John Lewis Exit Sparks Crisis in Build To Rent: What London Landlords Need to Know

Why John Lewis’s Withdrawal Matters to Landlords

John Lewis Partnership’s sudden exit from its Build To Rent (BTR) project is more than a headline—it marks a critical juncture for the UK’s BTR sector. Cited causes include soaring construction inflation and a tougher financial environment, issues that resonate beyond a single developer. This move has reverberated through the market, highlighting structural challenges that could slow the delivery of new BTR homes, especially in London where supply pressures are acute.

The Build To Rent Sector’s Current Landscape

Recent data from the British Property Federation (BPF) underscores the severity of the slowdown: new BTR home starts have plunged sharply, with London seeing some of the steepest declines. This contraction threatens to reduce the availability of professionally managed rental homes, placing upward pressure on rents and limiting tenant choice.

Notably, the BPF has called on the Chancellor to reintroduce Multiple Dwellings Relief (MDR), a stamp duty relief withdrawn in 2016 that previously supported the economics of BTR schemes. Without MDR, the upfront tax burden on large-scale residential acquisitions increases, curbing investment appetite and delaying projects.

Implications Across the Landlord Spectrum

• Single-unit landlords may see indirect effects as supply constraints push rents higher, but their operational models remain largely unaffected.
• HMO operators could face increased competition from reduced BTR stock but should watch for shifting tenant demand patterns.
• Portfolio landlords and institutional investors need to reassess new acquisitions and development plans, factoring in potential changes to MDR and heightened construction costs.
• Accidental landlords might experience changes in tenant turnover and demand influenced by broader market shifts stemming from fewer new BTR properties.

Practical Steps to Mitigate Risk and Adapt Strategy

1. Monitor Fiscal Policy Developments

Stay alert to government announcements regarding MDR and other tax reliefs. The reintroduction of MDR could materially improve BTR project viability and market supply. Engage with industry bodies like the BPF for timely updates and advocacy.

2. Review Portfolio and Investment Strategies

Given the likelihood of a slower BTR pipeline, reassess your investment assumptions. For portfolio landlords, consider diversification strategies and the impact on exit and acquisition timing. Single-unit landlords should factor in changing rental demand and possible rent inflation.

3. Communicate Proactively

Be transparent with tenants and investors about potential market impacts. For landlords managing multiple units, ensure tenant retention strategies are robust in a tightening market.

4. Engage Professional Support

Consider commissioning a compliance audit or portfolio review focused on risk exposure in a shifting market. Rentals & Sales offers tailored advisory services to help landlords realign strategies effectively.

Looking Ahead: Strategic Planning for Property Teams

Property managers and operational teams should prepare for the potential shifts in tenant supply and demand dynamics. Scenario planning—including adjustments to rent pricing, maintenance budgets, and tenant engagement protocols—will be essential to mitigate risks associated with BTR development slowdowns.

How Rentals & Sales Can Support You

Our dedicated Landlord Intelligence Hub is equipped to guide you through these changes with:

• Portfolio reviews tailored to assess exposure to the BTR sector slowdown
• Compliance audits to ensure all regulatory requirements continue to be met amid shifting market conditions
• Pricing strategy consultations to optimise rental income in a changing supply environment

Contact us to arrange a consultation and safeguard your investments against emerging risks.

Compliance Note: This article provides general information and does not constitute legal or financial advice. Landlords should consult with qualified professionals regarding specific circumstances.