BLOGS

A widening approval gap in London planning

London's planning system has never been an easy route to consent, but the gap between asset classes is becoming harder to ignore. REalyse planning data shows build-to-rent (BTR) schemes across Greater London have secured approval at or close to 100% in every year since 2021, and purpose-built student accommodation (PBSA) has approval rates typically in the 74-93% range over the same period. General residential-for-sale schemes, by contrast, have seen approval rates slide from around 67% in 2021 to roughly 59-60% by 2023-2025.

This isn't a story of London becoming more hostile to housing in general. It's a story of which housing typologies planning committees and officers are willing to back, and why institutional rental product keeps clearing a bar that speculative for-sale development increasingly struggles to reach.

Why BTR and PBSA keep clearing the bar

Three structural factors explain the gap, and REalyse's planning pipeline data helps quantify them.

Delivery certainty beats site-by-site risk

BTR and PBSA schemes are typically brought forward by operators with a long-term hold strategy and institutional balance sheets behind them, rather than developers relying on pre-sales to fund construction. Local authorities increasingly treat this as a proxy for deliverability. A scheme that doesn't depend on retail buyer sentiment or mortgage availability is less likely to stall post-consent, which matters to boroughs under pressure to show housing delivery against their targets.

REalyse's planning pipeline tracking shows this playing out in unit volumes as much as approval rates. PBSA-granted units in London grew from around 3,400 in 2021 to over 13,000 in 2024, a trajectory that has continued even as general residential consents have plateaued.

Policy alignment on affordable and mixed tenure

Many London boroughs now have explicit BTR-friendly policies, including the ability to deliver discounted market rent as a form of affordable housing contribution, which can be more straightforward to structure and secure than equivalent Section 106 obligations on a for-sale scheme. PBSA, meanwhile, sits largely outside the general housing target framework in most local plans, giving committees fewer competing considerations to weigh against a scheme's density or massing.

Rental fundamentals hold up where sales fundamentals don't

This is the part that matters most for investment committees. REalyse transaction data shows the London sales market losing momentum on multiple fronts: average sold price per square foot across the capital has drifted down from around £666-672 in early-to-mid 2024 to roughly £596-598 more recently, and average days on market for sales listings has stayed elevated, generally in the 95-120 day range over the last two years. Sales transaction volumes have also been notably uneven quarter to quarter.

Rental demand has not shown the same softness. Structural undersupply of purpose-built rental stock, combined with resilient occupier demand from both the wider rental market and the student cohort, continues to support achievable rents and gross yields that underwrite institutional appetite even with higher debt costs baked into scheme viability. For lenders and investors running comparables through REalyse, this is precisely the divergence that shows up when overlaying rental yield trends against sales £/sqft and days-on-market data by borough: rental product is proving more resilient on the demand side, which supports the case planning officers are being asked to weigh.

Higher financing costs haven't reversed the trend

It would be reasonable to expect higher interest rates and construction finance costs to have cooled BTR and PBSA planning activity in the same way they have cooled speculative for-sale housebuilding. The data doesn't support that reading, at least not on approval rates. What has moved is deal size and timing rather than planning appetite: BTR unit volumes granted per year have been lumpier since 2023, reflecting fewer, larger schemes coming through rather than a fall-off in the pipeline itself.

This matters for how developers and investors should read the London opportunity right now. Consent risk, historically one of the biggest sources of uncertainty in underwriting a scheme, has become comparatively low for well-structured BTR and PBSA proposals. The remaining risk has shifted toward viability and financing, which are more tractable problems for institutional capital with patient hold periods than for developers dependent on near-term unit sales.

Outlook

The planning data points to a durable structural shift rather than a temporary anomaly. As long as London's sales market remains subdued on pricing and liquidity, and boroughs continue to treat BTR and PBSA as lower-risk, policy-compliant routes to housing delivery, institutional rental product should keep winning a disproportionate share of consents relative to its share of applications. For investors and lenders assessing where to deploy capital into London residential development, the planning approval data is arguably now a more useful early signal than sales market pricing alone.