The number of build-to-rent (BTR) homes in the UK has increased by 23% over the past 12 months, according to new data provided by the British Property Federation (BPF) and Savills.

The total number of rental homes has reached more than 120,000, with 273,700 BTR homes currently complete, under construction or in various stages of planning.

There are 103,000 new homes in the planning system, including 54,500 homes with planning consent, although the number of new applications fell by 12% in the last quarter.

Construction activity has also contracted sharply, with the number of homes under construction down 20% year-on-year. The slowdown in construction is being seen more acutely in the regions, which dropped 23% to 34,500 homes, than in London, where activity fell 11% to 15,500 homes.

Ian Fletcher, director of policy at the British Property Federation, said: “Build-to-rent has made a critical contribution to housing over the last 12 years with £40bn invested to date and 120,000 new homes built. The sector provides housing across the country for a wide range of people, especially since its diversification into low-rise homes for families.

“However, increased regulatory and other costs that have faced the sector for the last few years is starting to take its toll on new schemes, as evidenced through a drop in construction starts and new planning applications. Investors continue to be interested in build-to-rent for the UK market, but we need to see policy that encourages schemes to progress and attracts the £250bn of further investment that is needed to meet demand.”

Guy Whittaker, head of UK build-to-rent research at Savills, added: “The build-to-rent sector has become an increasingly important aspect of housing delivery. In the past year, a tenth of all new home completions came via build-to-rent developments, twice the contribution it made in 2019, five years earlier. But starting new sites remains a challenge and the reduction in the construction pipeline is reflective of wider development challenges facing all forms of housing delivery.

“Viability remains a hurdle in the current climate, with elevated debt and construction costs, as does the planning system, particularly in London. If these obstacles can be navigated there is no shortage of investor demand to deliver new homes for rent, with more and more investors re-allocating capital from traditional investment sectors to living sectors.”