Given the choice of a government led by a Republican former real estate mogul and a centre-left European, private equity executives would probably expect the former to be more friendly. But while US President Donald Trump wants to ban institutional investors from the housing market, the UK’s Labour Party is trying to encourage them.
It isn’t hard to see why the UK government is reaching for solutions. Labour is way behind on its goal of getting 1.5mn new homes built across England by the end of this parliament. Institutions that buy up entire developments to rent out could help speed things up by giving builders long-term visibility on their sales, reducing the risk of new projects.
However, the number of rental homes under construction has been falling since mid-2023, according to data from the British Property Federation and Savills. In London, there were just 613 new starts in 2025, an 80 per cent drop year on year.
Housing minister Matthew Pennycook wants more housebuilders to partner with investors, but builders aren’t the problem — investors increasingly just don’t think build-to-rent projects are worth the effort.
Institutions have been discouraged by all the same factors that hold back consumer demand, like a sluggish economy, rising tax costs and policy uncertainty. More importantly, though, the profits on offer just aren’t that attractive. Residential specialist Grainger earns a yield of around 4.5 per cent on its build-to-rent portfolio; why should a Blackstone or Greystar keep building and managing housing portfolios when they could earn the same amount almost risk free buying gilts?
Vistry, one of the largest builders of BTR properties, last month reported “weakening demand” from private rental groups and said it expects instead to do more work with housing associations, which benefit from government grants and less pressure to maximise returns. That picture is unlikely to change without either a reduction in costs or a big increase in rental prices.
To be fair, the government is making some progress on costs. Reforms to the planning system and the Building Safety Regulator are welcome but it will take time to work through backlogs and feel the benefits. The British Property Federation, which represents many institutional investors, has suggested easing stamp duty for large-scale developments. That’s a sensible idea, though the politics of giving a tax break to big investors while families struggle with affordability are tricky.
It quickly becomes clear why previous governments kept returning to demand-side schemes for consumers like “Help to Buy” equity loans, despite fears that they help housebuilders more than their customers. The further the current government falls behind its construction targets, the more likely another such scheme becomes.
