Cities keep the people they house
The evidence
Close Brothers Property Finance, the Housing Forum and JLL have put numbers to a link the market has talked about for years. Across 20 of the UK's principal university cities, the ten with the most developed rental living sectors grew jobs by 14% between 2015 and 2025. The other ten managed 8%.
The young population moved the same way. In the typical top-ten city, the number of residents aged 20 to 34 grew by 13%, twice the rate elsewhere, and that group is forecast to keep growing there to 2035 while it shrinks slightly in the rest.
Chiara Caldwell of Close Brothers put the argument in one line: "If our cities are to grow, they need to keep the people they train."
How the cycle turns
A graduate who can rent a decent flat near work is more likely to stay in the city after their course ends. Employers follow the people they want to hire, because a business choosing between two cities looks first at where its next intake will come from.
Those jobs create the next wave of demand for homes. Investors who have watched a city fill its first build-to-rent blocks are more willing to fund the next ones.
Manchester is the clearest example. It recorded the fastest growth in the study, with GVA up 57% and jobs up 31% since 2015, and it has the second-largest co-living and build-to-rent markets of the 20 cities.
The report shows growth and rental homes moving together, and the largest cities in the top ten had other advantages besides. The direction of the evidence is consistent, and 94% of the developers, investors and operators surveyed agree that high-quality rental homes help cities hold on to graduates and young professionals.
The homes have to arrive
The cycle only turns if the homes get built. Jobs are forecast to grow faster than housing stock in 15 of the 20 cities to 2035. Cambridge faces the widest gap, with jobs forecast to rise 21% against 11% for homes.
Manchester shows the limit. It has the most developed rental living sector in the study and has added homes faster than most cities since 2015, yet jobs there are still forecast to grow by 20% against 14% for housing. If the best performer is falling behind, most cities in the study have a delivery problem to solve.
What holds the money back
The appetite to close that gap is there. Of the developers, investors and operators surveyed, 65% plan to increase their exposure to the sector over the next two years.
Development viability was named as a main barrier by 94% of respondents, and 82% said the Building Safety Regulator's gateway process has had the greatest effect on their appetite to invest. Confidence has slipped, with 53% less optimistic than they were a year ago.
The report sets out what local and national government can do, from planning for rented homes in Local Plans to making staged building safety approvals run to predictable timescales. Those changes take time, which leaves the weight on delivery in the meantime.
Where viability is won or lost
Delivery sits with lenders, developers and their advisers. A living scheme's viability is set at appraisal, but it is won or lost on site.
A month of programme slip on a build-to-rent block is a month of rent that never arrives and a month more interest on the facility. A cost overrun that uses up the contingency before the frame is finished leaves the lender deciding whether to fund the gap.
This is where independent monitoring earns its fee. A monitoring surveyor who values the work built on site and tests the cost to complete against the remaining facility gives a credit committee something to act on early. If the money left won't finish the scheme, the report should say so in pounds while there is still time to fix it.
A stalled site is the outcome everyone loses on. It ties up capital and tells the next investor to look elsewhere.
Finishing what gets funded
Our part is making sure the schemes that get funded are finished on the figures they were funded on. Every block that completes and lets up gives lenders and investors the evidence to back the next one.
Joe Garner MRICS, Director, Axo Consulting
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