Delivery across the build-to-rent sector slowed in the first quarter of the year, with pinch-points in the development pipeline creating a bottleneck in supply, according to the British Property Federation.
Analysis conducted in collaboration with Savills found that BTR completions now outpace starts, with 12,500 homes completed in the 12 months to the end of March, down 33% on the 2017-2019 average.
The number of homes currently under construction has fallen by 6% compared to Q1 2023, with London taking the brunt of the fall with 16% fewer starts and the regions 1%.
The slowdown in new starts points to the ongoing challenges in the sector, including build cost inflation and planning delays. According to BPF research produced in Q4 2023, 40% of BTR sites take at least a year to achieve planning consent.
The total number of BTR homes in planning fell by 1% between Q1 2023 and Q1 2024, to 108,900.
Despite this, the number of homes with detailed planning permission is the highest on record at 59,000 as the sector continues to push towards the self-set target of delivering 30,000 homes per annum – a 10th of the government’s national housing target of 300,000 homes a year.
Encouragingly, the number of local authorities with BTR in their pipeline has increased, standing at 208. This means that in the 12 months to Q1 2024, a total of 22 new local authorities have added BTR to their supply of homes.
The report shows that between Q1 2023 and Q1 2024, the total sector pipeline, which includes completed homes, those currently under construction or those in various stages of planning, grew by 4% overall.
The total pipeline now stands at more than 265,000, with the BTR market growing by 4% in the regions and by 3% in London.
Ian Fletcher, director of policy at the BPF, said: “The number of built-to-rent homes receiving detailed planning permission is the highest on record, which is testament to the strength of the product, investor appetite, and consumer demand for homes for rent. While it is encouraging that the sector continues to grow, the sector has faced a challenging 18 months.
“The sector needs to grow, so it can service huge rental demand, but policy decisions, such as the shock Budget announcement to abolish multiple dwellings relief, hinder rather than help the sector.”
Guy Whittaker, head of UK BTR research at Savills, added: “Amid slowing build cost inflation, the number of completions in Q1 2024 has overtaken the number of starts for the second quarter in a row, widening to 3,404 homes from a gap of 421 homes in Q4 2023, suggesting that investors are prioritising existing schemes over new ones.
“Although starts are subdued, it is encouraging to see that there are a still number of homes at the construction and permission stage which have the potential to then support the starts we are lacking and contribute to more completions in 2024.”
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