Introduction

To tackle the housing crisis, the United Kingdom needs more good homes, across tenures, including private rent and Build to Rent. But more importantly, we need to deliver positive social impact through Build to Rent.

What is Build to Rent?

Build to Rent (BTR) is purpose built, institutionally owned and professionally managed residential property which is rented on the open market. ‘Multifamily’ BTR describes rental apartments in core urban locations and ‘single family rental’ describes houses, usually in suburban areas.

At The Good Economy (TGE), we believe that long-term, institutional investment into the wider BTR sector is critical to delivering the housing the country requires. Moreover, done well, targeted investment into professionally managed BTR could also lift the private rental sector (PRS) into delivering better outcomes for residents, places and the planet as the long-term focus of institutions drives a different approach from traditional landlords.

Growth of BTR Sector

Currently, BTR accounts for just 2% of the UK’s PRS[1] but this is growing. In August 2024, the BTR sector reached its 100,000-home milestone following exponential growth over the last decade[2] and projections indicate that the sector will continue to grow.[3]

Graph: BTR Growth in the UK since 2012[4]

This growth pattern is mirrored elsewhere including across Europe, where investment in BTR is also on the rise, fuelled by increasing demand and supportive market dynamics.[5] In recent years, investment has focused on multifamily schemes in major cities,[6] targeting young professionals[7] – but this is diversifying, reflecting the wider range of needs in the rental market and single family housing has been the largest growth area in 2023-24.

TGE has worked with a wide range of clients operating across the BTR sector – specialising in both single and multifamily schemes, in the UK and across Europe. They include dedicated BTR investors and investment funds, investors apportioning a share of their funds to BTR, as well as developers that raise capital to deliver and operate BTR schemes. All our clients have been looking to measure, manage and maximise their positive social impact – at home, scheme and portfolio levels.[8] While we do not believe there is a ‘silver bullet’ solution, we wanted to share what we’ve learned so far and drive the conversation forward about what ‘good’ looks like and how to achieve it.

How to Drive Positive Social Impact Through Build to Rent

1. The Private Rental Sector (PRS) is a crucial part of our housing system… and it is broken

Accounting for 19% (over 4.6m) of England’s households,[9] the sector – and its renters – are struggling. Rents are rocketing,[10] driven by soaring demand and insufficient supply. Up to 1 million additional rental homes are needed by 2031.[11] Private landlords (currently 98% of the £1.6bn rented sector)[12] are leaving the sector, driven by a range of policy and tax changes, as well as interest rate increases.[13] This often has devastating impacts for tenants, including being made homeless.[14] The number of houses available for rent in 2024 is down 41% on the 2017-19 average.[15] Quality in the PRS is the poorest of all tenures,[16] with research indicating PRS renters have the worst health outcomes (below social renters).[17] Labour’s plans may go some way to helping renters, including the Renters Rights Bill which among other commitments proposes to extend the Decent Homes Standard to the private rental sector.[18] But there’s a long way to go, and concerns around the potential of new policy to inhibit development must be addressed.

2. Renting deserves a new narrative

Renting is a lifestyle choice for some, but a necessity for a large and growing part of the population. Cultural and political narratives often focus on ownership as housing’s holy grail, but we think renters deserve better. Renting does not have to be a second-class tenure. The focus on quality, community and wellbeing that permeates BTR when it’s done well – supported by long-term investment – can help build a powerful counter-narrative. While historically BTR was associated with high-end apartments, evidence shows that developments are increasingly affordable and lived in by the whole spectrum of society.[19] This flexibility and variety supports our view that the housing crisis requires a joined-up, place-based approach to meet the full range of local housing needs across the social and private sectors – bringing in the right mix of public and private investment.

3. BTR operators are incentivised to deliver positive social impact for residents

BTR is a sector where the business case (stable, long-term, diversified cashflow income, usually single-digit financial returns) aligns with resident needs (quality homes, communities people want to live in, secure tenancies, professional management). Put simply, vacancies are bad for business. Investors and operators are incentivised to create places which support health and wellbeing where people are happy in the long term – with a superior offer to the open market. This provides an opportunity to bake in tangible commitments to ensure positive social impact for residents – whether long-term leases, limits on rent and service charge increases, complaint-handling targets, or amenities and events that enhance wellbeing and community-building. And to ensure those commitments are underpinned by quality partnerships with the right property managers to deliver on these ambitions. Investors’ desired returns are possible because of (not in spite of) focus on the core factors that drive positive social impact for residents and communities.

4. BTR can deliver positive local impact – but it requires an intentional approach

There is strong evidence that increasing housing supply – even high-end homes – has a positive impact on local affordability.[20] Moreover, with an intentional approach to social impact delivery, BTR schemes can benefit the local economy. This can be achieved through the development process by, for example reviving derelict / underutilised sites, curating meanwhile uses, working with local developers who create local jobs and training opportunities, prioritising local procurement and supporting local businesses, organisations, community groups and charities. Once operational, ‘porous’ BTR schemes that are well integrated locally can create local jobs, bring in local businesses, creatives, and the community, and encourage residents to spend locally. Where BTR schemes target priority regeneration areas, they can contribute to a wave of catalytic private sector investment as demonstrated by ECF’s Salford project.[21]. The concentration of BTR schemes in areas of high deprivation according to the Index of Multiple Deprivation demonstrates the potential of BTR to support regeneration ambitions.

Graph: BTR in deprived areas according to the Index of Multiple Deprivation[22]

Other great examples of the varied ways social impact can be intentionally driven through BTR schemes – above and beyond accelerating housing delivery – include:

• Simple Life by Sigma champions a people-centred, “boots on the ground” approach to social impact, driven by community engagement, empathy, and deep understanding.[23] Their award-winning LoveToRent 2023 entry showcased a range of impactful community initiatives, from outward bound trips for teenagers and access to horse-riding lessons for disadvantaged children to a community-wide book share program. Simple Life has also implemented a biodiversity initiative in collaboration with local primary schools, brokered an education-focused partnership between local schools and Burton Albion Football Club, and supported charities like Speed of Sight and the NSPCC.[24]
• Way of Life’s scheme for NHS workers during Covid offered vacant apartments to NHS staff at reduced cost to enable them to keep working and avoid putting loved ones at risk. The Wullcomb, Leicester, offered other services including support for those isolating and pamper boxes for NHS staff.  The scheme remains popular with NHS workers and is the highest ranked in Leicestershire by residents according to resident feedback.[25]
• Non-profit education academy Regeneration Brainery – integrated into many BTR schemes – demonstrates how targeted education and employment programmes can have a truly transformative impact on local people and communities, as well as the wider development ecosystem – far above and beyond mandated Section 106 requirements.
• We have supported clients including Get Living to develop bespoke, data driven local needs tools to help them understand scheme locations and define targeted mixed uses and initiatives and support local charities and community groups.

Local benefits don’t occur organically. And there is a difference between maximising positive impact for residents and ensuring the existing community benefits. Maximising positive local impact requires truly understanding the local place and its people. This means:

• Taking the time and effort to engage with local authority stakeholders in the planning and design phase to ensure schemes fit with local plans and serve local housing need – as well as contributing to a joined-up picture in terms of access to infrastructure, amenities etc. In this vein, we also encourage positive, receptive engagement by local authorities towards the BTR sector, and in line with the revised National Planning Policy Framework note the need for increased awareness of the benefits BTR can bring.[26]
• Engaging with and forging a genuine, long-term partnership with the existing local community, and ensuring this informs the scheme’s design and operational plan.
• Reviewing public data sets to understand the high level, quantitative picture. This may include identifying whether the area has particularly poor educational attainment or health outcomes, and looking to incorporate appropriate considerations into the design, development and operation of schemes.

To reinforce the above, positive, empowering and accessible language is crucial, geared towards community understanding and ownership. As the Impact Frontiers’ Social Equity consultation proposes this should focus away from community deficit and towards a focus on assets.[27]

5. BTR can deliver positive environmental benefits compared with alternatives

Building new homes uses more carbon than not building homes or retrofitting existing homes. True. But while we need many more homes and the more vulnerable are struggling most, BTR can be part of a positive solution. Institutional scale capital is needed for large scale retrofit / brownfield redevelopment – and these schemes provide the opportunity to minimise negative environmental impact – significantly increasing onsite biodiversity, preserving greenspace and minimising embodied carbon where retrofit is possible. Moreover, the scale of BTR enables further action to minimise operational carbon, whether through adopting technology at scale to monitor and manage carbon usage or leveraging deals on state-of-the-art carbon saving technology. Moreover, as stated above in point three (3), the long-term nature of BTR investment inherently aligns investor appetite with futureproofing assets, making the case for investment in environmental and social benefits to protect and potentially enhance returns in the future.

6. Impact Measurement and Management is essential

An over-arching impact measurement and management strategy is essential to maximise positive social impact, underpinned by scheme-level delivery plans. Social impact is unlikely to be maximised where intentionality is absent. Many stakeholders are well-versed in social value calculations (monetised social value approaches required for planning, often with a limited focus on the development process). There are also pockets of best practice where large-scale schemes have high quality social impact research and well-being evaluation programmes baked in. And there’s a lot of great language. But underpinning that, two factors are absolutely essential:

Fund / Organisational Level IMM

At the organisation (and Fund) level, impact considerations must be embedded in the investment cycle and measured and managed alongside financial returns. This should include KPIs and targets (ideally with incentives) to hold decision-makers to account for impact and review points to ensure ambitions have held true – supported by strong impact governance structures. These need to be nuanced for different actors in the BTR space, e.g. according to purpose and investment horizon. Underpinning this, there are best-practice examples and standards for impact measurement and management that we believe all BTR investors (and their supply chains) should ascribe to.[28] Tightening regulation and a growing spotlight on green- / impact-washing make this need all the more pressing.

Scheme Level IMM

At the scheme level, impact ambitions must be understood, developed and assessed, based on a deep understanding of local needs and meaningful resident and community engagement. Scheme level baselining and follow-up assessment is key to this.

7. Impact risk must be assessed and actively mitigated

Unfortunately, some concerns around BTR (see point 2) are grounded in real-life examples – such as existing communities priced out of their local areas, or BTR blocks forming siloes that fail to integrate with the wider community. BTR schemes carry impact risk for residents, local communities, and the environment. These risks must be identified at both the strategic and scheme level – and unflinchingly mitigated.

We consider impact risks – the likelihood that an enterprise’s impact on people and planet will be different than expected – against Impact Frontiers’ nine categories of risk.[29]

Those most material to BTR are as follows:

1. Execution risk – the probability that activities are not executed as planned
2. External risk – the probability that external factors disrupt the ability to deliver the impact
3. Stakeholder participation risk – the probability that the expectations and/ or experience of stakeholders are misunderstood or not taken into account
4. Drop-off risk – The probability that positive impact does not endure and/ or that negative impact is no longer mitigated

BTR Risks

Viability

(Execution/ External Risk)

Macroeconomic headwinds have made viability increasingly challenging – with compromises to scheme design required in order to enable or expedite delivery. This may lead to impact being watered down – for example reducing the share of Affordable homes, sustainability characteristics or apartment size. A commitment to consider viability in a transparent way together with a scheme’s impact credentials can help, particularly where difficult decisions are required.

Affordability

(Execution/ External/ Drop-off Risk)

As noted above, BTR is increasingly available across the affordability spectrum, reflective of the wide range of need for good quality rental homes. The risk of affordability challenges for residents can be mitigated by effective resident screening processes, rent-setting approaches that align with accepted affordability thresholds,[30] and commitments to fair, transparent increases. We have seen examples of schemes, like those in the Europe residential strategy managed by CBRE Investment Management, targeting middle incomes households where initial rents are set to not exceed a third of local net median household income – ensuring that housing costs are affordable to the target demographic. Linking increases to CPI ensures they remain affordable over time. Such approaches are well suited to long-term institutional capital – and others.

Wider Community Impact

(Execution/ Stakeholder participation/ Drop-off risk)

Ensuring existing communities benefit from schemes and don’t lose out takes long-term planning, active and open listening (followed by adaptation), commitment, and resources. Ensuring sufficient Affordable homes, engaging community members in co-design, and actively pursuing benefits to local businesses/ jobs etc. during development and implementation are positive supporting strategies.

Central and Local Authorities – and The Big Picture

(Execution/ External Risk)

BTR is not the only piece of the housing crisis solution puzzle – but it has the potential to be an important piece. However, negative stereotypes can prevent its benefits from being leveraged. The NPPF’s recognition of BTR is an important step,[31] but this journey needs to continue. Central and local governments must maintain a bird’s eye view to ensure that the country isn’t just building the homes it needs, but that they are also of the right type and tenure, serving the needs of local people, and maximising positive benefits for residents and wider communities.

8. The sector needs to set itself high standards for achieving social impact, and those standards need teeth

We worked with the Association of Rental Living (ARL) to develop principles that will underpin a Code of Practice for the BTR Industry.[32] We think this is a welcome and important step towards ensuring minimum best practice standards for impact across the BTR industry. It is also a encouraging that the sector wants to differentiate itself from negative stereotypes of landlords. But, as with all these things, it will need teeth to ensure its credibility and encourage adoption. Watch this space for stage two (and in the meanwhile, please provide feedback on the draft principles!)

9. Done well, BTR benefits stakeholders

When considering impact in the context of the investment universe, we recognise that there is a spectrum of capital ranging from traditional investment, through managing ESG risk, to impact investing.[33] Impact Frontiers’ ABC Categorisation helps define investments according to their impact “A – Avoids Harm; B – Benefits Stakeholders; C – Contributes to solutions for underserved Groups.[34]

Provided schemes exceed a sustainable threshold (e.g. they manage the risks mentioned, are considered affordable to residents,[35] aren’t over-crowded, and exceed the decent homes standard), it is our view that most BTR would be categorised as “B”/ Benefits Stakeholders – “by not only acting to reduce harm for all stakeholders, but also maintaining or causing improved wellbeing for one or more groups of people and / or the condition of the natural environment, so that it is within the sustainable range established by the societal or ecological threshold.”

Further, positive impact can be ‘cranked up’. This includes where BTR schemes are first movers in deprived areas targeted for regeneration, engage with the local authority to maximise Affordable tenure provision in a way that provides housing for local people in housing need. Comparative to other developments, BTR schemes can have significant flexibility to adapt tenures and discounts to meet local needs.

10. Looking forward

The sector is evolving as it grows to meet the country’s housing need – impact strategies will need to adapt with it. As BTR investment picks up pace, the sector is also changing shape. In order to sustain its growth, the sector must increasingly embrace affordability.[36] Single family rental – currently just 10% of institutionally owned rental stock – accounted for over 40% BTR investment last year, with the remaining investment in multifamily.[37] Schemes are spreading out from core urban centres into other towns and cities, as well as suburbia, and embracing new markets such as senior living. For us, each BTR strategy provides an opportunity to ensure that investment maximises positive impact for people, places and the planet.

Conclusion

In conclusion, despite challenges within the current market, the BTR sector in the UK is likely to see continued growth. BTR presents a unique opportunity to address the housing crisis while benefiting people and places and minimising harm to the planet at the same time.  By prioritising resident needs, community engagement, and environmental responsibility, BTR can offer a superior rental experience compared to traditional PRS. The sector’s long-term investment approach aligns with creating sustainable, thriving communities. As BTR continues to evolve, it is crucial for the industry to set high standards for social impact, ensuring that this growth benefits all stakeholders and contributes to a more inclusive and resilient housing market.

If you’d like to learn more about our work and how we support our clients, please get in touch.

 

References

[1] Spotlight: Investment in UK Operational BTR – Savills, 2024

[2] Spotlight: Investment in UK Operational BTR – Savills, 2024

[3] £20bn to be invested in Build to Rent schemes over next decade – BTR News

[4] Graph presented by Savills at the NHBC’s Innovator event, November 2024

[5] European Living Sectors Investors Survey – Knight Frank, 2023/24

[6] Build To Rent Map – British Property Federation

[7] Who lives in Build To Rent – British Property Federation 2024.

[8] Social impact refers to real-world social, cultural, economic or environmental wellbeing effects of a business’ activities on individuals and communities.

[9] English Housing Survey 2021-22.

[10] ONS data revealed rents were up 9.2% in the year to March 2024 – the highest annual increase since records began in 2015; Rental housing demand triples say landlords, National Residential Landlords Association, December 2023

[11] The Future of Build to Rent Houses – Summary report, Savills, 2024

[12] Spotlight: Investment in UK Operational BTR – Savills, 2024

[13] Why are landlords leaving the rental market? – CBRE, 2023

[14] Private landlords selling up leaving 2,000 households a month in England facing homelessness, Guardian, 2024

[15] Single Family Housing Report – Knight Frank, 2024

[16] The English Housing Survey (2021/22) found that 23% PRS homes failed to meet the Decent Homes Standard, compared with 10% Housing Association homes, and 17% owner occupied homes.

[17] Renting rather than owning a private sector home linked to faster ‘biological ageing’, BMJ, 2023

[18] Renters (Reform) Bill – UK Parliament, 2024

[19] Who lives in Build to Rent? British Property Federation, 2024.

[20] The Affordability Impacts of New Housing Supply, Greater London Authority, 2023.

[21] ECF (English Cities Fund), a member of TGE’s Place-Based Impact Investment Network, is a partnership between Homes England, Legal and General and Muse.

[22] Graph presented by Savills at the NHBC’s Innovator event, November 2024 based on data from the Index of Multiple Deprivation.

[23] TGE interview with Niamh Waldron, ESG Director, Sigma.

[24] LoveToRent – 2023 Winners

[25] The Wullcomb, Leicester, HomeViews review page.

[26] Proposed reforms to the National Planning Policy Framework and other changes to the planning system, Ministry of Housing, Communities and Local Government, 2024.

[27] Impact Frontiers – Proposed Social Equity Changes to the Norms

[28] Global best practice for impact measurement and management recognises a number of sources, including Impact Frontiers, and the Operating Principles for Impact Management.

[29] https://impactfrontiers.org/norms/five-dimensions-of-impact/impact-risk/

[30] Defining and measuring housing affordability – an alternative approach, Affordable Housing Commission, 2019.

[31] Proposed reforms to the National Planning Policy Framework and other changes to the planning system, Ministry of Housing, Communities and Local Government, 2024.

[32] https://thearl.org.uk/wp-content/uploads/2024/03/ARL_Code_of_Practice_02.pdf

[33] Spectrum of Capital, BVCA

[34] Sustainability performance classifications — Impact Management Platform

[35] In line with the Affordable Housing Commission, we consider housing costs that do not exceed 33% household income as affordable: Defining and measuring housing affordability – an alternative approach

[36] https://www.lsh.co.uk/explore/research-and-views/research/2024/february/build-to-rent-report-2024

[37] https://btrnews.co.uk/sfh-build-to-rent-market-update/