Living

January 2026 Forecast

Build-to-Rent

Single Family Housing (SFH) will continue to account for a large share of activity and Multifamily Housing (MFH) investment will remain focused on stabilised assets in early 2026. Forward funding deals will re-emerge later in the year as viability pressures ease because of further decreases to interest rates.

Midyear review

• The pause in the interest rate cutting cycle has heightened development viability challenges, meaning forward funding deals will be more difficult to execute in the second half of 2026 than we initially anticipated in January. However, there has been a recovery in investment activity in London, particularly for stabilised income-producing assets.
• This was evidenced by L&Q’s £1bn sale of its private rental business, which holds a portfolio of over 3,000 homes in London. The £500m acquisition of a 904-home portfolio at Elephant Park by Greystar also showed demand for income-producing MFH assets.
• While SFH investment volumes have been relatively muted this year, there continues to be desire for funding on both new developments and stabilised assets.

January 2026 Forecast

Purpose-Built Student Accommodation

Purpose-Built Student Accommodation (PBSA) investment will remain strong. 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.

Midyear review

• H1 PBSA investment volumes were dominated by Unite’s acquisition of the Empiric Student Property portfolio, made up of largely Russell Group university markets. Institutional appetite remains concentrated at the prime end.
• Beyond this transaction, the absence of best-in-class stock coming to market and forward funding viability challenges have shaped deal flow.
• Activity has been increasingly driven by joint venture structures, development and refurbishment, and value-add strategies as an alternative entry point to prime core.

January 2026 Forecast

Regulatory changes

Broadly, institutional investors and operators are already compliant with the measures introduced by the Renters’ Rights Act and so will remain largely unaffected.

The Government has committed to improving the efficiency of the Gateway 2 stage of the Building Safety Act. This should improve development viability and support a healthier pipeline in 2026.

Midyear review

• The Renters’ Rights Act has, so far, had minimal impact on living sector operations. There has been an indirect effect of reducing supply from the private rental market. Landlords have continued to sell Buy-to-Let (BTL) and Houses in Multiple Occupation (HMO) properties.
• There have been improvements in the efficiency of the Building Safety Regulator (BSR). Between April and June, the approval rate of Gateway 2 applications increased to 89%, up from 61% in the preceding three months. However, the median approval time remains 22 weeks.
• While regulatory shifts and BSR improvements have been broadly beneficial to the living sector in 2026, viability and a recovery in the pipeline remains hampered by elevated debt and build costs.

H2 2026 Outlook

Government funds will support living investment

Funding deals has been difficult in the year to date due to the challenging economic environment and the pause in interest rate cuts, which has prolonged the constraints on development viability. However, we expect the number of deals to increase as we move through 2026, supported by significant patient capital, which focuses on long-term sustainable growth, scheduled to be deployed in the market. Public investment can close viability gaps and unlock housing delivery.

Both Homes England and the Greater London Authority (GLA) have announced large scale investment programmes to support housing delivery. April saw the launch of Homes England’s National Housing Bank and the deadline for Social and Affordable Housing Programme’s Strategic Partnership bidding.

We forecast a 4.1% year-on-year increase in living investment volumes in 2026, to end the year at £13.1bn.

Figure 11: Forecast living investment volumes

The lack of funding deals in the last 18 months will lead to an extremely constrained supply of new rental housing in the medium-term. MFH delivery is expected to average just under 11,000 homes per annum across 2027 and 2028, 22% below the previous five-year average.

Meanwhile, rental demand will be supported in the second half of 2026 by the recent increase in mortgage rates, which has made home ownership less affordable. The supply and demand dynamics provide the conditions for robust rental growth, which will be key in improving viability challenges faced across the sector.

Record levels of university acceptances in 2025/26 and early application data for 2026/27 points to sustained undergraduate demand for PBSA as well. However, forward funding viability has had a significant impact on the PBSA development pipeline and planning applications have dropped as a result. The Renters’ Rights Act will lead to a further squeeze on supply in both the BTL and HMO markets.

Figure 12: Forecast BTR completions