“Equity is plentiful. But banks hate lending on development at the moment. And they hate lending on speculative development. So that can make it difficult.”

Palmer Capital Chief Executive Alex Price laid out the quandary when it comes to the capital markets for the build-to-rent sector. Investors from across the world invested £3.1B in UK rented residential in 2018, according to CBRE, and the broker said there is £34B of equity targeting the sector in the UK right now.

But Price and other panellists at Bisnow's UK Build To Rent Expansion event said debt is still not easy to find for development, and that is to some degree holding the sector back.

Traditional banks are willing to lend 50% of the cost of a development, Price said. Debt funds are willing to take on more risk, but even they will go up to 70% at most.

“The issue is, even a small scheme costs £50M to build, or a medium-sized scheme is £100M. So even for a small scheme you need a lot of equity,” Price said.

The panellists summed up the issue by pointing to a firm called Venn Partners. In 2014 the debt fund manager was appointed by the UK government to oversee a £3.5B pot of money the UK government had made available for build-to-rent development. Five years later, it has lent just £442M.

The panel agreed that for stabilised schemes, debt is freely available. But developers are having to get more creative. Forward funding is one of the most popular methods of funding development, Liv Capital Executive Mike Toone said. This can allow developers to boost returns.

“We’ve seen some situations where the profit of the developer is tied to the leasing success of the scheme,” he said. “The developer is working hand in glove with the investor, and if it is a well-designed scheme then that can improve returns.”

But he said forward-funding deals carried an inherent risk, in that delays and costs overruns can impact the ultimate value and return from the scheme.