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Build-to-Rent investment volumes will remain robust in 2026
The macroeconomic backdrop will be supportive for the UK living sector in 2026. Inflation is forecast to fall back to the 2% target, enabling the base rate to be cut to 3.5% by late 2026. This will translate to cheaper debt, which will restore accretive financing and bolster investment.
Supply and demand pressures remain acute, though this rebalanced in 2025 as affordability kept tenants in situ. However, the introduction of Assured Periodic Tenancies in May 2026 may increase demand and tenant mobility. Private landlords have continued to exit the sector, and viability challenges have inhibited Build-to-Rent (BTR) supply, particularly in London. The BTR pipeline weakened through 2025, with Q3 data showing a 13% year-on-year fall in construction volumes, with a 29% decrease in London.
BTR investment will remain robust in 2026. Single family BTR will continue to account for a large share of activity, with government housing ambitions creating new opportunities. Multifamily investment will remain focused on stabilised assets in early 2026, with forward-funding deals re-emerging later in the year as viability pressures ease. Purpose-Built Student Accommodation (PBSA) will mirror these trends. Portfolio transactions could increase across the 2026/27 academic cycle, supported by continued appetite for ‘clean and green’ income-producing assets. Core capital is expected to return selectively from mid-2026.
Development activity in the affordable housing sector is expected to increase in 2026. The £39bn Social and Affordable Homes Programme (SAHP), a 10-year rent settlement of CPI+1, a consultation on introducing rent convergence, and the introduction of a National Housing Bank with £16bn of public investment will all support affordable housing delivery.
However, Registered Providers (RPs) will face rising refinancing costs as legacy bonds roll from 2–3% coupons to c. 6–7%. This will drive more joint ventures with for-profit providers, who will also continue to acquire secondhand stock from traditional registered providers.
Operational performance remains robust, with BTR occupancy averaging c. 97% and income growth to persist into 2026. Although some single family schemes have had lease-up challenges, these have been highly scheme-specific and will improve as developments mature. In PBSA, operators are recalibrating strategies following two exceptional rental cycles to promote higher occupancy rates.
Rental growth will remain positive but continue to decelerate, shaped by moderating inflation and stretched affordability. Yields are expected to be stable in 2026 but subject to transaction activity, there is the potential for yield compression towards the end of the year. This, alongside rental growth, will contribute to capital value growth.
Figure 8: BTR investment by transaction type
Trends to watch
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Renters’ Rights Act
Key provisions of the Renters’ Rights Act will come into effect in May. Broadly, institutional investors and operators are already compliant with these measures. Anecdotally, some investors are earmarking funds to cover any costs from potential rent challenges, but this is viewed as prudent housekeeping rather than a material risk.
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Purpose-Built Student Accommodation (PBSA)
Although the PBSA sector is protected from the Renters’ Rights Act, it faces specific headwinds stemming from the Immigration White Paper published in May 2025. The proposal to introduce a 6% levy on fees for international students could dampen enrolment in the 2026/27 cycle, with the impact likely to fall disproportionately on lower-tier universities.
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Building Safety Act
The Government has also acknowledged the challenges that the Building Safety Act, particularly the Gateway process, has brought to housing delivery. In response, it has committed to improving the efficiency of the Gateway 2 stage. Streamlining this process should strengthen development viability and support a healthier pipeline in 2026.
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Social and Affordable Homes Programme (SAHP)
The launch of the Social and Affordable Homes Programme will mark a turning point for the sector in 2026 but the impact will not be immediate. Bidding opens in February, but the process from grant application to site start is extensive, so positive momentum is only likely to emerge towards the end of the year. A challenge lies in the requirement that 60% of homes delivered through the programme must be Social Rent – a tenure with the greatest viability gap.
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Planning reform
Planning reform will also be pivotal in 2026. The new National Planning Policy Framework draft looks to introduce a 'default yes' for developments around train stations among other reforms. The affordable home requirement in London has also been temporarily reduced. Collectively, these measures could have a material impact on development activity across the living sector throughout 2026.