Article
Can Single Family Housing help resolve the housing crisis?
May 1, 2025 4 Minute Read
Part 1: Understanding the Single Family Housing investment opportunity
Welcome to part one of our three-article series where we explore how Single Family Housing can help the housing crisis.
With the UK Living sector amongst the top choices for European investors for 2025, interest in Single Family Housing (SFH) is poised for expansion in 2025. To understand what is motivating and hindering investors and operators of UK SFH, we spoke with key players in the market to understand how their investment strategies are enabling the Government’s plans to build 1.5m homes by 2029. This series will explore recurring themes from our discussions.
The Opportunity
Early investors into UK SFH identified the size of the opportunity, with the 2021 census showing that 77.9% of dwellings in the UK are houses or bungalows – housing 19.3m people – and 18.8% of households privately rent as of 2023-24. The population of renters in the UK is forecast to increase by 18% between 2023 and 2028. However, there has been a net reduction of nearly 600,000 buy-to-let mortgages since 2016 (equating to around 10% of the private rented market), with landlords choosing to exit due shifting EPC, taxation, and Stamp Duty regulations, as well as increasing interest rates (UK Finance). Additionally, new housing supply is slowing due to rising construction costs and slowing sales, highlighting the competing pressures facing the UK housing market.
For institutional investors, SFH meets not only social and critical infrastructure investment criteria, but is inflation-linked, enabling a long-term investment stance, with a resiliency due to high occupancy levels generating regular income. Housebuilders, who historically sold directly to private individuals, were severely impacted by the increase in interest rates throughout 2023, as well as the end of Help to Buy. This acted as a catalyst for housebuilders’ eagerness to transact directly with institutional investors to supplement their contracting sales volumes.
Investors have ‘seized the opportunity to provide housing that meets the depth of consumer demand at a price point that is affordable, aligning with risk and return requirements.’
The Challenges
For both renters across the UK and SFH investors, the largest barrier is low supply of modern housing in areas of high demand, the delivery of which is estimated to continue being muted and below target in 2025. Investors are restrained in their ability to scale their portfolios at pace by housebuilders’ lengthy delivery timelines.
Housebuilders may decide to pivot back to individual sales in order boost margins, should interest rates continue to fall, however this allocation of new supply needs to be finely balanced to continue to provide incentive to institutional investors.
SFH investors, unlike BTR investors, feel protected by the ‘fail-safe’ exit strategy of granular sales, strengthened by their portfolio deal structures often including a discount for bulk acquisition. However, if this discount diminishes, the institutional investment case will weaken.
Conclusion
Undoubtedly, the development of institutionally-owned SFH will aid the supply and demand issues that have riddled the rental market. However, the proposed relaxation of mortgage regulations may boost home ownership amongst owner-occupiers or buy-to-let landlords, as discussed in our recent article, which could result in housebuilders changing their tone regarding forward-funding deals with investors to deliver new homes. This is a key concern amongst the investors we spoke to, and a key consideration for their ability to continue to deliver high-quality, professionally operated rental housing.
The growing population of renters in the UK will need housing options to match, which institutional investors are increasingly eager to provide (also discussed in our series on Co-Living investment). Housebuilders and the Government should continue to welcome (or continue to allocate supply towards) wholesale deals with institutional investors to provide SFH, as this investor base is able to take the front-end financial risk to increase the supply of rental housing in the UK, forming a key portion of the ambitious 1.5m homes that are tapped for delivery before the next election.
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