Blackstone in UK rental housing push with £580mn Vistry deal

Blackstone has reached a deal with housebuilder Vistry to buy about 1,750 new homes for rent as big money managers increasingly see opportunities in the UK’s underserved rental market. 

The £580mn deal by Blackstone and its minority investment partner Regis marks the second big transaction with Vistry in eight months, totalling £1.4bn, and funding more than 4,500 homes. 

The UK rental sector still largely relies on small private landlords but big money managers are increasingly moving into the market. Residential properties have weathered the downturn in commercial real estate caused by higher interest rates better than many other sectors. 

“Institutional private capital can play an important role in providing high-quality housing stock across the UK, particularly in the private rented sector, which is significantly undersupplied today,” said James Seppala, head of European real estate at Blackstone. 

Blackstone has long invested in housing in the US and has swept up tens of thousands of homes in Europe. In the UK, it has focused on funding new-builds.

The properties built under Tuesday’s deal will be managed by Leaf Living, a company launched by Blackstone and Regis in 2021 to manage single-family homes for rent in the UK and already has about 500 homes. A second company Blackstone backs, Sage, has a portfolio of 16,000 affordable homes and is aiming for 30,000 by 2030.

The UK’s largest listed rental landlord, Grainger, manages about 10,000 homes.

Private equity investors in housing have faced scepticism about driving up rents and treatment of tenants.

Blackstone in April said that it was a “myth” that institutional investors such as themselves were “driving up rents”, given it owns less than 1 per cent of the rental housing stock in each market where it operates across the US and Europe.

People living in the UK’s 5.5mn private rental homes have suffered through a period of record rent increases that analysts blame on a rush of tenants back into the market after Covid-19 being met by a shortage of landlords, who have faced rising interest costs on their debt and increased regulation.

The Conservative government’s flagship bill to increase tenants’ protections was scrapped when Prime Minister Rishi Sunak called a snap election for July.

Average private rents rose 8.9 per cent in the year to April, pulling back slightly from a peak of 9.2 per cent in March, according to government statistics. 

Since taking over housebuilder Countryside in 2022, Vistry has shifted its strategy to focus on partnerships to build affordable housing on behalf of the public sector and non-profit organisations. The homes sold to Blackstone are concentrated in the south-east of England, with the sites mainly coming from the land bank for Vistry’s legacy commercial housebuilding business, the company said. 

“This agreement supports our differentiated business model, with the certainty provided by the pre-selling of homes enabling us to accelerate our build programmes, guarantee work for our supply chain, reduce sales and build costs and create vibrant new communities,” said Vistry chief executive Greg Fitzgerald. 

The focus on these partnerships has helped Vistry fare better in the housing market downturn, which has led other housebuilders to slash their output as high interest rates put off buyers. Vistry said it was on track to increase new home completions by 10 per cent this year.