The private rented sector is forecast to lose half a million homes during the next decade, leaving a large supply gap that can be filled by the build-to-rent sector, it has been claimed.

Savills’ new report on opportunities for investors in build-to-rent explains that the PRS stopped growing in 2016, fuelled by more buy-to-let investors exiting the market.

Between December 2022 and August 2023, an average of 4,500 buy-to-let mortgages were redeemed every month. It adds: “Assuming these lead to sales, we will lose more than half a million homes in ten years.”

Savills says it would take £250 billion worth of investment to help fund the extra 800,000 to 1,000,000 private rented sector households needed by 2031 and suggests that Single Family Housing (SFH) which is better known as 'buidl to rent' is a key solution to the supply problem – namely, new build, low rise houses in a good location with local amenities.

It explains: “SFH is intended to be owned and operated as a rental product for the long term. Portfolios are viewed as a single entity and investors are not seeking to break up the homes to be sold individually.”

Risk reduced

These homes speed up house building on development sites, which reduces costs, says Savills, effectively encouraging sales of homes before they are constructed, which reduces development risk.

Large-scale investors can also help support the delivery of energy-efficient, sustainable rental properties as 72% of new SFH homes have an EPC rating of B or above, compared with 12% of existing private rental homes.

Savills' director of investment research (main image, inset) adds that 90% of investors are targeting a minimum of EPC B across their portfolios.

The number of local authorities with SFH in their construction pipeline has grown steadily from just four in 2013 to 114 in 2023, encompassing 33% of councils in England and Wales.