UK cities with the most developed living sectors have added jobs at almost twice the rate of those with less mature living sectors, according to new research from Close Brothers Property Finance and the Housing Forum, with data partner JLL. It is the first research to analyse the link between the scale of the living sector and local economic performance across the UK’s university cities.
The Living Sector: an engine for growth and talent retention for the UK’s cities examines purpose-built student accommodation (PBSA), co-living, single-family housing and build to rent across 20 of the UK’s principal university cities. It finds that between 2015 and 2025:
- the number of jobs grew by 14% among the ten with the most developed rental living sectors, against 8% in the other ten.
- unemployment fell in nine of the ten cities with the most established living sectors, compared with four of the other ten.
- the population aged 20 to 34 also grew twice as fast in the ten cities with the most developed living sectors, a sign that they are attracting and retaining young people.
The ten cities with the most developed rental living sectors are Manchester, Birmingham, Leeds, London, Cardiff, Glasgow, Sheffield, Edinburgh, Liverpool and Exeter. Manchester stands out, with the fastest growth of any city in the study (Gross Value Added up 57% and jobs up 31% since 2015) alongside the second-largest co-living and build to rent markets.
Key findings from the report include:
- Jobs – In the typical city with a well-developed rental living sector, jobs grew by 14% between 2015 and 2025, against 8% elsewhere. Jobs grew faster than the UK average in eight of the ten cities with the most developed living sectors, led by Manchester (+31%) and Liverpool (+23%).
- Unemployment – The unemployment rate fell by 1.6 percentage points in the typical top-ten city, while in the other ten it rose by 0.3 points. Across the UK it fell by 0.5 points. Unemployment fell in nine of the ten cities with the most developed living sectors, with the largest falls in Glasgow (2.9 points), Edinburgh (2.8 points) and Cardiff (2.1 points). Among the other ten cities, unemployment rose in five, including Brighton & Hove, Cambridge and Oxford.
- Young people – The number of residents aged 20 to 34 grew by 13% in the typical top-ten city, twice the rate of the other ten (7%), and is forecast to keep growing to 2035 while it is forecast to decline slightly in the typical city among the other ten. Seven of the top ten grew their young population by more than 10% over the decade, against three of the ten cities with less developed sectors.
- Homes not keeping pace – Jobs are forecast to grow faster than supply of new homes in 15 of the 20 cities to 2035, with the widest gaps in Cambridge (jobs +21%, homes +11%), Manchester (+20% against +14%) and Nottingham (+12% against +6%). The Manchester figures show that even the most successful market is not building enough: the city has the most developed rental living sector in the study and has grown its housing stock faster than most since 2015, yet jobs are still forecast to grow faster than homes.
The research shows that the living sector and local economic growth go hand in hand. The report argues that, with many new councillors now shaping local housing and planning policy, local authorities should treat purpose-built rental and student homes as part of their growth and talent-retention strategies, rather than as a planning challenge.
Investors confident in the sector, but held back by viability and regulation
An accompanying survey of developers, investors and operators active in the UK living sector found that 94% agree high-quality PBSA, build to rent and co-living can play a significant role in retaining graduates and young professionals, and 65% plan to increase their exposure to the sector over the next two years.
However, confidence has weakened, with 53% less optimistic than they were 12 months ago. Development viability was named as a main barrier to investment by 94% of respondents, and 82% said the Building Safety Regulator’s gateway process was the regulatory change with the greatest impact on their investment appetite.
The report sets out practical recommendations for local and national government, developed with parliamentarians and industry leaders. They include planning explicitly for rented homes in Local Plans, identifying brownfield and town-centre sites for living uses, making staged building safety approvals work in practice with predictable timescales, and reviewing the tax treatment of residential investment so that professionally managed rental homes are not disadvantaged against other real estate uses.
Chiara Caldwell, Managing Director, Structured Finance at Close Brothers Property Finance, says: “Too often, the living sector is treated as a planning challenge rather than a policy solution. The evidence in this report points the other way: the cities that have made room for professionally managed rental homes are the cities adding jobs, reducing unemployment and keeping young people. If our cities are to grow, they need to keep the people they train. This research shows that where the living sector has been allowed to develop, local economies have developed with it, adding jobs and holding on to young talent. We hope it gives local authorities, and the many new councillors now shaping housing policy, a clear evidence base for the role the sector can play in local growth.”
Alex Notay, Chief Executive of the Housing Forum, says “Our members see every day how a shortage of the right homes can hold back growth, investment and opportunity. This report highlights the importance of providing a genuine mix of tenures, with high-quality rental homes alongside homes for sale and affordable housing, helping local communities and economies to thrive.
As councils and combined authorities develop new plans for growth, this research underlines the need to view housing as critical social and economic infrastructure, and a diverse and flexible mix of tenures as a key enabler of local and regional prosperity.”
Marcus Dixon, UK Head of Living and Residential Research at JLL, says: “Demand for professionally managed rental homes continues to grow, with the majority of tenants we surveyed expecting their next home to be rented. Yet in most of the cities we analysed, housing supply has not kept pace with jobs, and forecasts suggest that gap will widen to 2035 without more delivery. With ambitious housing targets and a clear housing need across our cities we need to ensure we are building more homes of all tenures. The living sector is ready to play a bigger part, but we need to ensure the conditions for investment are right, barriers are lifted and we have a government who are working alongside us to deliver more homes.”
The full report is available at: The Living Sector: An Engine for Growth and Talent Retention in the UK's Cities | Close Brothers Property Finance
