BLOGS

A two-speed planning system takes hold

UK residential planning has never treated every scheme equally, but the gap between favoured and unfavoured asset classes has widened sharply. Higher-for-longer interest rates, persistent build cost inflation and a cooling sales market have combined to squeeze development viability across the board. Yet build-to-rent (BTR) and purpose-built student accommodation (PBSA) continue to clear planning committees at a pace general-needs housing simply isn't matching.

This isn't evidence of planning reform lifting approval rates universally. It's a story about which asset classes local authorities are willing to back, and which ones institutional capital is still prepared to fund through to a planning decision. For developers, lenders and investors deciding where to deploy increasingly scarce development finance, that distinction matters more than ever.

What the approval data shows

REalyse's planning dataset — tracking scheme status, unit counts, decision outcomes and dates across England, Scotland, Wales and Northern Ireland — shows a consistent pattern over the past five years. BTR schemes have posted approval rates in the low-to-high 90s in every year since 2021, while general residential ("other residential") applications have typically sat in the low-to-mid 70s. Student accommodation has occupied the middle ground, usually landing in the mid-to-high 80s.

The unit volumes reinforce the story. Granted BTR units rose from roughly 12,600 in 2021 to over 41,000 in 2024, before easing slightly through 2025 and into 2026. Student accommodation followed a similar arc, climbing from around 8,300 granted units in 2021 to close to 39,000 in 2024. Neither sector has faced anything like the pullback seen in general residential grants, where approved units fell from a 2022 peak above 420,000 to roughly 340,000–360,000 across 2023 and 2024.

Committees, in short, are not simply approving more of everything. They are differentiating — and BTR and PBSA are the categories benefiting most from that differentiation. For lenders assessing planning risk on a pipeline, and for developers weighing where to commit scarce equity, that's a signal worth building into underwriting assumptions rather than treating as background noise.

Why institutional-grade schemes are still clearing the bar

Several factors explain the gap. BTR and PBSA schemes typically come with professional, long-term operators attached from the outset, single ownership structures that simplify management conditions, and design standards that tend to exceed general-needs housing on amenity space and build quality. For planning officers under pressure to demonstrate housing delivery against local targets, a large single-consent scheme with an institutional covenant behind it is often an easier "yes" than a smaller speculative housebuilder application facing viability challenges or nutrient neutrality objections.

Capital markets have reinforced this. Knight Frank recorded roughly £4.3bn of PBSA investment in 2025, up around 10% year-on-year, while separate estimates from JLL put the figure closer to £4.6bn — both comfortably above the ten-year average. On the BTR side, investment volumes are estimated at over £5bn for 2025, with several forecasts pointing towards continued growth in 2026. Capital hasn't left either sector; it has simply become more selective about the stage and income profile of the scheme it backs.

Rental growth has cooled, but the fundamentals haven't collapsed

The context matters here: this resilience in planning and investment is happening against a backdrop of markedly slower rental growth. ONS data shows UK private rent inflation running at roughly 3.3%–3.7% through mid-2026, down from the double-digit peaks of 2022–2023, with Zoopla forecasting a further slowdown to around 2.5% for the year. Student accommodation has told a similar story — average PBSA rental growth eased to around 2% across the 2025/26 letting cycle, alongside a rise in incentives, according to sector data, while private-sector PBSA occupancy softened to roughly 85%, well below the high-90s levels seen before the pandemic.

That combination — softer rent growth and softer occupancy — has been enough to knock total returns. CBRE measured UK PBSA total return at around 3.4% for the year to September 2025, down sharply from 9.8% the year before, even as income return held up at roughly 5.4%. For REalyse users comparing gross yields across residential asset classes, this is exactly the kind of divergence that becomes visible when isolating comparables by property type and postcode district rather than relying on headline national averages.

None of this has been enough to stop capital committing to planning applications, though. The structural drivers remain intact: a private rented sector that has lost an estimated tens of thousands of landlords a year to tax and regulatory changes, chronic undersupply of purpose-built student beds relative to record university application numbers, and a sales market that Zoopla and others describe as "steady, not booming" — all of which point institutional investors back towards operational rental income as a defensive allocation.

Where the appetite is concentrating

The regional picture adds further nuance. Lambert Smith Hampton reported that close to 60% of BTR units currently under construction sit outside London and Greater Manchester, with Birmingham singled out as the fastest-growing regional market. For PBSA, Knight Frank's 2025 delivery data shows London still leading new supply, but Nottingham and Leeds following as the next largest contributors — a pattern REalyse's planning and comparables data can help developers stress-test against local demographics, university intake and existing pipeline before committing capital to a specific catchment.

The message for lenders and investment committees is that "BTR" and "PBSA" are no longer single-market plays. Approval rates and yields vary meaningfully across cities, and the sub-sectors within them — single-family rental, co-living, Russell Group-adjacent PBSA versus lower-tariff catchments — carry genuinely different risk profiles. Blanket assumptions about institutional resilience are becoming less reliable than granular, comparable-led underwriting.

Outlook

The direction of travel is fairly clear: BTR and student accommodation remain the two residential sub-sectors best placed to keep moving through the planning pipeline while general-needs housing approvals stay under pressure from viability and finance constraints. But this isn't a story of immunity. The slowdown in newly granted BTR units through the early part of 2026, alongside softer PBSA occupancy and total returns, suggests the sector's advantage is relative rather than absolute.

For developers and lenders, the practical takeaway is to keep testing planning and yield assumptions at the local level rather than assuming national sector trends apply uniformly. Comparable-led analysis — mapping consented pipeline, achieved rents and yields at postcode-district level — is likely to matter more, not less, as institutional capital becomes choosier about where within these favoured sub-sectors it's prepared to commit.