Housebuilder Supply Key To UK's £8B Single-Family Housing Market

The UK’s single-family housing market is no longer a niche offshoot of the build-to-rent residential boom but an asset class finding its footing — still maturing, but outperforming its more established multifamily sibling.

Its growth has been turbocharged by a housing market in which housebuilders have used SFH buyers to offload unsold homes. Even as the housing market changes, that channel will remain open as SFH gobbles up a bigger portion of the rented residential pie.

“The interest rate environment is lower, and SFH plays a real role as a de-risking tool for housebuilders,” Kennedy Wilson Director of Strategy for Europe Lottie Outen told more than 150 attendees at Bisnow's Single-Family Housing Summit, held at the Waldorf Hilton in London.

“Most of the big housebuilders have now established [SFH] partnership teams. It’s fundamental going forwards, and we expect to see investors looking to bring brand value and fewer, bigger platforms by 2030.”  

Pricing discipline remains central to investment decisions, according to JLL Senior Director Jonathan Smith, who said bulk purchases from housebuilders typically come with a unit discount of between 10% and 15%.

“Fair feels like 10% to 12%” as the market becomes more established, Smith said, particularly as housebuilders increasingly buy land with the sale of units for SFH priced in. Exit discounts matter less, he added.

The UK needs 834,000 additional homes, JLL Head of UK Living and Residential Research Marcus Dixon said, pointing to a structural gap that institutional rental housing is increasingly expected to fill.

Capital has already begun to respond, Dixon said, adding that total investment into SFH had reached about £8.2B by the end of 2025, with around 32,000 homes developed or in the pipeline. Of that investment, 76% has come since 2023.

Global financial uncertainty has coincided with a sharp shift in living habits, with families with children either with mortgages or living in social housing reducing, while the private rented sector has seen soaring increases in households with children. That demographic change is spurring the growth of the institutional SFH sector. 

For investors, the macro backdrop also feels supportive, with the government and Homes England having set ambitious new homes targets that SFH will play a part in.

In the near term, investors see SFH as one of the more resilient real estate segments over the next 12 months, behind only offices and well ahead of several traditional asset classes.

At the end of 2024, SFH was about halfway down the investment preference list, with multifamily and purpose-built student accommodation significantly higher, Dixon said, anticipating that this momentum will continue.

“We’re forecasting investment in 2026 to be on par with or slightly ahead of 2025,” he said.

A total of £4.7B was invested in UK rental homes in 2025, of which 55% was invested in SFH, the first time it has ever eclipsed the multifamily sector in the UK.

Dixon said that while the north-west and West Midlands had traditionally accounted for about half of all SFH stock, some investors are now “retreating back towards the south-east,” while Scotland is “one to watch” following greater reassurance around the relaxation of rent caps.

While most activity for Kennedy Wilson remains concentrated in the south, south-east and up through the Midlands, Outen stressed a pragmatic approach.

“It’s very site-specific, bottom-up strategy,” she said. “The investment criteria and number of units really matter. But the backdrop is very positive for SFH. We know the government and Homes England have a 1.5-million-homes target, and SFH has a role to play.”

Outen also said the sector fills the void left by small landlords exiting the market and will help address planning and infrastructure constraints. She said she would like to see SFH embedded in the National Planning Policy Framework and for the government and Homes England to use public money for large master plans.

That sense of confidence was echoed by Matter Real Estate Director Sunny Sanghera, who said, “Confidence brings scale,” as he described growing interest from global investors seeking exposure to “UK plc” as part of wider portfolios. Comparing markets, Sanghera said the UK’s rental dynamics remain attractive.

“In Europe, rents go up by inflation. In the UK, there’s churn, which allows you to push rents up to market levels,” he said. “That means, in theory, annual growth should be higher than inflation.”

Financing conditions are also stabilising, although Sanghera said lower interest rates and consistent yields in mature European markets remain more predictable than in the UK, which means that long-term capital requires all parts of the UK market to function well to make it competitive.

For operators on the ground, the story is less about rates and more about supply as investors look to housebuilders to make SFH a consistent part of the site mix.

“Interest rates are relevant, but it’s not fundamental,” Leaf Living CEO Will Montague said. “The fundamental issue is chronic undersupply of housing.”

Supply dynamics are changing, too, and Smith said he anticipates that the relationship between SFH investors and housebuilders will mature as they get a deeper understanding of each other.

“Housebuilders still aren’t selling enough product to us. But over time, they’ll be more motivated,” Smith said. “At the same time, mum-and-dad landlords are leaving in their droves, with a lot of stock coming online for investors. By 2030, I think we’ll see some meaningful moves in that part of the market as well.”