John Connor, partner and head of financial institutions sector at Womble Bond Dickinson, discusses how best to invest in the build-to-rent (BTR) sector
The UK’s build-to-rent (BTR) sector has evolved rapidly over the past decade, moving from a niche investment strategy to a central pillar of housing delivery.
With institutional capital driving large-scale developments across cities and regions, BTR is now recognised not only for its commercial viability but also for its potential to address housing shortages, regenerate urban areas and offer professionally managed rental homes at scale.
An ever-evolving environment
Yet, as the sector matures, it faces a more complex operating environment. Planning constraints, regulatory reform and delivery risk are increasingly shaping investor confidence and influencing how schemes are financed and built. BTR presents both opportunity and challenge across planning, development, construction and funding.
Unlocking its full potential will require strategic legal guidance, policy alignment and a shared commitment to quality and sustainability.
The investment landscape remains broadly optimistic. According to our latest insights report, Building Blocks: Unlocking the Potential of UK Build-to-Rent, 75% of developers rate the current investment environment as favourable, with 26% describing it as ‘very favourable’. Funders echo this sentiment, with half reporting a strong appetite for lending to the sector and 39% viewing BTR as more resilient than other real estate classes.
This confidence is underpinned by strong rental demand, promising returns and growing recognition of BTR’s long-term potential, both domestically and among overseas investors.
Developers recognise, and back themselves to be able to overcome planning delays, and construction risks such as cost overruns, supply chain issues and labour shortages. These pressures have to be managed as increasing costs erode profitability, which is compounded where schemes are debt-funded and delays lead to increased interest costs.
The Building Safety Act has changed
In addition, BTR schemes often include buildings that are 18 metres or higher, bringing them into the scope of the Building Safety Act. The Act has delivered much-needed improvements to building regulations in the wake of Grenfell, but teething issues with the administration of those regulations have led to delays that make sector participants nervous.
According to our report, 96% of developers believe the Building Safety Act and related regulations have had a depressive impact on delivery. As it can take up to a year for schemes to receive Gateway approval, the strength of that sentiment is understandable.
The policy landscape adds further complexity. Housing is a devolved matter, and the governments in England, Scotland, Wales, and Northern Ireland are each pursuing different strategies to support BTR. In Scotland, Wales and Northern Ireland, public sector bodies are already using or developing grant funding and rent guarantee schemes to stimulate BTR delivery and expand housing supply. These mechanisms are helping to de-risk projects and attract institutional capital into markets that might otherwise be overlooked.
In England, government support is often delivered through the Homes and Communities Agency, Homes England. Increasingly, it plays a pivotal role in BTR deal activity – not just as a funder, but as a strategic partner. By collaborating with developers and local authorities, Homes England can step in to do what traditional lenders often cannot, unlocking stalled sites, supporting regeneration and enabling delivery in areas of acute housing needs. Local authority pension funds are also emerging as a new source of liquidity, offering long-term capital aligned with the sector’s investment horizon.
This divergence in policy and funding approaches across the UK is creating a patchwork of opportunity. For investors, understanding the nuances of devolved housing strategies is becoming as important as assessing site viability or rental demand. In some cases, the availability of public support, whether through grants, guarantees or infrastructure funding, can be the deciding factor in whether a scheme proceeds.
In this evolving context, investors are becoming more selective. The fundamentals of location and demand remain important, but they are no longer sufficient. What’s increasingly shaping investment decisions, and determining whether projects succeed or stall, are five interrelated factors that go beyond the balance sheet. These insights could be the difference between success and stagnation in UK build-to-rent:
1. Planning certainty and local authority engagement
Planning remains one of the most cited barriers to BTR delivery. Developers are prioritising locations with clear housing strategies, consistent policy interpretation and a track record of supporting BTR. Where local authorities understand the model and its potential to support regeneration, tenure diversity and long-term stewardship, schemes are progressing more smoothly. But inconsistency across planning departments continues to frustrate delivery.
The Levelling Up and Regeneration Act has introduced new powers for local authorities, including design codes and infrastructure levies. While these aim to improve design quality and accountability, they also risk creating inconsistency and delay. For planners, early engagement, clear guidance and a willingness to treat BTR as a distinct tenure are essential to unlocking sites.
Some local authorities have embraced BTR as a tool for urban renewal, while others remain cautious – often due to concerns about affordability or the perceived loss of opportunities for home ownership. This inconsistency creates uncertainty for investors, who must weigh the risk of prolonged planning negotiations against the potential for long-term returns.
Here, planning certainty is foundational. Without it, capital is likely to flow to other sectors or geographies. The ability to secure timely, predictable planning outcomes is now a key differentiator in investment decisions.
2. Regulatory stability and legal clarity
The sector is navigating a period of significant regulatory change. The Renters (Reform) Bill proposes open-ended tenancies and the abolition of Section 21 ‘no fault’ evictions. While the intent is to improve tenant security, the lack of clarity around implementation is causing concern among investors and operators.
The administrative burden of compliance, coupled with delays in registration and inspection, is slowing delivery and increasing costs. Developers of future schemes should benefit from lessons learned during this transitional phase, and advisors can help clients navigate the new obligations. Continued investment is needed to ensure there are enough Building Safety Regulators to meet the demand of the market.
For investors, regulatory stability is a key determinant of risk appetite. Sudden policy shifts, such as rent controls, tax treatment, or safety compliance, can undermine financial models and deter long-term capital. Legal advisors play a critical role in interpreting legislation, anticipating change and ensuring that schemes are structured to withstand regulatory headwinds.
3. Sustainability and ESG integration
Environmental, social and governance (ESG) factors are now central to investment decisions. BTR’s long-term ownership model makes it well-suited to sustainable development, but expectations are rising. Investors are looking for schemes that demonstrate measurable ESG outcomes, from energy efficiency and biodiversity to social value and community engagement.
Our insight report highlights that almost all developers (95%) consider ESG important in their decision-making, including funding strategies and design principles. This is not just about compliance, it’s about differentiation. Schemes that can demonstrate strong credentials are more likely to attract capital, secure planning consent and command tenant loyalty.
For planners and developers, this means aligning with both local policy and investor mandates. For contractors, it means adopting low-carbon construction methods and ensuring buildings are future-proofed for operational efficiency. ESG has become a fundamental part of delivering both resilient communities and securing investment – central to how investors assess and evaluate long-term value and impact.
4. Operational performance and design for management
As the sector matures, operational excellence is becoming a key differentiator. Investors are increasingly focused on occupancy rates (36%), operator experience (42%) and government policies and regulations (34%). This is influencing everything from the mix of home sizes and types (known as unit mix) and amenity provision to digital infrastructure and maintenance strategies.
Designing for long-term management and not just initial delivery is now essential. Developers are also under pressure to work with experienced operators, which can constrain competition and limit innovation. This is because established operators often have favoured tried-and-tested models, which can reduce opportunities for newer or smaller players to enter the market or propose alternative approaches. It can also lead to more standardised schemes, leaving less room for creative design, emerging technologies or locally tailored solutions. The challenge is to balance standardisation with flexibility, ensuring schemes are both efficient and responsive to local needs.
Operational data is also becoming more important. Investors want to see evidence of performance, not just projections. This includes metrics on tenant retention, maintenance costs, energy use and customer satisfaction. For developers, this means building in systems that support data collection and reporting from day one.
5. Innovation financing and public-private collaboration
The funding landscape is diversifying. While institutional capital remains dominant, developers are exploring alternative models, including private equity, fintech platforms and public-private partnerships. Research in our report reveals that developers are expecting a broader mix of funding sources over the next decade.
24% of investors surveyed anticipate a decline in traditional bank loans, driven by tighter lending regulations. In response, 37% expect government-backed or incentivised funding to play a larger role. Interest in alternative financing models is also growing – 35% foresee increased use of models such as crowdfunding and fintech platforms, with a similar proportion expecting greater international investment. Private equity is set to become more prominent, with 30% anticipating more involvement, while another 30% point to rising interest in green finance and ESG-compliant funds.
Reflecting this shift, ‘increased funding and incentives’ was also the most popular answer when developers were asked what additional government actions would support their goals, marking public finance as being crucial to the sector’s continued growth.
The future of UK build-to-rent
Forward-funding agreements and income-strip leases are helping to de-risk delivery, but they require careful legal structuring and a clear understanding of investor expectations. Collaboration with local authorities, particularly on infrastructure and land assembly, will be key to unlocking complex or marginal sites.
Legal advisors must help structure deals that align public and private interests, manage risk and ensure long-term viability. Access to flexible and innovative funding is often the tipping point for investors between moving forward or walking away.
The UK build-to-rent sector has demonstrated its resilience and relevance. But its continued growth depends on how effectively it can navigate the current regulatory and delivery landscape. For planners, developers and construction professionals, the focus must now shift from ambition to execution, ensuring that schemes are not only fundable, but buildable, sustainable and aligned with long-term community needs.
The five factors outlined – planning certainty, regulatory clarity, ESG integration, operational performance and innovative financing – are not just technical considerations. They are the strategic levers that will determine whether BTR continues to scale or is stymied under the weight of complexity. Each represents a critical decision point for investors, and together they form a framework through which the sector’s future will be shaped.
What’s clear is that BTR is no longer just a housing product; it’s a delivery model, a policy tool and a long-term investment strategy. It requires a joined-up approach across disciplines and sectors. Legal advisors, planners, developers, funders and local authorities all have a role to play in ensuring that the sector delivers on its promise.
If the right conditions are in place, BTR will help address the UK’s housing crisis, support economic growth and raise the standard of rental living. But if those conditions are neglected, and planning remains inconsistent, regulation is unpredictable, or funding is inaccessible, the sector risks losing momentum at a time when it’s needed most.
The next phase of BTR will be defined not by scale alone, but by quality, resilience and collaboration. The insights driving investment today will shape the communities of tomorrow.
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