April 16, 2025
Charles Allen, Head of European Real Estate, recently spoke with IREI about the rapid expansion of the UK single-family rental housing market.
When the Labour party came to power in the summer of 2024 in the United Kingdom, it announced a raft of changes to the country’s planning system. It also committed to addressing housing shortages, by delivering 1.5 million homes, including build-to-rent(BTR) properties, and provided £2 billion (€2.4 billion) of additional guarantee capacity towards delivery of more than 10,000 more BTR homes.
The UK government’s plans have been a fillip to the UK’s BTR sector — and its single-family homes (SFH) subsector in particular, which had already been booming before the2024 UK general election.
A 2025 report from Knight Frank on the SFH segment reveals that 2024 saw a record 31SFH deals complete nationwide in the United Kingdom, up 24 per cent year-over-year and more than double the level in 2022. It also showed investment into SFH reached £1.8billion (€2.1 billion) in 2024, and that the total invested since 2020 has now reached £4.4billion (€5.3 billion). In 2024 alone, more than 3,000 SFH homes were completed.
Furthermore, the consultancy’s 2023 survey of more than 50 of the largest investors in the UK living sector found that nearly three-quarters (71 percent) of respondents said they were planning to target the SFH subsector within the next five years.
Managers have also been active in the space. James Stevens, head of investment for global real estate at Aviva Investors, reveals that since the final quarter of 2022, the manager has committed over £500 million (€597 million) of capital to single-family rental property alone.
2025 started with notable SFH investment announcements, providing further evidence of the sector’s forward momentum. In January, Long Harbour, which first invested in SFH in2013, reported that it had secured a £300 million (€359 million) equity commitment from South Korea’s National Pension Service for its SFH housing fund. It said that the fund would be acquiring forward-funding, forward-purchase and standing-stock opportunities and targeting new-build family homes across the United Kingdom, focusing on the South and Southeast of England.
In the same month, Kennedy Wilson reported it had purchased more than 650 units from three housebuilders across seven development sites in the United Kingdom, for a total price of £213 million (€255 million).
Commenting on the growth of the sector, Simon Martindale, fund director at Swiss Life Asset Managers UK, says: “What stands out is the sheer scale of overseas investment now coming into the market from the likes of Blackstone, Kennedy Wilson, South Korea’s National Pension Service and others. This is in addition to the allocations coming from traditional UK institutional investors, which continue to diversify away from traditional commercial sectors.”
Considering what might be the most attractive or popular market segments of SFH, Stevens says: “We strongly believe that the investment approach must be tailored to the location.
“To select potential locations for investment, we use a bespoke proprietary toolkit using22 key metrics. We assess macro fundamentals and analyse demographics, with a particular focus on historic and forecast growth of populations, particularly the 25 to 45age bracket.
“Historic residential market data are key metrics; these include the number of dwellings in a location, as well as rental-growth statistics. Our analysis will also consider the location’s connectivity to green spaces, employment hubs and local amenities, while also ensuring the split of two- three- and four-bed homes is in line with demand.”
Laying the foundations
While the United Kingdom has traditionally leaned more towards buying rather than having a culture of renting, the cost of purchasing property has become a deterrent —and this state of affairs is unlikely to change anytime soon.
BNP Paribas Real Estate notes in its Q4 living market update that the BTR and SFH sectors have been benefitting from the structural fundamentals of the housing market, with demand for homes to rent outstripping supply.
“Due to increasing affordability constraints, particularly amongst young people, we expect home ownership to continue to fall in line with current trends,” says Martindale.
Mike Pegler, president of Kennedy Wilson Europe, agrees, pointing out a shortage of 2.1million homes in the United Kingdom following missed housing targets over the last 20years. “The current supply-and-demand imbalance is a significant driver of investment activity into the UK SFH market,” he says. “This is still a nascent sector with limited institutional capital invested to date, and we see significant opportunity for that to grow in the years ahead,” he adds. “SFH developments can provide a resilient, inflation-proof income stream for investors, while supporting growing local economies across the United Kingdom and accelerating the delivery of much-needed, good-quality housing.”
No limit?
While it has already made significant progress, SFH could have even further to go.
“The appeal of SFH as an institutional asset class lies partly in the sheer size of its addressable market,” explains Charles Allen, head of European real estate at Fiera Capital.
“Over half of the UK’s 5 million-strong rental population lives in the suburbs, where SFH is concentrated, yet as few as 10,000 of these are served by a professionalised product. This means there is a huge opportunity for [the sector] to grow.”
Knight Frank estimates there are some 3.1 million renters already living in suburban households across the United Kingdom, with only 0.2 percent of current privately rented homes operated by institutional investors. Jack Hutchinson, a partner in Knight Frank’s residential investments team, believes the size of the opportunity within SFH is “immense”.
“We’re only scratching the surface,” he says.
“Our projections suggest the market could absorb more than 1 million SFH homes at full maturity. Given the size of the demand pool, we expect SFH delivery to eventually overtake multifamily as the market continues to evolve,” he adds.
For Oscar Kingsbury, portfolio manager for PGIM Real Estate’s UK affordable housing strategy, it is not entirely clear yet whether SFH will turn into the behemoth of its category, but he also acknowledges its potential: “There are a number of commentators in the market forecasting the ultimate size of the UK SFH sector and that it will eventually be larger than other types of UK institutional, rental, residential housing stock,” he says.
“This may or may not come to fruition. However, what we do know is the institutional SFH market is currently very small, so there is a significant opportunity for growth into a market which has been dominated by noninstitutional landlords.”
Getting in on the ground floor
Investors seeking to gain exposure to SFH can approach the segment in a range of ways.
“As the sector is maturing, institutional investors are increasingly turning to housebuilder partnerships in the form of forward-funding or joint-venture (JV) models, where housebuilders deliver purpose-built stock funded by institutional investors, who then operate the assets as part of a scaled portfolio,” says Allen.
“Investors can scale their portfolios quickly this way, as it enables the development of large schemes with high build-and-design quality, which exemplify the very best sustainability credentials.”
Whichever route chosen, Kingsbury says it is fundamental to consult an expert: “We believe that it is vital for investors to select an asset manager or investment manager that has experience of acquiring, owning and operating SFH.”
Other BTR categories are of course available, such as multifamily homes (MFH), but when comparing SFH returns with those of MFH, SFH appears to have the edge, says James Nicholls, investment manager at Thriving Investments.
“In the current market and on a risk-adjusted basis, SFH returns on the whole are seen as more attractive than MFH,” he says. “From a cashflow perspective, SFH becomes income-producing far more quickly than MFH, as housebuilders are generally able to hand over completed houses within around six to eight months from start on-site.”
This presents investors with less risk exposure to development and construction, and given the generally lower price points relative to inner-city flatted schemes, yields are more attractive, adds Nicholls.
Hitting the wall?
While further SFH growth is broadly anticipated, there are some possible headwinds on the horizon.
There is the possibility that the current attraction to rental could wane, as it becomes increasingly expensive. Zoopla’s March rental market update reports the annual cost of UK rent is up by £3,000 (€3,580) to an average of £15,400 (€18,400) per year — and is expected to rise by another 3 percent to 4 percent during 2025.
Furthermore, it is also possible that the UK government may need to ramp up its plans to increase development and tackle the housing crisis. Martindale says: “We suspect that the government will have some success in increasing the supply of housing if relaxation of planning rules occurs. However, it needs to focus more on providing a larger construction workforce.
“Private capital, including the ability to attract international investment, is critical to the supply of new housing. But in an environment of rising labour and material costs and higher interest rates, it is difficult to make development appraisals stack up in all but the most prime locations,” he argues.
Martindale underlines how government support for underinvested locations is critical to ensure the delivery of high-quality homes that people can afford. The trade-off is often that although the public sector makes an initial capital loss, the added value to the local economy more than makes up for it and primes further investment into deprived locations.
Reflecting on other potential obstacles, Jack Spearman, managing director at Long Harbour, says uncertainty on legislation is a current challenge, with the Renters’ Rights Bill still making its way through Parliament. If the bill becomes law, it will allow tenants to challenge rent increases and make it much harder for landlords to evict tenants.
“We are waiting to see what the final piece of legislation will mean in practice,” says Spearman.
In addition, he stresses, supply pipelines have been constrained by a lack of planning. “There are hopes that planning reform will drive change here, but it will take time,” he says. “There are also some operational complexities that are still an unknown due to the nascency of the market.”
One perceived hurdle — NIMBYism — however, may not be as hard to overcome as once feared. The UK Prime Minister, Sir Keir Starmer, has been vocal about addressing the bugbear of NIMBYism, but its ability to hold back the SFH market may have been overstated.
“While NIMBYism will always be an issue, there is enough brownfield land in the United Kingdom to build over 1.2 million homes,” says Nicholls. “This is land that’s already been built on that just needs the right scheme and the correct funding support to be brought forward.”
Despite its early stage of development, and potential obstacles and unknowns, the popularity of SFH looks set to build out further. For the foreseeable future, there is no place like single-family homes, for both investors and renters.