Round table report: The UK housing sector – building on shifting trends and opportunities

The UK housing market is facing a range of challenges, from planning delays and financial pressures to the evolving needs of residents and investors.

A panel of experts joined TheBusinessDesk.com and Nimbus Maps, to delve into how stakeholders are responding to the shifting market and taking interest in single-family rental housing, co-living and later-living schemes.

The discussion explored the current challenges in planning and development, the evolving market trends, and the potential for future growth within various housing sectors.

Challenges in Planning and Development

Mike Burrows, director for Savills said: “We’re seeing increasing optimism from a lot of our housebuilder clients as the government is saying the right things about taking away the blockage of the system, trying to boost housing delivery, trying to speed things up, make things more efficient

The National Planning Policy Framework (NPPF) has been undergoing consultations, with potential revisions expected soon. Reforms could ease urban housing pressures, rural authorities may struggle to meet new targets.

Burrows said developers are positioning themselves to capitalize on these opportunities.

“If the government follows through on its promises, there should be clearer requirements for housing delivery, along with increased overall targets. This would shift some housing allocations from urban to rural areas, which could create challenges for rural local authorities.

“For many of these authorities, the new targets could reduce their five-year land supply below five years. This shortfall would allow developers to submit applications for sites that haven’t been allocated, which is favourable for the development industry. In fact, developers are already preparing applications to submit as soon as the revised NPPF takes effect”.

The bigger planning challenge is getting applicated determined believes Burrows, citing the example that Birmingham City Council takes eight weeks on average to validate an application.

Thomas Taylor, managing director of Court Collaboration has seen different planning challenges when developing urban vs rural schemes.

He said: “For 14 years we’ve delivered city centre core urban development projects and whilst the council is suffering with cutbacks – generally we’ve got there with the city centre.

“Just recently, we’ve started a sister company to take advantage of the boom in single-family housing so we’re now embarking on a journey of trying to build traditional houses. We’ve been bidding and trying to deal with the planning system on grey belt rural land. Oh my goodness, it’s a completely different world.

“You just can’t persuade funds that there’s any certainty that you’re actually going to get planning – it’s been quite eye-opening”.

For Eleanor Deeley, there’s “such a disconnect between the planners and the members – it’s a real issue”.

The managing director of the Deeley Group has found: “You can have planners that are very knowledgeable, and they have done a really thorough job. Then, you go to members and there is no logic, no understanding, and no knowledge. It seems that Birmingham is particularly behind in terms of car parking, which is crazy sometimes, and doesn’t fit in with the planning requirements either”.

Single-Family Housing Market and Institutional Investment

The single-family housing market has drawn considerable attention from institutional investors, particularly since COVID-19.

Stuart Eustace, director of residential capital markets for CBRE points out that private equity firms and institutional funds from North America have been actively exploring the UK market, attracted by rental growth and urban regeneration prospects.

It’s changed traditional exit strategies for large-scale housing projects, with developers pursuing institutional partnerships rather than sales to individual buyers.

Eustace said: “North American private equity firms quickly entered this space after seeing rapid growth in the US. They anticipated strong rental growth, although the market for rentals was still relatively soft, often featuring individual landlords with lower-end furnishings, which did not command high rental premiums. To make these investments viable, these firms had to offer competitive yield profiles to align with the price expectations of UK housebuilders.

“When Liz Truss’s policy announcements further impacted the market, sales for PLC housebuilders slowed significantly. They ultimately turned to institutional exits, looking for larger investment funds to acquire portfolios, to meet financial obligations and report back to the City.

“For a period, only three or four UK institutional funds were active, but now the single-family rental market is maturing. PLC housebuilders and large SME developers are no longer discounting properties for short-term gains but are looking for institutional sales as part of a broader, strategic approach to exit urban regeneration and expansion projects.

“Citra has been very active in this space over the last few years, and there is more capital on the horizon. A major US fund is expected to announce a joint venture soon, potentially bringing in around £1bn, with additional players likely to add another £500m into the market”.

The shift in the market has seen developers partner with sustainability-focused investors. Court Collaboration is venturing into the single-family rental housing market, as its investors in build-to-rent apartments were flocking to the sector.

Thomas Taylor said: “We’re seeing so much money pouring into single-family rental housing marker that it made perfect sense to explore that.

“We’ve partnered with a company called Green Core Homes, which is delivering amongst the most sustainable homes in the UK today. They’re ultra-low in carbon, construction and operation.

“A lot of investors are not just looking for a traditional house, they’re looking for something that ticks all those ESG credentials.

“The English psyche has always been that people want to own their own home. But increasingly people are coming to terms with renting. Parents aren’t passing down a big inheritance pot anymore, so people aren’t able to get into the housing ladder. It’s becoming less of a social distinction”.

In build-to-rent schemes where amenity space was a huge selling point, Charles Lucas, business development director at Centric says amenity provision is now under the “microscope”.

He said: “In various development schemes that we’re involved in, a common question arises: do we need all the amenities we initially planned, or do customers truly want them? Should we design them out, and if so, how?

“While there are exceptions, the trend is moving away from adding amenities like gyms and community spaces within residential developments.

“Rising living costs and the ability to afford service charges are becoming huge factors for many residents, so developers are increasingly evaluating alternatives. Residents may rather go to a David Lloyd gym three miles away, which is convenient and doesn’t have the added costs tied to the development itself”.

“When these amenity-driven developments first gained traction, the industry looked to North American models for inspiration”, said Eustace.

“But if you look at Europe, the approach is simpler with limited amenities and a greater emphasis on delivering a high-quality customer service experience over lavish facilities.

“To justify higher rents, many buildings have included amenity space to attract tenants and sustain projected returns. However, the capital expenditure (CapEx) needed in five to seven years to refurbish these amenity spaces to be relevant, is often overlooked”.

Andras Karpati, CEO of Cordia has seen the tide turn from “flashy amenities” to spaces which “make everyday living more convenient.

He said: “I believe the rental premium doesn’t come from having flashy amenities like token gyms or rooftop running tracks. Especially post-Covid, tenants are prioritising smarter apartment designs that make everyday living more convenient. Features such as external spaces like balconies, designated offices or home-working areas, even in smaller one-bedroom apartments, are now highly valued. There is a strong focus on energy efficiency and the longevity of the building”.

Co-Living, Later-Living, and the Future of Affordable Housing

Co-living has emerged as an alternative to the “vanilla” way the UK does housing, believes Deeley.

She said: “We’re looking at co-living in Birmingham within different ethnic groups. It’s quite an interesting way of designing it as we’re so vanilla in the way we do housing in the UK.

“Different communities live in a different way and housing supports different lifestyles”.

The rise in co-living’s rise is similar to the build-to-rent journey said Jon Weston, development director at Vita Group.

Vita Group has recently submitted plans for the redevelopment of the former Axis Square to Birmingham City Council.

Proposals for Goods Station feature five new buildings from 10 to 49 storeys designed by SimpsonHaugh, set around a new urban garden which creates a route from Navigation Street to Holliday Street.

The masterplan will include three residential buildings creating 990 new homes, a 221-room serviced apartment building and a PBSA plot delivered under Vita Group’s House of Social brand alongside a 17,000 sq ft public food hall.

Weston said Vita tried to add co-living to Goods Station but planners were against the proposal.

In Manchester, however, it created Union, the city’s first co-living development.

Union offers a resident’s gym, lounge, co-working space, and private dining rooms, following thousands of hours of research and development.

Vita spent interviewing the city’s young professionals working in retail and hospitality, nursing, tech, and other industries to find out exactly what they need from their accommodation.

Weston said: “The perception of co-living is that it’s like a HMO, a five or six-storey terrace house which has been converted into the 40 flats. I think co-living is going to go on the same journey as build-to-rent has gone ultimately”.

Another growing sector of housing is later-living schemes which are reducing healthcare costs and improving quality of life for residents.

The Deeley Group currently has around 1,000 units in development for later-living and the sector has been its largest growth area by far.

Deeley said: “A key part of the challenge is helping local and planning authorities fully understand the benefits of these types of developments.

“Over a 24-year lifecycle, a 70-unit extra-care building, for instance, can save the government £50m by delivering care more effectively and improving health outcomes for residents. These savings are realised across different government budgets, which we’re not currently good at coordinating.

“It would also help to refine the marketing and make clearer distinctions in planning definitions. Right now, when people downsize into what’s labelled ‘extra care’ or ‘later-living’ – it’s very similar to standard apartment buildings but marketed differently.

“The key is making these spaces attractive as social hubs, where residents can enjoy wine clubs, social meals, or other group activities. This kind of vibrant community can offer a significant improvement in quality of life compared to living alone.

She added: “Never mind first-time buyers – there needs to be last-time buyer programmes as well. It would be a much quicker way to free up more family housing and get older people into more appropriate space.

“80% of what we do is within city centres, and the ideal place is next to a student scheme. We did one in Coventry, and there was an angst from the planners. But now, the students will help residents with their shopping if they see them coming back from town and the residents love it.

“Having young people and more elderly people living together creates a healthier community. We shouldn’t be age-segregated within any city”.

Affordable housing remains a priority, but recent financial pressures have limited progress, says David Atkinson, national head of land & development at Willmott Dixon.

Atkinson said: “Affordable housing has faced significant challenges over the past couple of years, as both RPs and local authorities have struggled to deliver new developments. Many of our long-time RP partners have had to redirect funding toward maintaining their existing stock rather than launching new projects. Limited rent increases have further constrained their budgets, slowing down development.

“However, I’m optimistic that recent government actions will support affordable housing. With social rent initiatives and grant funding, there’s an opportunity to boost growth in this sector. Moving forward, I see the potential to work closely with RPs and local authorities to bring them in on new projects and make sure they’re part of our development journey”.