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Build-to-Rent Boom: Why Institutional Investors Are Pouring Billions Into UK Rental Housing

News · February 14, 2025 · Daily Junction Editorial Team · 10 min

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Build-to-Rent developments have surged across the UK, with institutional investors committing over £12 billion to purpose-built rental housing in 2024. The sector now accounts for 8% of all new housing starts, offering professional management and longer tenancies—but critics warn it is driving up rents and reducing homeownership opportunities.

Build-to-Rent (BTR) has emerged as one of the fastest-growing sectors of the UK housing market, with institutional investors pouring over £12 billion into purpose-built rental developments in 2024 alone. The sector, which barely existed a decade ago, now accounts for 8% of all new housing starts and has delivered 78,000 rental units across the country, with another 50,000 in the pipeline.

For tenants, BTR offers longer tenancies, professional management, and on-site amenities that traditional buy-to-let landlords rarely provide. For investors, it offers stable, inflation-linked returns in a market where homeownership is increasingly out of reach for younger generations. But critics warn that the BTR boom is entrenching a "generation rent" model, driving up rents, and reducing opportunities for people to buy their own homes.

What is Build-to-Rent?

Build-to-Rent refers to purpose-built apartment buildings designed and constructed specifically for long-term rental, rather than for sale to individual homeowners. Unlike traditional buy-to-let, where individual landlords own one or a few properties, BTR developments are owned by a single institutional investor—typically a pension fund, insurance company, or specialist real estate investment trust (REIT)—and managed professionally.

BTR developments are typically large-scale, with hundreds of units in a single building or complex. They are concentrated in city centres and urban areas with strong rental demand, and they target mid-to-high income renters, often young professionals who cannot afford to buy or prefer the flexibility of renting.

The key features that distinguish BTR from traditional rental housing include:

• Longer tenancies: BTR landlords typically offer tenancies of three years or more, compared to six or twelve months for traditional buy-to-let. This provides tenants with greater security and stability.
• Professional management: BTR developments are managed by dedicated teams, with on-site staff, 24/7 maintenance, and digital platforms for reporting issues and paying rent.
• On-site amenities: Many BTR buildings include gyms, co-working spaces, communal lounges, roof terraces, and concierge services, similar to luxury apartment buildings in the US.
• Predictable rent increases: Rents are typically reviewed annually and linked to inflation or a fixed percentage, rather than being subject to arbitrary increases.
• Pet-friendly policies: Many BTR landlords allow pets, recognising that this is a key concern for renters and a competitive advantage.

The growth of the sector

The UK BTR sector has grown rapidly since the early 2010s, driven by a combination of policy support, investor demand, and demographic shifts.

According to the British Property Federation (BPF), there were just 5,000 BTR units in the UK in 2012. By the end of 2024, that number had grown to 78,000 completed units, with another 50,000 under construction and a further 30,000 in planning. The sector attracted over £12 billion in investment in 2024, making it one of the most active areas of the UK property market.

Geographically, BTR is concentrated in major cities. London has the largest number of BTR units, with around 28,000 completed or under construction, followed by Manchester (14,500), Birmingham (9,200), Leeds (4,800), and Glasgow (3,600). Manchester has been particularly successful in attracting BTR investment, with its lower land costs, strong rental demand, and supportive local planning policies making it the UK's leading BTR city outside London.

The growth has been supported by government policy. In 2017, the government introduced a specific planning definition for BTR, allowing local authorities to require BTR developments to provide affordable housing in the form of discounted rental units rather than shared ownership or sale. This made BTR more viable by allowing investors to retain ownership of the entire development.

Tax changes have also played a role. The reduction in mortgage interest tax relief for buy-to-let landlords, introduced in 2017, made traditional buy-to-let less attractive, while BTR investors—who typically use corporate structures—were unaffected. The 3% stamp duty surcharge on additional properties also discouraged individual landlords, while institutional investors buying entire developments were less impacted.

Who is investing and why?

The investors driving the BTR boom are primarily institutional: pension funds, insurance companies, sovereign wealth funds, and specialist real estate investment trusts (REITs). These investors are attracted by the stable, long-term income that rental housing provides, particularly in a low-interest-rate environment where bond yields are unattractive.

Major investors in UK BTR include:

• Legal & General: The UK insurance giant has invested over £3 billion in BTR, with developments in major cities including a 1,500-unit scheme in Salford.
• Greystar: A US-based BTR specialist that has become one of the largest BTR landlords in the UK, with over 10,000 units under management.
• Sigma Capital: A UK-based developer and investor focused on regional cities, with major schemes in Manchester, Birmingham, and Edinburgh.
• M&G Real Estate: The asset management arm of M&G, which has committed over £1 billion to UK BTR.
• Pension funds: Including the Universities Superannuation Scheme (USS) and local government pension schemes, which see BTR as a stable, inflation-linked asset class.

For these investors, BTR offers several advantages over other property sectors:

• Stable income: Rental income is less volatile than commercial property rents, which can fluctuate with economic cycles and tenant turnover.
• Inflation protection: Rents typically rise with inflation, providing a hedge against rising prices.
• Scalability: Owning entire buildings is more efficient than managing portfolios of individual buy-to-let properties, with lower management costs and easier financing.
• Regulatory stability: The UK's rental regulations are relatively landlord-friendly compared to many European countries, with no rent controls and limited tenant protections (though this is changing).
• Demographic tailwinds: High house prices, limited mortgage availability, and cultural shifts toward urban living and flexibility all support long-term rental demand.

The tenant experience

For tenants, BTR offers a different experience to traditional buy-to-let. The key advantages are longer tenancies, professional management, and on-site amenities.

Longer tenancies provide security and stability, allowing tenants to put down roots, invest in their homes, and avoid the stress and cost of frequent moves. Professional management means faster maintenance, clearer communication, and less risk of disputes with landlords. On-site amenities—gyms, co-working spaces, communal areas—add value and convenience, particularly for younger renters who prioritise lifestyle and flexibility.

However, BTR is not without downsides. Rents are typically higher than comparable buy-to-let properties, reflecting the higher quality, amenities, and professional management. According to Savills, BTR rents in Manchester average £1,200 per month for a one-bedroom apartment, compared to £950 for a similar buy-to-let property.

Tenants also have less negotiating power with large corporate landlords. While individual buy-to-let landlords may be willing to negotiate rent, accept late payments, or overlook minor issues, BTR landlords operate on standardised terms and are less flexible. Rent increases are predictable but also inevitable, with most BTR leases including annual uplifts linked to inflation or a fixed percentage.

There are also concerns about the corporatisation of rental housing. Some tenants report feeling like customers rather than residents, with impersonal management, aggressive enforcement of rules, and a focus on maximising revenue. The on-site amenities, while attractive, are often underused and may be seen as justifying higher rents rather than adding genuine value.

The impact on the housing market

The BTR boom has sparked debate about its impact on the wider housing market. Proponents argue it increases housing supply, improves rental quality, and provides homes for people who cannot or do not want to buy. Critics argue it reduces homeownership opportunities, drives up rents, and entrenches a model where institutional investors profit from high housing costs.

The case for BTR:

• Increases supply: BTR adds to the overall housing stock, particularly in city centres where development is otherwise limited. The 78,000 BTR units completed by 2024 represent homes that might not have been built otherwise.
• Improves rental quality: BTR developments are typically higher quality than older buy-to-let stock, with modern design, energy efficiency, and professional management.
• Provides security: Longer tenancies and predictable rent increases give tenants stability that traditional buy-to-let often lacks.
• Meets demand: High house prices and limited mortgage availability mean millions of people will rent for the foreseeable future. BTR provides a better rental experience than the alternative.

The case against BTR:

• Reduces homeownership: BTR developments occupy sites that could be used for homes for sale, reducing opportunities for first-time buyers. In some cities, BTR accounts for over 20% of new housing, crowding out affordable homeownership.
• Drives up rents: BTR rents are higher than buy-to-let, and the presence of high-quality BTR developments can push up rents in surrounding areas as landlords seek to match the market.
• Entrenches generation rent: BTR normalises long-term renting and benefits institutional investors at the expense of individual ownership. It creates a two-tier system where older generations own homes and younger generations rent from corporate landlords.
• Limited affordability: BTR targets mid-to-high income renters and does little for affordability at the lower end of the market. The "affordable" units required by planning policy are often set at 80% of market rent, which is still unaffordable for many.

The evidence is mixed. BTR does increase supply, but it is concentrated in city centres and targets a specific demographic. It improves rental quality for those who can afford it, but does little for low-income renters or those seeking homeownership. Whether it is a net positive or negative depends on your perspective and priorities.

Regional variation

The BTR boom is not evenly distributed. London, Manchester, and Birmingham dominate, while many smaller cities and towns have little or no BTR activity.

Manchester has been particularly successful, with its lower land costs, strong rental demand from young professionals and students, and supportive local planning policies making it attractive to investors. The city's 14,500 BTR units represent nearly 20% of the UK total outside London, and major schemes like the 1,500-unit Angel Gardens development have transformed parts of the city centre.