Investors see scale in single-family housing drive

Institutional capital is reshaping the UK housing landscape, with single-family housing emerging as a major area of opportunity. At a roundtable at UKREiiF, industry leaders discussed how institutional investors are responding to supply-demand imbalances, aligning for scale and integrating social impact across the residential spectrum.

Colin Thomasson, head of UK investment properties at CBRE, noted the shift. “There is a huge focus on urban build-to-rent. We can see the difference it’s had on city centres such as Leeds,” he said. “However, in the last year or two, the real focus has been on single-family housing. Last year single-family was over half the capital that was deployed into the living sector, £2.5bn.”

The shift is being driven by strong fundamentals and a broader international appeal. “Single family housing is where we’re seeing the intersection of domestic capital but also international capital coming together at scale,” said Catriona Buckley, senior director of client solutions at CBRE Investment Management. “We have colleagues looking after some of our sovereign wealth fund clients in Asia and just last week they’ve said, ‘OK, we want to explore single family housing in the UK’.”

A perfect crisis

Andrew Davey, fund manager at CBRE Investment Management, urged a reframing of the housing “crisis” as an investment opportunity: “It’s a crisis because there’s a lack of supply and a massive amount of demand. If you put that on paper to investors, that is the perfect universe for investor returns.”

For Johnny Caddick, managing director of Moda Living, the opportunity in single-family housing is clear but the delivery challenges are often underestimated. “We started our single-family platform in 2020, just coming out of Covid,” he said. “The idea was to do self-build, and then the housing market exploded in 2021. You couldn’t get land. You couldn’t talk to a housebuilder about selling to yourself as a fund. It was an extreme dislocation.”

That market shift required a hands-on approach: “We had to work with housebuilders, educate them about what the product is, about institutional quality, and hold their hand all the way through the process,” said Caddick. “And we’ve also had to work closely with local authorities, especially in Scotland, where we’ve spent a lot of time showing what a rental product really means, giving customers choice, not just replicating old landlord-tenant models.”

Kevin Etchells, head of real assets at the Greater Manchester Pension Fund, echoed the need for a long-term, integrated view. “We don’t necessarily segment it between BTR, single-family, we see it as housing and creating the right product for the right area, we’re looking at it as infrastructure, effectively wanting to own assets for 20–30 years.”

Scale was a recurring theme through the discussion. “There are a lot of managers that are trying to go into the sector because that’s where they think capital would go,” said Buckley. “The largest housing fund is about 5,000 homes at the moment. In pan-European, it’s 150,000.”

For Etchells, sub-scale funds limit impact. “There’s been 47 fund investments from LGPS in housing over the past 10 years. Of those, 77% are below £50m and the average ticket size is £27m. There’s a real captive capacity here, but we need to be more ambitious.”

Risk and return

Social impact is increasingly woven into strategies. “From an operational perspective, social impact is first and foremost down to the customer,” Caddick said. “We’re trying to create a lifestyle, create communities and look after people. We’ve delivered most of our regional projects in regeneration areas – places where others wouldn’t build, and we’ve helped stitch communities back together.”

Davey pointed to CBRE IM’s Affordable Housing Strategy as a bellwether. “It was launched not just as a residential strategy, but also as our flagship impact fund, it’s a given that risk and return needs to be part of that journey.”

To scale effectively, government and private capital must collaborate. Thomasson urged more strategic public investment: “If all of [the funds] are subscale and not delivering their general thesis, then you’re not going to get to 1.5m homes, the capital that government is prepared to deploy, needs more flexibility attached to it.”

Etchells added: “It’s not a capital problem. We need to do everything we can to just drive more collaboration between the various stakeholders.”

Buckley noted a significant shift among infrastructure investors: “The traditionally held view of infrastructure is that it’s dams and motorways, but the wider description encompasses housing and social infrastructure.”

While challenges persist, Caddick remains optimistic: “Partnerships with capital that take a medium to long-term view, like Homes England or the West Midlands Combined Authority, are key. And we’re seeing real momentum now as housebuilders, local authorities and investors begin to understand that rental, done right, can be part of the solution to the housing crisis.”

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