Regulator Clears Backlog, But Investment In London BTR On A Knife-Edge

London’s build-to-rent market, once a bright spot in the capital with schemes from Wembley to Elephant and Castle, has seen the brakes slammed on since the introduction of the Building Safety Regulator, a centrepiece of the post-Grenfell regulatory settlement.

With London residential development facing a viability crisis, the government has acted to simplify the approval process and says that the backlog is being cleared, speeding approvals and paving the way for a fresh wave of investment.

Investors are circling as multifamily valuations make the capital look more attractive again, in a way that it hasn’t for the past two years. Yet with multiple challenges to development, decisions between deploying capital in London or looking elsewhere remain on a knife-edge.

“Capital is mobile and has a choice,” M&G Real Estate Global Head of Living Alex Greaves said of the decision by many international investors to move money to other residential markets.

“The London BTR market is right on the edge of viability again, from our perspective. But the line between viability and nonviability is wafer-thin. However, this could be the moment for a renaissance in BTR.”

While interest rates, land costs, building inflation and planning challenges have all hindered new development, the regulator’s Gateway system — designed to check over high-rise residential development, requiring detailed technical submissions — has created delays in approvals for new developments. 

That has raised uncertainty over when schemes can be built, deterring investors from funding new developments.

In theory, front-loading of scrutiny for high-rise development should reduce risk and improve quality. In practice, it created a bottleneck with approval times of around 36 weeks, triple the government’s target, according to the British Property Federation. 

There were just 613 BTR starts in London in 2025, down 80% from 3,105 starts in 2024, according to fourth-quarter figures compiled by the BPF and Savills. The regions had 8,063 starts in 2025, down 37% from 12,781 in 2024.

But the approvals backlog is finally clearing. Across London, the regulator reports that a significant proportion of Gateway 2 decisions now result in approvals, often through an “approval with requirements” pathway that allows projects to proceed while conditions are addressed. 

The Building Safety Regulator made almost 700 decisions on applications in the 12 weeks to 23 January, according to its latest progress report as a newly independent organisation. The BSR also confirmed that 630 new applications were submitted in the same period, bringing the total number of live applications to 1,159.

This followed a record final quarter in 2025 with 673 BSR decisions by 31 December, the most since it started operations in 2023.

Greaves said the problems with the BSR backlog have been just one challenge for the market, causing capital to shift to less complex markets in Europe.

“Investors are looking to multifamily BTR and SFH for long income, stable investment, and in theory, this should be a win-win situation, with renters paying annual increases aligned with wage inflation, meaning a fair deal for everyone," he said.

Investors want their tenants to stay for a long time, so they are incentivised to ensure buildings are well maintained.

“It’s a vanilla investment, but for a vanilla investment, the last thing you want is uncertainty,” Greaves said.

The other problem for London is that borrowing has been more expensive than in Europe. But if interest rates cool and rent inflation settles around 3%, then capital will potentially be attracted back.

“We’re not rushing back, but we’re looking at it again because when we consider multifamily pricing, this could be a very good time to invest,” he said.

However, while the backlog appears to be clearing rapidly, the pipeline has slowed to a trickle.

“Clearly, with delays there has been a knock-on effect, and that just means there is slightly less appetite for developers and operators to build more homes,” Get Living Chief Financial Officer Dan Greensdale said, highlighting the bifurcation between multifamily, which is more likely to be high-rise, and single-family, which is attracting more capital.

The majority of new-build applications continue to be assessed by the BSR’s new Innovation Unit following its separation from the Health and Safety Executive. In the 12 weeks to 23 January, the IU took a median time of 13 weeks to approve applications, 14 weeks for rejections and 12 weeks to resolve withdrawn applications.

“What I will say is the government have very much listened, and there's been a lot of positive progress,” Greensdale said. “Decisions have been made in 12 weeks, so that's astonishing progress compared to where we were. About two-thirds of that has been related to London.

“Certainly, if you haven't followed the process, then applications were getting rejected, and once you get rejected, you go right to the back of the queue. I think that that has been a common theme.”

He highlighted CBRE figures showing investment volumes for 2025 were £4.7B, up 14% year-on-year. The number of completed units increased by 13%, although applications fell by 21% in the fourth quarter.

“It is hard to build the case for build-to-rent in terms of viability,” Greensdale said. “There are quite a few reasons for that in London. Specifically, you've got the drag on development. It takes an awful long time from buying land to getting a finished product. It's the whole ecosystem around housing. We've got to unlock everything in order to find a way forward.”

But while welcoming the changes, British Property Federation Assistant Director for Planning and Development Sam Bensted said more than half of the applications that go into the Gateway don't pass the validation process.

“They're essentially stuck, and the next few months will be quite interesting to see if they can get invalid applications sorted out through the new process and crucially get the approval percentages up as well,” Bensted said.

“We're hoping in the coming months that, as applicants become better versed in the new processes, rejections will go down,” he added. “It's just about making sure that you're not prolonging the process for an uncertain period of time and not having any feedback from the BSR.”

Bensted also said smaller schemes need to be taken out so that the BSR can focus its resources on residential towers. He said the BPF was even aware of residential-to-office conversions, which do not need to go through the process, being referred.

“The viability piece is a slow accumulation of various different tax and regulatory changes, which I think individually are all well intentioned but that cumulatively negatively impact development or that have been implemented in a challenging way,” BPF Director of Policy Danny Pinder said.

“It will also take some time to unwind. The last quarter in 2025 was the eighth consecutive quarter completions outpaced applications,” he said. “There's nothing coming through behind, and BSR improvements will take time to feed through.”