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Inflation and labour shortages slowdown in BTR growth

A new analysis published today by the British Property Federation (BPF) shows the total number of Build-to-Rent (BTR) homes in planning, under construction or completed increased by 14% in 2022, rising from 212,916 to 242,548. Still, economic headwinds are stalling activity due to inflation.

The analysis, conducted at the end of the fourth quarter in collaboration with Savills, shows a slowdown in the growth of the BtR sector, which has increased by an average of 28% per year since 2017.

A slowdown in BtR construction was pronounced in Q4, with build cost inflation, labour shortages and broader economic uncertainty meaning that construction starts were 24% lower than in the same period in 2021 (15,600 in 2022; 20,400 in 2021).

Despite the current challenges, the BtR pipeline remains robust, with 113,379 units in planning, up 14% year-on-year. The regions are set to see a significant increase in activity with a 17% annual increase in units in planning. The expansion of the BtR sector is further evidenced by the fact that 180 local authorities now have completed BtR homes or units in the pipeline, up 29% in Q4 2021.

Ian Fletcher, Director of Policy, British Property Federation, comments: “The Build-to-Rent market had continued to grow over the past twelve months, but we see a slowdown in activity as inflation and an uncertain economic backdrop makes it more challenging to deliver.

“In the long-term, we expect the sector to continue to expand as a vital component of overall housing delivery, but Government must be careful not to stymie its progress. The watering down of national housebuilding targets may mean there is less urgency around allocating land for residential development. There is already evidence that the rent cap introduced in Scotland, and being debated in Bristol, is deterring investment. The BtR sector has a major role to play in urban regeneration and levelling up, and we cannot take its success for granted.”

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