The Intermediary – March 2026 - Flipbook - Page 36
BUY-TO-LET
Opinion
The BTR lever is
there to be pulled
W
hen John Lewis
withdrew
from its buildto-rent (BTR)
development
programme, it
was deeply disappointing. A patient,
well-capitalised brand with an owned
landbank and long investment
horizon stepping back from BTR was a
signal that required aention.
But here’s the thing about
signals, they can point in two
directions simultaneously. The
same data that describes a sector
under pressure also maps out an
extraordinary opportunity, waiting
for the conditions to convert it into
action. For brokers, lenders and
investors operating in the specialist
space, that opportunity is worth
understanding clearly.
The case is proven
UK BTR investment hit a record
£5.3bn in 2025, up 6% year-on-year,
with Q4 2025 alone accounting for
nearly £2.7bn, the highest quarterly
total ever recorded, reports Savills.
That’s not a sector in retreat, but
one where institutional conviction
remains strong, even as development
conditions have tightened.
Single family housing (SFH) is
leading the charge, aracting £3.17bn
of investment in 2025, up 28% on the
previous year and representing 59% of
all BTR capital deployed, per Savills.
Institutional investors are
increasingly drawn to SFH’s direct
comparability with mainstream
residential, its greater geographic
spread, and appeal to family
households – the backbone of the
private rented sector (PRS).
For intermediaries advising on
portfolio diversification, this maers.
BTR, and SFH in particular, is rapidly
becoming a mainstream asset class
rather than a niche. The capital flows
and tenant demand are there, what’s
needed now is the delivery to match.
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The Intermediary | March 2026
The existing BTR pipeline makes
the opportunity tangible. Savills puts
the consented-but-not-started BTR
pipeline at more than 101,000 homes.
That isn’t a greenfield aspiration, these
are developments awaiting financial
confidence to proceed.
The demand side is not in doubt
either. More than half a million
additional people are projected to
be renting by 2036, reports Knight
Frank, and 1.2 million more by
2050. Institutional BTR portfolios
are reporting strong occupancy and
resilient rental income.
The Government’s own 1.5 million
homes target is not achievable without
BTR performing. Ministers know
this, and the sector has genuine
political wind behind it at a strategic
level. The question is not whether the
opportunity is real, it’s why more of
those 100,000 consented homes are
not yet under construction.
The viability squeeze
The answer is a combination of factors
that are individually manageable,
but have collectively tipped too many
schemes from viable to not.
Construction cost inflation has not
fully unwound, financing conditions
are materially more demanding
than the low-rate environment in
which many BTR investment models
were originally calibrated, and the
cumulative effect of regulatory change
– building safety reform, energy
efficiency requirements, evolving
tenancy legislation, the abolition of
Multiple Dwellings Relief (MDR) – has
created a more complex environment.
The abolition of MDR, in particular,
has had a direct and measurable
impact on the debt stack for BTR
schemes. The British Property
Federation estimates it has directly
stalled or impeded the delivery of up to
25,000 homes. Fewer viable schemes
means fewer lending opportunities
and compressed margins across those
that remain.
BRENDAN GERAGHTY
is CEO of the Association for
Rental Living (ARL)
Lenders that understand this
dynamic, and are positioned to act
when viability improves, will have a
first-mover advantage.
What investors need
The encouraging thing is that the
levers available to address these issues
aren’t complicated and don’t require
public subsidy at scale. Institutional
capital is not looking for handouts –
it’s looking for predictability.
These are investors making
decisions on 10-to-20-year horizons;
a stable, clearly sequenced regulatory
framework is worth more than any
short-term incentive scheme, because
it allows development economics to be
underwrien with confidence.
The ARL is explicit with
Government about what
‘predictability’ means in practice:
genuine commitment to impactassessing regulatory changes before
they are layered onto existing
requirements; planning policy that
explicitly recognises BTR as a distinct
delivery model; and a serious look at
reversing the MDR decision.
These aren’t radical asks, they’re the
minimum conditions for institutional
capital to price risk with confidence.
As the ARL continues to make
the case for policy conditions that
allow BTR to reach its potential, the
intermediary market has every reason
to engage. A more active BTR pipeline
means more business, not less.
The John Lewis story is real, but
the bigger story is that consented BTR
homes are waiting. Investment hit a
record £5.3bn in 2025, demand has
never been stronger, and the policy
changes required are neither radical
nor expensive. The lever is there. It’s
time to pull it. ●
