Construction firms are collapsing. Did Britain forget who used to finance housing demand?

Property118

Construction firms are collapsing. Did Britain forget who used to finance housing demand?

There is an uncomfortable statistic buried in the latest insolvency figures which ought to interest anybody wondering why Britain continually promises to build more homes while struggling to get them out of the ground.

According to the latest figures from the Insolvency Service, 3,805 construction companies in England and Wales became insolvent in the 12 months to the end of June 2026. Construction accounted for 17% of company insolvencies where the industry was recorded, making it the largest single sector.

That does not mean construction insolvencies are suddenly accelerating. The annual number is actually slightly lower than during the preceding 12 months. Nevertheless, almost 3,800 construction businesses becoming insolvent in a year hardly suggests an industry enjoying the conditions necessary to deliver the enormous increase in housebuilding politicians continue to promise.

Recent failures put some names behind those statistics. Leeds-based Torsion Construction entered administration on 29 July 2026. It employed 115 people and specialised in residential and living-sector construction. Its administrators, Interpath, referred to liquidity pressures arising from delayed capital events, contract margin pressure, rising input costs and the wider market downturn.

The collapse of Ardmore Construction Group provides another example of the pressures affecting the sector, although its circumstances were different. Substantial losses and liabilities associated with historic projects and building safety issues played an important part in its problems, demonstrating why it would be far too simplistic to attribute the construction industry’s difficulties to any single cause.

Construction operates on notoriously thin margins and businesses have had to contend with expensive finance, wage increases, higher material costs, legacy fixed-price contracts and developments which no longer stack up financially. When a substantial contractor fails, the effects can also spread rapidly through the supply chain as subcontractors and suppliers are left with unpaid invoices.

There is, however, another side of the equation which receives considerably less attention.

Who is going to buy all the homes that developers are being encouraged to build?

Something the late David Knox FCA spotted ten years ago

Long-standing Property118 readers may remember the late David Knox FCA, who wrote for Property118 under the pseudonym Appalled Landlord.

David died in January 2020, but some of the research he left behind looks increasingly relevant to the housing problems Britain is confronting today. He had a particular talent for digging into official statistics and following the numbers to conclusions which were sometimes very different from the prevailing political narrative.

One of his most striking observations concerned what happened to England’s housing stock during the expansion of buy-to-let.

The figures do not originate with Property118. They come from the Government’s own English Housing Survey: Profile of English Housing 2013.

Between 1996 and 2013, the total number of dwellings in England increased from approximately 20.3 million to 23.3 million, an increase of around three million homes. Over precisely the same period, the number of privately rented dwellings increased from around 2 million to 4.5 million, an increase of 2.5 million.

Put those numbers beside one another and it becomes obvious what caught David’s attention.

Growth of 2.5 million privately rented homes was equivalent to approximately 83% of the three million net increase in England’s entire dwelling stock during those 17 years.

That is an extraordinary statistic, although it needs to be interpreted responsibly.

It does not mean private landlords personally commissioned or built 83% of all the new houses constructed during that period. Properties moved between tenures, existing buildings were converted and homes were renovated or brought back into use.

What it does demonstrate is the extraordinary scale of private landlord investment during the period generally associated with the growth of buy-to-let.

The Government’s own report went further. Discussing changes in the private rented sector, the English Housing Survey identified the introduction of buy-to-let mortgages in the late 1990s and noted that this resulted in a greater proportion of newer homes entering the private rented sector relatively soon after purchase.

In other words, there is Government evidence supporting something landlords and developers of that era already knew: buy-to-let investors were important customers for newly constructed housing.

We revisited David’s research on Property118 earlier this year, but in light of what is now happening throughout the construction industry, his original warning deserves another look.

David’s warning in 2016

In September 2016, David published an open letter to an MP on Property118.

He was principally writing about Section 24 and the consequences he believed would follow from deliberately discouraging leveraged private landlords. Buried within that letter, however, was an observation which looks remarkably prescient ten years later.

David pointed out that landlords were already withdrawing from buying properties requiring renovation, meaning that the builders and tradespeople who had previously carried out that work were losing business.

More importantly for today’s discussion, he specifically referred to landlords no longer purchasing new properties off-plan.

That matters because housebuilding does not begin when somebody lays the first brick. It begins much earlier, when a developer and its funders become sufficiently confident that there will be customers for the homes they intend to build.

During the buy-to-let boom, private landlords were part of that customer base.

David could already see what might happen if they disappeared.

Housebuilding starts with somebody prepared to buy

Governments tend to discuss housing supply as though granting planning permission causes houses to appear.

It doesn’t.

A development has to be commercially viable. Land must be acquired, planning obtained, finance arranged, contractors appointed, materials purchased and wages paid, often long before the developer receives the proceeds from selling completed homes.

Confidence in future sales is therefore enormously important.

During the expansion of buy-to-let, hundreds of thousands of individual landlords represented an additional pool of purchasers. Some bought existing properties, certainly, but others bought new-build apartments and houses, frequently before construction had finished.

Off-plan investor sales could provide developers with early evidence of demand and, depending upon the development and its financing structure, help demonstrate to development lenders that sufficient purchasers existed to justify advancing construction finance.

The landlord therefore did not need to put on a hard hat or employ a bricklayer personally to contribute towards housing supply. The economic role was further along the chain: providing demand and private capital which helped make development commercially worthwhile.

That distinction appears to have been largely forgotten.

What happens when investment is deliberately discouraged?

For much of the past decade, successive governments have pursued policies specifically intended to reduce or constrain individual landlord investment.

The additional Stamp Duty charge on second properties increased acquisition costs. Section 24 changed the income tax treatment of mortgage finance costs for individual residential landlords. Regulation and compliance costs have increased substantially, while continuing uncertainty surrounding possession, energy efficiency requirements and rental reform has also affected investment decisions.

Each policy can be debated on its individual merits. What cannot reasonably be argued is that making an investment progressively more expensive, uncertain or difficult has no effect on people’s willingness to make that investment.

The consequences do not necessarily stop with landlords.

A landlord who decides not to purchase a new-build flat represents one fewer potential customer for a developer. A landlord who decides against converting a redundant commercial building represents one less source of private capital for regeneration. A landlord who stops buying tired properties to refurbish represents less work for builders, plumbers, electricians, decorators, kitchen suppliers and dozens of other businesses.

One landlord changing strategy makes no measurable difference nationally. Hundreds of thousands of investment decisions eventually do.

That was essentially the warning David Knox was making in 2016.

The construction industry’s problems are much bigger than landlords

None of this proves that today’s construction insolvencies have been caused by the decline of buy-to-let investment.

They haven’t, and suggesting otherwise would weaken the argument.

Torsion’s administrators referred to delayed capital events, contract margin pressure, rising input costs and the wider market downturn. Other construction businesses have failed for entirely different reasons.

Across the industry there are expensive borrowing costs, wage pressures, volatile material prices, fixed-price contracts entered into when costs were lower and the familiar cash-flow problem of having to pay workers and subcontractors before money is received further up the contractual chain.

There is also a domino effect when a substantial contractor fails. Subcontractors can be left with unpaid invoices, developers have to find replacement contractors and projects can be delayed while somebody works out who will finish the job and at what price.

The argument, therefore, isn’t that government policy towards landlords created the construction industry’s problems.

It is more interesting than that.

Britain may have spent a decade deliberately suppressing one source of private investment in housing at precisely the same time as politicians have become increasingly desperate for the private sector to build more homes.

The 1.5 million homes question

The Government has committed itself to building 1.5 million homes over this Parliament, an ambition set out in its housing and planning programme.

That inevitably leads to a question which deserves far more attention whenever ambitious housebuilding targets are announced.

Who are the customers?

Some new homes will be social and affordable housing and will require public or institutional funding. Some will be purchased by first-time buyers and existing homeowners. Institutional Build to Rent will finance another proportion.

However, if Britain genuinely wants a dramatic increase in housing construction, it seems strange simultaneously to regard one of the largest historic sources of private capital entering housing as something which ought to be discouraged.

The experience of the buy-to-let expansion suggests that private landlords did considerably more than redistribute an existing stock of houses between owners and tenants. Their money also supported refurbishment, conversion and regeneration, while their willingness to purchase newly constructed properties, including off-plan, provided developers with customers.

The numbers David Knox identified do not prove that every additional PRS property represented a newly constructed home, and we should not pretend that they do.

What they demonstrate is something more fundamental.

During a period when England’s housing stock expanded by around three million homes, the private rented sector expanded by approximately 2.5 million. Private landlord investment was therefore occurring on an enormous scale at exactly the time Britain’s housing stock was growing.

The Government’s own English Housing Survey recognised both the extraordinary expansion of private renting and the relationship between buy-to-let finance and newer properties entering the sector.

David Knox spotted the significance of those numbers nearly ten years ago.

Sadly, David is no longer here to continue the argument himself. However, his original 2016 article remains on Property118 and makes fascinating reading with the benefit of hindsight.

At a time when 3,805 construction companies have become insolvent in England and Wales within a year, while the Government remains committed to delivering 1.5 million homes, perhaps the question should no longer be how to stop landlords investing in housing.

Perhaps we should start asking what might persuade them to invest again.

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Rent controls risk landlord exodus – Propertymark

Property118

Rent controls risk landlord exodus – Propertymark

Rent controls could push more landlords to sell and reduce the number of homes available to tenants, Propertymark has warned as the debate over imposing rent controls gathers pace.

The property body argues that limiting prices tackles the effect of the housing shortage rather than the shortage itself.

In London, the average rent for a one-bedroom home is equal to 52% of median pre-tax pay, compared with 42% across the rest of England.

Propertymark says increasing housing supply and encouraging investment would do more to improve affordability.

Rent controls warning

Propertymark said: “Rent pressures are real, but controlling the price of a scarce product does not create more of it.

“Rent controls can protect some tenants in the short term, but they do not address the shortage of homes that drives high rents.”

It added: “They can also weaken investment, reduce the number of properties available and make it harder for people seeking a new tenancy to find a suitable home.

“Evidence from schemes implemented around the world backs Propertymark’s opposition to rent controls and work to challenge and reshape the policy in Scotland.”

Evidence points to supply

Research cited by Propertymark found San Francisco’s 1994 expansion of rent controls reduced tenant mobility by 20%, while affected landlords cut the supply of homes for rent by 15% through conversion to owner-occupation and redevelopment.

In Berlin, a stricter rent freeze reduced prices for controlled homes, but weekly listings fell by more than 50%, from more than 600 before the policy was announced to fewer than 300 afterwards.

Studies of Catalonia’s 2020 controls produced differing results, with one finding rents fell by around 4% to 6% without evidence of a short-term supply reduction.

Another found an average rent fall of around 5% alongside an estimated 10% drop in supply.

Scotland landlord concerns

Propertymark says its experience in Scotland also highlights the potential impact on landlord confidence, after temporary restrictions were introduced under the Cost of Living (Tenant Protection) (Scotland) Act 2022.

A subsequent survey of Scottish letting agents found 93% reported more landlords expressing a wish to withdraw property from the private rented sector, while 83% had seen an increase in landlords serving notice to sell.

Under the Housing (Scotland) Act 2025, councils must complete their first assessments of local rent conditions by 31 May 2027, with the main controls not expected to operate before 2028.

Where a rent control area is introduced, the permitted annual increase will be CPI plus 1%, capped at 6%, while Propertymark is continuing to argue that exemptions should not favour institutional investors over individual landlords.

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