BTR, the Draft London Plan and Budget Levers
Build to Rent is fast becoming Manage to Rent, as investment has switched from development to operational stock. So how do we recapitalise the sector, and does the Draft London Plan offer any support?
Unlike Build to Sell, BTR drives immediate delivery because the rental demand is real, willing and liquid. Tenants don’t need a deposit, aren’t held back by SDLT, conveyancing or the London price premium, and buildings can be fully let in months, not years.
London’s success story is Wembley Park, Zone 4, northwest London, and credit is due to US private equity: Lone Star had the vision and, just as important, the balance sheet and the confidence. Its developer, Quintain, along with a handful of investors/developers, have now delivered around 10,000 homes around the stadium, most of them for rent, in 11 years. 900 units per annum! The so-called oversupply has pushed net effective rents down. Whatever your politics, everyone should want more of this: more supply, moderating rental growth. The market is the rent control mechanism.
Had Wembley Park been a masterplan led by Build to Sell, selling 200 homes a year, those 6,000 homes would have taken 30 years, three times as long. For live examples, look at Barking Riverside (c. 190 homes a year), Greenwich Peninsula (c. 210) or Southall Gasworks (c. 150).
The rise of single family investment
Today, single-family housing aside, the equity committed to UK residential would rather buy lower-risk standing PRS or first gen BTR stock than take development risk, let alone the regeneration risk Lone Star took at Wembley. Why? Risk versus return, when all-in replacement cost is £700 psf+ versus operational stock at £500 psf. Core capital is also sitting on its hands and there simply isn’t enough new capital.
The fall of multi-family
A back-of-a-fag-packet read of the latest Opportunity London Investment Prospectus points to a £9bn equity shortfall across a handful of London’s biggest housing sites. We need large private equity back in UK housing development, and we need it now.
Since Wembley Park was built, viability has been hamstrung by a string of factors well documented by PropViews: second staircases hammering net to gross, Building Safety Regulator gateways, interest rates and outward yield shift, late-stage reviews, rising operating costs, the Renters’ Rights Act, and soon the Building Safety Levy and the landlord database. Together these have added around 40% of development costs. Developers now need higher margins to attract capital, and that capital is choosing other sectors and other geographies.
The draft London Plan and BTR paralysis
Yet the Draft London Plan gives BTR little or no leg up. Affordable housing thresholds are set at the same level as Build to Sell, the very thresholds that already don’t work. The supporting viability study shows just 15 of 115 BTR scenarios as viable, and even that relies on inputs closer to the 2021 market than today’s.
The biggest flaw in the Draft London Plan Viability Study? The cap rate assumption. The study optimistically assumes prime yields of 3.75% to 4.1%. For those not close to the market, this is folly. The few stabilised BTR assets that are selling trading at around 5% and are trending softer as investors demand an appropriate risk premium over ever rising government bonds. There are plenty not selling at even this level. Whether this is a short term blip or “reversion to the mean” the point is policy makers shouldn’t be more optimistic than developers!
Move the BTR yields out by 75bps and the share of viable scenarios drops from 14% to 4%. On today’s market, the plan’s BTR viability case does not stand up. Another 75bps move out and not even higher density tenures such as PBSA or PBSL survive.
I was in the conference room at Living UK. The core capital is there and wants to invest. But it is hibernating, waiting for the viability levers to be pulled.
Across London I see huge opportunity for growth. But also a lot of very large, stalled regeneration schemes, many of them in the Mayor’s own flagship Opportunity Areas.
What are the levers
Here are my suggested levers, so Wembley Park can be repeated at Earl’s Court, Old Oak, Greenwich Peninsula, Silvertown, and maybe even Meridian Water, Barking Riverside and beyond.
Within designated regeneration zones:
- No SDLT on land or new homes. With so few transactions today, the cost to the Treasury is negligible
- A 5% affordable housing threshold on BTR-led schemes
- 0% for the more affordable co-living tenures.
- Meaningful Corporation Tax incentives on newly started phases
- 80% CIL relief (Mayoral CIL and borough CIL)
- No Building Safety Levy
- Zero-rate VAT on BTR rents, so operators can recover VAT on costs in the same way commercial landlords can.
- Exemption from selective and onerous licensing for professionally managed BTR
- Council tax charged only once a unit is occupied
Whether these are permanent or only for the first five years almost doesn’t matter at this stage. We just need capital moving back into the sector.
I’m convinced that, applied to these zones, we would see immediate results. Results mean starts, starts mean homes, homes mean growth, prosperity and tax receipts for Government and City Hall.
Wouldn’t it be great if the upcoming Budget pulled some of these levers? And with the Draft London Plan consultation open until 15 October, now is the time to make that case.
#Multifamily #BuildToRent #LondonPlan #Housing #Coliving #Viability
Sources: GLA Draft London Plan – Phase 1 Report July 2026 (GLA Viability Team). Knight Frank Research. Molior. Urban Sketch Ltd analysis of the Draft London: Welcome – Urban Sketch
