By Build to Rent (BTR) is an ever-expanding corner of the UK’s property market, which adds thousands of new-build rental properties to the Private Rental Sector every year. With 141,839 operational units across the country, this niche market segment takes up only 2% of the PRS sector, meaning that it has plenty of room to grow, making it one to watch for investors and landlords alike.
Lambert Smith Hampton’s (LSH) BTR Report projects that the sector will attract a record-breaking £6 billion worth of investment in 2025, highlighting the sector’s scope for growth. According to Knight Frank, in Q2 2025, the pipeline of Build to Rent homes complete, under construction or planning approved surpassed 300,000 units.
When compared to the traditional Buy-to-Let market, the BTR sector has been designed specifically with renters in mind. These purpose-built developments often occupy prime town or city centre locations, featuring higher-end options with premium onsite facilities, including a gym, cinema room, communal gardens, concierge, and co-working spaces.
With the tenant experience at the heart of most BTR developments, some operators are leveraging Proptech to create bespoke tenant apps. These apps enable renters to report issues, book co-working spaces, and manage their tenancy agreements, thereby providing high-quality private rental properties to the market.
Will Build to Rent Solve the Housing Crisis?
On the surface, the volume of new BTR properties looks promising, but the experts at Knight Frank have emphasised that the pipeline of new properties makes up a small piece of the private rental sector pie. Whilst there are approximately 113,400 with full planning permission, the pipeline doesn’t necessarily equal new housing starts, with developers citing rising build costs as a hurdle to breaking ground. Knight Frank analysis shows that completions will end 2025 11% below 2024 levels, with an expectation that this will decline further in 2026.
The UK’s housing crisis, marked by a deficit of 4.3 million homes, presents a significant challenge. While the Build to Rent sector has a role to play in delivering new properties, its impact on the supply chain will remain limited unless developers can overcome the hurdle of rising construction costs. Without addressing this fundamental issue, the sector’s potential to alleviate the housing shortage will be constrained.
What are the Downsides of Build to Rent?
Rising construction costs are a major factor hindering the growth of the UK’s Build to Rent sector, but they aren’t the only concern. The BTR model also presents potential downsides for landlords and investors.
One significant risk for those investing in BTR properties off-plan is the development failing to complete. While many tens of thousands have been successfully completed, there are instances where developers have faced delays or gone into liquidation. To mitigate this risk, it is important for landlords to invest with reputable developers who have a proven track record.
Another emerging issue for private investors is rising operational costs. Many BTR schemes involve a management company, and investors should seek professional legal advice to understand how these costs might increase over time. They should also verify that the lease agreement grants leaseholders the power to replace the management company if its service is unsatisfactory.
As BTR apartments are typically sold on a leasehold basis, investors should seek professional advice to review the terms of the lease agreement to ensure there are no unexpected surprises down the line.
As with any property investment, the BTR sector has its pros and cons. However, those who conduct thorough due diligence have the opportunity to build a profitable and stable portfolio while contributing to the UK’s housing supply.
Who Lives in Build to Rent Properties?
The tenant profile for Build to Rent (BTR) properties is evolving, offering landlords access to a large and growing pool of renters. A significant factor driving this trend is the current economic climate, where rising house prices and interest rates are creating major barriers for first-time buyers. As a result, many who would have previously purchased a home are now remaining in the rental market for longer.
A recent report by the British Property Federation (BPF), the Association for Rental Living (ARL), and BusinessLDN, in association with PriceHubble, sheds light on the demographics of BTR tenants.
The majority of BTR tenants are under the age of 35, with the dominant age group being 25 to 34 years old (51% of BTR tenants). This is a higher concentration than in the broader Private Rented Sector (PRS), where this age group accounts for 42% of tenants.
Interestingly, the proportion of tenants aged 35-44 living in BTR properties has increased by 3% in the last year. This suggests that BTR is becoming an appealing option for an older demographic, likely due to changing lifestyle preferences and the ongoing difficulties of getting onto the property ladder.
It is also worth noting that an Inside Housing report has shown that students make up a significant portion of BTR tenants, accounting for three in ten residents, which could be an indication that university towns and cities should be on the radar for those considering where to invest.
Where to Invest?
The success of a Buy-to-Let investment often hinges on its location, and this is true with the BTR sector. Unsurprisingly, LHS research has shown that London and Greater Manchester hold the majority of existing Build to Rent properties. According to Savills, almost 25% of PRS stock in Manchester is now BTR.
However, 60% of BTR units currently under construction are located outside these two historic strongholds, showing just how widespread the development activity is across the UK.
Birmingham is leading this regional charge and is now recognised as the fastest-growing BTR market outside London. The UK’s second city has over 16,000 units either under construction or with planning approval, and its BTR stock grew by 29% in 2024.
Cities and towns with younger populations, good employment prospects, and even a large student population could provide a fruitful market for those considering adding a BTL apartment to their portfolio.
The Future of Build to Rent
The Build to Rent (BTR) sector is poised for continued growth, fuelled by a robust development pipeline and a projected record-breaking £6 billion in investment for 2025. However, this expansion is not without its challenges. The sector must navigate issues such as rising construction costs, evolving tenant demands, and the need for greater regulatory clarity to reach its full potential. Despite these hurdles, the substantial investment and strong demand for quality rental housing suggest a promising future for BTR as a key component of the UK’s housing strategy.
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