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The UK Living sector continues to attract significant investor interest. In July, CBRE reported that £4.4 billion was invested into the sector in the first half of 2026 alone, representing a 48% year-on-year increase.1 Yet while institutional appetite for residential assets remains strong, the opportunity now lies in ensuring that capital can be deployed efficiently and at the scale required to support housing delivery.
Generally, the issue is not a lack of investor appetite. Instead, developers and investors are contending with a combination of rising costs, regulatory complexity, building safety requirements and wider economic uncertainty, all of which are making it harder to deliver viable schemes to a programme. Despite these pressures, the long-term fundamentals of the sector remain compelling, creating opportunities for both the public and private sectors to unlock further investment and bring forward new homes.
Against this backdrop, the question is no longer whether investors want exposure to the sector, but how the UK's established residential development industry can continue to overcome the barriers constraining capital deployment at the scale required to satisfy institutional demand and start to properly mitigate the UK's accommodation shortage?
As the market evolves, particularly through growing institutional participation in areas such as Single Family Rental (SFR), there are clear opportunities to translate strong investor appetite into long-term housing delivery.
Cost pressures
One of the most significant constraints on delivery is mounting cost pressure.
While demand from investors remains strong, rising development costs continue to challenge scheme viability and make it harder to bring forward new projects.
Although construction cost inflation has stabilised from the peaks seen in recent years, costs are still increasing. Savills, citing data from BCIS, reports that tender prices rose by 2.3% in the year to Q1 2025, with further increases of 2.8% forecast for 2025 and 2.7% for 2026.2 These pressures are being driven not only by an increase in labour and material costs, but also by compliance with increasingly complex regulatory requirements.
For the Living sector, the cost pressures extend beyond headline construction costs. New building safety obligations, additional design requirements and forthcoming measures such as the Building Safety Levy are adding further strain to the bottom line, particularly for large scale, residential schemes.
The impact is already being felt in delivery figures. Despite continued investor demand and an expanding pipeline of consented schemes, in January 2026, Savills reported that there have been more Build to Rent completions than starts for eight consecutive quarters, highlighting a widening gap between investor appetite and delivery.3
Though developers are still delivering viable schemes while navigating cost pressures, a period of relative calm in the global economic environment would undoubtedly bring about more starts on site and a stronger pipeline of completions by reducing inflation and enabling more accurate forecasting.
Regulations
The cost of complying with increasing regulation also remains one of the most significant challenges to delivery across the Living sector.
Building safety requirements in particular continue to affect how quickly schemes can move forward. Savills reports that Gateway 2 approval periods for Higher-Risk Buildings (HRBs) have, in some cases, exceeded 40 weeks, with developers experiencing delays that can add around 12 months to development programmes.4
These delays create uncertainty, affect viability and make it harder to convert planning permissions into delivered schemes. The impact is increasingly visible in delivery figures: in London, Build to Rent starts in 2025 were 93% lower than in 2022, highlighting the growing challenge of translating the healthy investment demand into new development.5
The broader regulatory landscape continues to influence investment decisions. While measures such as EPC C requirements are unlikely to significantly affect many modern assets, the transition to fully electrified buildings presents more complex operational and affordability considerations. The Renters’ Rights Act appears to be having a more limited direct impact on investor sentiment, particularly among operators with experience of similar reforms in Scotland, although it adds another layer of uncertainty in a market already facing viability and delivery pressures.
Greater certainty, efficiency and predictability within the regulatory framework would help support delivery and enable our sector to achieve its full potential.
Economic and geopolitical uncertainty
It is understandable that broader macroeconomic and geopolitical uncertainty continues to weigh on market confidence.
At the start of 2026, the Living sector appeared to be moving towards a period of more consistent growth, supported by resilient occupier demand, stabilising inflation and strong investor interest. However, ongoing geopolitical tensions and wider economic uncertainty have made investors more cautious, increasing scrutiny on development risk and project viability. Notwithstanding that, the trend prior to that caution demonstrated a strong underlying demand and supply.
This uncertainty has created an unfortunate, albeit temporary, gap between investor appetite for deployment of capital and our sector's ability to deliver some brilliant schemes. While investment volumes remain robust and the trend is positive, in the short term investors are unsurprisingly becoming increasingly selective. The long-term fundamentals of the sector remain strong, but short term volatility restricts the pace at which capital can be deployed into new residential development.
The growth of Single Family Rental
One area where institutional capital and housing delivery are increasingly aligning is Single Family Rental.
SFR has been one of the principal beneficiaries of increased institutional interest in the Living sector and investors desire for less complicated assets.
SFR is often viewed as more predictable in terms of delivery, faces relatively fewer regulatory complexities and offers our established house building industry a route to secure capital at scale through large SFR disposals, which it can build to each institutional landlord's specification.
Reflecting this demand, Savills reports that 59% of all UK Build to Rent investment in 2025 was directed into SFR, the highest share on record. [6]
This is no surprise. Over the past 3 to 5 years, the market has seen some significant momentum generated here. Our increasingly sophisticated house building industry is forming some important partnerships with institutional money, schemes are being delivered, new assets are becoming stabilised and the pipeline is good. The delivery of SFR dwellings is being considered as part of site identification, planning and acquisition. This is a maturing market.
The tenure-blind approach is attractive to the rental market, the value to a tenant of an institutional landlord compared to a private landlord is understood and there has been a generational shift which has caused the UK owner-occupier mentality to perhaps become outdated in part of the market at least.
Opportunities
The UK Living sector is not short of capital interest or demand, or residential development expertise.
There are some elements causing friction here that the Government can influence more directly; reducing regulatory requirements (and thereby the cost of complying with those) and giving more political certainty (with the intention of reducing inflation and cost volatility). These are the opportunities to allow our Living sector to achieve its full potential and secure capital which the institutions are eager to deploy.
There will always be factors beyond the Government's direct control, including global economic uncertainty and wider geopolitical disruption.
But, if Government focuses on those aspects which it can influence more directly and quickly we anticipate the resultant marginal gains will unlock many more opportunities for institutional money to be deployed into the UK Living sector.
As the market matures further, particularly regarding SFR, we will see more and more transactions in respect of existing stabilised assets and portfolios. We expect that activity to bolster the demand for the development of new Living assets, as institutional money is further attracted to the sector on the basis of both strong income and capital value growth.
The opportunity for the sector, and those responsible for our political and regulatory environment, is not attracting investment interest (which is already there) but easing some of the friction around the costs and certainty of delivery. If we are able to exploit these opportunities our excellent UK residential development industry will be given the opportunity to reach its full potential.
Footnotes
1. https://www.cbre.co.uk/press-releases/44-bn-transacted-in-the-uk-living-sector-in-h1-says-cbre
2. https://www.savills.co.uk/research_articles/229130/376154-0/what-is-happening-to-build-costs-
3. https://www.savills.co.uk/research_articles/229130/386427-0
4. https://www.savills.co.uk/research_articles/229130/376154-0/what-is-happening-to-build-costs-
5. https://www.savills.co.uk/research_articles/229130/386427-0
6. https://www.savills.co.uk/research_articles/229130/386427-0
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