to see a decline in construction starts. Despite repeated warnings about the challenges impacting the pipeline, issues persist, especially with how London boroughs are implementing policies for build-to-rent and the increasing difficulty of making projects financially viable.”

Sandra Jones, managing director at PriceHubble, said: “This independent research was designed to explore whether the build-to-rent sector caters for a narrow segment of the renter population, but it has consistently found that the type of people choosing to live in build-to-rent mirrors the wider private rental sector surprisingly closely.”

Previous research shows just 11% of MPs would prioritise the development of new build-to-rent homes in their constituencies.