BLOGS

A two-speed planning market

UK development activity has become increasingly uneven. Higher-for-longer interest rates have pushed up the cost of debt on speculative for-sale schemes, and appraisals that once stacked up comfortably at 4-5% base rates now struggle at levels several points higher. Many housebuilders and mixed-use developers have responded by shelving or slow-walking sites, particularly where sales values haven't kept pace with build cost inflation.

Yet build-to-rent (BTR) and purpose-built student accommodation (PBSA) are moving in the opposite direction. Planning pipeline data tracked through REalyse shows these two sectors continuing to secure approvals at a steady pace, even in regions where wider residential consents have slowed. Local authorities are approving large-scale BTR blocks and student halls schemes that, on paper, face the same cost pressures as any other development - so the question is why they keep clearing the planning hurdle while other typologies stall.

Income certainty beats sales risk

The core answer is revenue predictability. BTR and PBSA are underwritten on rental income rather than unit sales, which removes the exposure to a soft sales market that has hit traditional for-sale schemes. Lenders and forward-funders can stress-test a single-let, professionally managed rent roll far more confidently than a phased sales programme dependent on mortgage-dependent buyers.

REalyse rental market data across BTR-heavy postcodes shows asking rents and achieved rents have continued to climb even as sales transaction volumes softened, supporting robust gross yields for institutional operators. That yield resilience matters directly for viability appraisals submitted to planning committees: a scheme that can demonstrate strong, stabilised rental income is easier to underwrite at higher debt costs than one relying on uncertain sales values 24-36 months out.

Local authorities have also become more receptive to BTR as a delivery vehicle for housing targets. Many councils view large single-ownership rental schemes as lower risk in terms of delivery certainty compared with phased developer-led sales schemes, which can stall mid-construction if the sales market turns. That perception is reinforced by planning application data showing BTR consents skew toward larger sites with single institutional promoters, rather than the smaller, multi-phase applications more typical of traditional housebuilding.

Student housing: undersupply meets structural demand

Purpose-built student accommodation tells a similar but distinct story. University towns and cities with growing domestic and international student intakes continue to show a structural shortfall in bed spaces relative to demand, and this undersupply has persisted for years in many core markets - London, Manchester, Birmingham, Bristol, Edinburgh, and other major university cities among them.

That imbalance supports strong occupancy and rental growth assumptions that lenders find easier to underwrite than speculative build-to-sell housing. REalyse data on PBSA rental performance shows achieved rents in supply-constrained university markets holding firm through the recent rate-tightening cycle, with average rent per bed continuing to track ahead of general residential rent growth in several cities. Planning committees, particularly in areas facing acute housing pressure on general-needs stock, have also shown willingness to approve PBSA schemes partly because they don't compete directly with family housing supply, easing some of the political friction that can accompany large residential consents.

What this means for viability and lending

For developers and lenders assessing where to deploy capital in the current cycle, the pattern is instructive. Comparable analysis of consented schemes shows BTR and PBSA appraisals are proving more resilient to higher exit yields and construction cost inflation than for-sale residential, largely because rental income assumptions can be benchmarked against granular, current market comparables rather than forecast sales values.

That doesn't mean these sectors are immune to the funding environment. Forward-funding terms have tightened, and institutional investors are demanding more conservative yield assumptions and stronger location fundamentals before committing capital. But relative to the broader slowdown in speculative housebuilding, BTR and PBSA are proving to be the segments where planning momentum and funding appetite are best aligned.

Outlook

As borrowing costs remain elevated, the gap between rental-led and sales-led development is likely to persist through the near term. Developers and investors focused on BTR and PBSA should expect continued planning support in supply-constrained markets, provided schemes are underwritten with realistic, comparable-backed rent and yield assumptions. For those still active in for-sale housing, benchmarking local rental performance and planning pipeline data may offer an early signal of where institutional capital - and planning committees - are placing their confidence next.