The introduction of the Renters’ Rights Act 2025 is set to further weaken demand for flat developments, adding to viability pressures already facing developers and investors.
According to RSM UK, the combination of regulatory change, shifting buyer preferences and rising costs is making high-density schemes increasingly difficult to justify – particularly in a market where investor appetite is already softening.
The warning comes as the sector prepares for sweeping rental reform from 1 May, including the abolition of Section 21 and a move to periodic tenancies, changes that are already prompting some landlords to exit or scale back portfolios.
For developers and bridging lenders, the knock-on effect is a potential slowdown in flat-led schemes, particularly those reliant on investor demand or forward sales to landlords.
UNVIABLE DEVELOPMENTS
Stacy Eden (main picture, inset), partner and national head of real estate at RSM UK, says: “Flat developments are becoming increasingly unviable, and the Renters Rights Act will further compound this. We are already seeing more landlords retract from the market, or shrink their portfolios, in response to rising taxes and increasing regulation.
“While the supply of flats has been a challenge, demand for flats has also fallen, with consumer concerns around high service charges and building safety, and a desire for outside space.
“As first-time buyers favour houses over flats now, and landlords leave the market, housing development now proves more profitable for developers. With prices of flats falling over the last six years or so, and costs and regulation increasing for developers, it’s no surprise that developments of flats, which provide much needed high-density housing, are becoming increasingly challenging.”
REALISTIC EXIT PLANNING
The shift has clear implications for the bridging market. Schemes that would previously have stacked up based on investor-led exit strategies may now require repositioning, whether through unit mix changes, alternative tenures or extended hold periods.
At the same time, falling flat values and weaker demand could increase reliance on short-term finance to bridge viability gaps, fund conversions or hold assets while developers reassess exit routes.
As the new regulatory framework beds in, lenders and brokers are likely to see a growing number of cases where original development assumptions no longer hold – placing greater emphasis on flexibility, structuring and realistic exit planning.
