Regional BTR schemes face viability squeeze

12:01 AM, 31st July 2026, 1 minute ago

Record investment in build to rent (BTR) is failing to translate evenly into new homes, with regional schemes increasingly struggling to remain financially viable.

Knight Frank says that just over 6,700 BTR homes have been completed so far in 2026.

Nearly half were delivered in London and Tier 1 cities such as Manchester and Birmingham.

Tier 2 cities, including Nottingham, Liverpool and Sheffield, accounted for 14% of completions.

Smaller towns and other regional locations delivered a further 14%.

Strong case for BTR

Nick Pleydell-Bouverie, the property consultancy’s head of residential investment, said: “The investment case for BTR remains incredibly strong.

“Demand for high-quality rental homes continues to outstrip supply in many markets, supporting strong occupancy levels and rental growth across the sector.

“We’re continuing to see a highly selective market, with a significant proportion of activity driven by a relatively small number of large transactions.”

He added: “The challenge now is ensuring that development opportunities can stack up financially so that much-needed new supply can be delivered.

“That’s where viability remains a key consideration for investors looking to deploy capital into the sector.”

Larger cities benefit

Knight Frank says projects outside the largest cities were facing pressure from rising costs and tighter development economics.

Some schemes now require grant funding, changes to Section 106 agreements or adjustments to affordable housing obligations before construction can proceed.

Completed BTR stock across the country has reached 166,359 homes, an increase of 17% compared with a year earlier.

Another 49,620 homes are under construction, while 125,639 are moving through the planning pipeline.

Viability pressures remain

Knight Frank said the pressure was particularly pronounced in regional markets, where higher development costs can be harder to absorb than in London or the largest cities.

Lizzie Breckner, the head of residential investment research, said: “While supply continues to increase overall, we’re seeing a growing divide between the largest cities, where schemes are still moving forward, and a number of regional markets where rising costs and tighter development economics are making it harder to bring forward new projects.

“Viability pressures remain, particularly across many regional locations, and are increasingly shaping where development can happen.

“As a result, multifamily delivery is likely to come under further pressure unless those challenges begin to ease.”

She added: “There are reasons to be optimistic. We’re starting to see improvements in parts of the planning process, particularly around Gateway 2 approvals, which should help improve certainty for developers.

“But there is still more to do if we want to unlock delivery at the scale required.”

Multifamily schemes dominate

Apartment-led multifamily schemes remain the largest part of that pipeline, making up 71% of homes currently being built.

Single-family housing now accounts for a quarter of construction, as investors and developers expand beyond city-centre apartment blocks.

Investment reached £2.08 billion during the second quarter, the highest quarterly figure recorded by Knight Frank.

However, the total was driven by a small number of major transactions.

Sales of completed and operating developments accounted for 29% of deals.

Forward funding and forward commitment agreements made up the remaining 71%.