Rapleys Alternatives: Living sectors continue to be in demand but outlook is ‘longer term’

The Residential Living sector continues to perform, structurally supported by ongoing supply/demand dynamics and continued investor interest in relatively secure long-income streams, according to strategic property consultancy Rapleys. However, across Affordable Housing, Build to Rent (BTR), Care & Retirement and PBSA there are a number of headwinds which stakeholders will need to navigate in order to ensure performance and delivery in the coming 12 months.

These were the findings from Rapleys’ latest ‘An Alternatives View’ report, which assesses the performance, challenges, opportunities, outlook and themes across 19 niche property sectors, which residential living forming the focus for this latest release. Other specialist reports will be published throughout the year including Automotive & Roadside (Car Dealerships, Forecourts, Drive Thrus, Service Stations and Self-Storage), Health & Science (Labs, Dentists, Vets, Education, Sports), and Infrastructure (Data Centres, Renewables, Transport, Utilities). It is the industry’s only comprehensive deep dive into Alternative assets. 

In terms of performance between the Living sectors, there wasn’t one standout winner. Both PBSA and BTR saw record levels of investment with Q1 2026 alone accounting for £2.1bn of investment in student accommodation – the highest single quarter figure in three years, taking cumulative investment in the sector to over £50bn in the past decade. BTR saw £5.2bn invested in 2025, another record, with half of that allocated to Single Family Housing. Despite this, performance varied greatly between asset types and locations with old vs new a recurring theme thanks to development viability pressures and asset management strategies favouring standing assets that require upgrades as way to increase income. The bifurcation in both of these markets is clear to see: on the one hand there is a flight to quality with the best schemes seeing full occupancy and rental growth and tertiary, dated and poorly managed schemes seeing high levels of distress. 

Development viability remains the greatest challenge. Whilst completions in BTR were up 13% in the last 12 months, starts were down 15%. Institutions are increasingly turning to PRS stock with Blackstone’s acquisition of a Vistry portfolio one of the most high profile examples. IN PBSA, only around 17,000 new beds are expected to enter the market this year. Where development is moving ahead, the preference is for amenity-lite BTR and Single Family Housing and, in PBSA, sites close to Russell Group Universities.

Ultimately performance in 2026 will depend on expert operational oversight, something shrewd investors are already tackling.

Care and Retirement property also continues to attract investor interest, buoyed by the sector’s compelling demographics. However, the swelling size of the market (care in residential is now worth £26.2bn, and residential homes is expected to reach £15bn this year), masks the fact that here also with operators facing cost squeezes including the rise in the Living Wage and NIC on top of development cost and supply pressures, only 86 net new beds were delivered in 2025.

Development viability is also hampering Affordable Housing, where the gap between need and delivery remains acute: 150,000 homes are still needed to catch up. Whilst grant funding provided certainty to investors and RPs, critics argue this isn’t nearly enough when considering the huge backlog of stock needing to be brought up to standard, the s106 units delivered but not acquired or operational, and the viability costs plaguing the delivery of development. Incentivisation for investors and developers, and council-building are measures that the industry needs Government to take.

Other similar themes and challenges are evident across all Rental Living sectors with planning a core consideration. The lack of specific use classes for BTR, PBSA and Care & Retirement in particular mean that sites are not always allocated for these uses in Local Development Plans which means developers are seeing a locational lottery depending on the LPA they are engaging with.

Similarly, legislation such as the Renters Rights Act and updated Building Safety regulations are adding to the viability squeeze.

Nick Fell, Head of Residential at Rapleys, said: “Rental Living still represents one of the best opportunities for real estate investment in the UK. However, operational expertise is essential to tackle the numerous challenges the sector faces such as viability, regulation and planning delays. As always, institutional and private investment is crucial to delivery and performance in each. The Government has a very real opportunity to incentivise and leverage the interest from such sources of capital, but big and potentially unpopular decisions will need to be taken: tinkering with s106 and planning simply won’t go far enough to meet targets to house the nation. Finally, it is crucial that developers (of all sizes) and landlords are seen as positives in the delivery of rental homes, it cannot be all stick and no carrot. The UK needs to foster a collaborative spirit, not one of competition. Too often these crucial stakeholders are presented in a negative light when we should be doing everything to work together to deliver.”