Economic headwinds facing the construction industry put the brakes on the build-to-rent sector last year.

Build cost inflation and labour shortages meant that it only grew by 14% in 2022 – adding up to 242,548 homes in planning, under construction or completed - compared to a long-term annual average growth of 28%.

According to the British Property Federation, a slowdown in BTR construction was pronounced in Q4, while the wider economic uncertainty meant construction starts of 15,600 homes was 24% lower than the same period in 2021.

However, it reports that despite these challenges, the BTR pipeline remains robust; expansion of the sector is further evidenced by the fact 180 local authorities have now completed BTR homes, or have units in the pipeline, up 29% on Q4 2021.

Doubled

Investment in the BTR sector almost doubled during 2022, helping to fill the gap left by exiting residential landlords, according to research which showed that £1.17 billion was invested in Q3, up from the £600 million in the same period in 2021. Legal & General and John Lewis are just two of the big names who have signed deals on developments.

‍

Ian Fletcher, the federation’s director of policy, says inflation and an uncertain economic backdrop makes it more difficult to deliver properties, and warns that government must be careful not to stymie the sector’s progress.

“The watering down of national housebuilding targets may mean there is less urgency around allocating land for residential development, and there is already evidence that the rent cap introduced in Scotland, and being debated in Bristol, is deterring investment,” says Fletcher.

“The BTR sector has a major role to play in urban regeneration and levelling up and we cannot take its success for granted.”