Paragon Development Finance, a division of Paragon Bank, has expanded its funding mechanisms, setting aside up to £35m for the acquisition and development of build-to-rent (BTR) schemes in key residential areas throughout UK cities and large towns. This initiative covers all stages of BTR schemes, from site procurement to the letting of a completed scheme and a quick stabilization facility.
The BTR market is seen as a pathway for experienced residential developers and serves as an addition to the buy-to-let market in the private rented sector, which is showing strong growth. The bank supports an unconventional BTR funding model that allows developers to keep the scheme post-completion for regular income from institutional-grade mid-size BTR schemes with limited upside benefits.
The British Property Federation has reported delivery of 90,000 units with an additional 50,000+ units under development. Single-family housing now forms 10% of this sector. Paragon's initiative aims to support the lifecycle of BTR schemes across major UK towns and cities.
Neal Moy, the managing director at Paragon Development Finance, sees the expanding BTR market as a viable alternative to traditional models. Simon Dekker also emphasizes the evolving UK housing market, with the growing BTR market serving as a feasible alternative to customary models, especially considering their experience with the PBSA market support.
The move comes amidst changing demands of the UK's population. It encourages developers, who usually bear most of the development risk but have limited upside benefits, to capitalize on potential growth in the rental market by retaining the scheme after completion. This leads to stabilized income-producing institutional-grade mid-size BTR schemes contributing significantly to the private rented sector and complementing the buy-to-let market.
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