Housing pressure pushes real estate capital into niche strategies

This article was first published by PERE in June 2026 and is reproduced here with permission.
 

Real estate investors are pivoting to specialist residential sectors as supply, demographics and rates reshape risk-return dynamics across markets, say Macquarie Asset Management’s Erin Ledger-Beaupre, Brendan Jones and Justin Ayre.
 

Housing affordability pressures are intensifying globally as population growth and migration drive demand, while rising construction costs and higher interest rates constrain new supply. As a result, real estate investors are reassessing where and how to deploy capital across living sectors.

Against this backdrop, Erin Ledger-Beaupre, Senior Managing Director, US Real Estate; Brendan Jones, Head of Europe Real Estate; and Justin Ayre, Managing Director, APAC Real Estate with Macquarie Asset Management point to diverging regional demand drivers. But a common set of structural themes: persistent undersupply, shifting tenant preferences and a growing role for institutional capital in traditionally fragmented segments, may present opportunity.

Which forces matter most in your region, and how are you addressing them?

Brendan Jones: Most major European cities have experienced large increases in immigration in recent years, as well as major affordability issues due to limited supply of new housing amid rising construction prices and interest rates.

Net migration in the UK has surged to around four times the long-term average in the past several years, reaching one million per annum. Although migration has now normalised, the cumulative impact of record arrivals against the backdrop of limited housing supply is still flowing through the system. In London, house prices are now 14 times the median income, compared to nine times less than a decade ago. The average first-time buyer’s mortgage payments are now 53 per cent of take-home pay, leading to a real drop in home ownership.

Given these shifts and similar impacts across Europe, we are focused on middle-market residential products that provide high-quality housing to a large population base at affordable prices.

We invest in and partner with specialist operator platforms to deploy capital across the living sectors on behalf of our clients. We have partnered with Goodstone Living to invest in three build-to-rent projects being developed in the UK, expected to deliver over 1,000 new homes, with a further two projects in London that are expected to commence construction within the next six months. We are also deploying capital to develop rental housing in Berlin and across Germany through EDGE, another of the platforms, and are partnering with a student accommodation platform, Tribera, to fund the build-out of modern affordable student accommodation across Europe.

Justin Ayre: Australia’s population is growing at 1.2 per cent per annum, and the over-65 cohort is growing at approximately twice that rate. At the same time, there is a structural undersupply of housing, which we expect to worsen given widening construction costs and planning constraints. Given this dynamic, we are investing across the full residential spectrum, both through equity and credit strategies.

With a growing population, housing preferences are also changing. For example, we are investing in new built-to-rent developments in partnership with Australian build-to-rent platform, Local. These products target a broad range of residents looking for professionally managed and long-term rental housing options. Such a product has not historically existed in Australia, but institutional real estate investors are increasingly investing in it, recognising the structural tailwinds driving the sector’s institutionalisation.

Another platform in Australia is Millbray, a specialist land lease communities group we established to develop purpose-built communities catering to the growing over 50s population. Separately, through our investment in IDA, we are facilitating the debt and equity financing of master-planned communities that cater to the preferences of first-time buyers for detached housing.

Erin Ledger-Beaupre: Housing affordability is also a major issue in the US. There is a massive under-supply of housing products for people with an average household income of between $75,000 and $100,000. This ‘missing middle’ group has lost about 6 million home units, including rentals and for sale units, over the past 15 years.

In response, we have spent a significant amount of time investing in manufactured housing through the Harborvale Living platform. We are now seeing real estate investor interest in the manufactured housing sector, but it has a few challenges. 75 per cent of institutional quality manufactured housing is privately owned, often by individuals or small investment groups. As a result, aggregating a portfolio of assets takes time.

The other challenge is that this product is also extremely hard to develop, and there has been virtually no new supply over the last 15 years.

Beyond this, we are also investing in the senior housing sector. Post-COVID, the senior housing market went through structural modifications which shut down the supply pipeline, so limited senior housing product has been built in recent years.

How has the risk-return equation changed, and where are you seeing opportunities today?

JA: Construction cost inflation for housing has increased more than 50 per cent over the last five years in Australia, creating challenges for all development and in particular smaller, under-capitalised developers. This, coupled with rising rates, has created conditions for developers with institutional capital and for private credit to provide more flexible financing solutions.

In the case of Local, we have seen build-to-rent strategy shift from greenfield development to turnkey structures that can de-risk construction costs and the associated planning risks related to development. IDA, on the other hand, focuses on providing flexible and accretive credit solutions.

ELB: Senior housing is currently an area of focus in the US. Cap rates widened materially post‑COVID while new development remained constrained at a time when demand was accelerating, creating conditions to acquire core‑plus assets with strong fundamentals. These assets typically require active management to achieve stabilisation.

How do managers sustain long‑term value creation in operationally intensive living assets?

BJ: Living sectors are inherently operational, so having a high-quality integrated OpCo is critical to driving asset performance and long-term value.

In European student accommodation, we combined two operator platforms to form Tribera, making a concerted effort to back teams with deep operational capability. That operating insight informs design decisions around unit mix, amenities and layout, creating an information advantage that compounds and is difficult to replicate.

Being active on the ground is also critical to driving occupancy and retention, which ultimately underpins net operating income. And operational capability provides data that enables dynamic pricing, smarter staffing and portfolio‑level cost control, helping inform future investment decisions.

ELB: In affordable and senior housing, getting service levels right is critical, both for financial performance and reputation risk. As affordability pressures increase, disciplined rent setting and strong operational execution become even more important.

JA: Operational capability means that the platforms we invest in directly own the relationship with their tenants which both provides insights to optimise the performance of existing assets while also identifying areas where demand may support new developments. By bringing property management and leasing functions in-house, specialist disability accommodation operating platform, Enliven, has been able to halve lease-up times for its new developments.

How should managers think about jurisdiction selection, policy change or regulatory alignment?

JA: Regulatory risk is a key consideration across all living sectors, but when structured effectively it can support institutional investment by providing greater certainty for owners, operators and residents. Governments are increasingly recognising the role private capital can play in addressing housing shortages and are introducing policies to encourage institutional participation. With a long term ownership mindset, we’re able to plan with potential regulatory change in mind and develop assets that are fit for purpose over time.

BJ: The biggest challenge is the uncertainty regarding changes to regulation as opposed to regulation itself. Many European governments and regulators have been constructive in delivering well-considered regulation and embracing institutional managers and capital to help deliver something that works.

One example is the government of Scotland providing exemptions to institutional landlords from rent regulations. This is a perfect case of a government collaborating closely with the local community and institutional managers to establish legislation that improves tenant conditions but also encourages institutional investment.

The platforms we invest in are focused on delivering high-quality assets that are aligned with the general policy direction of travel. When Goodstone Living started thinking about designing their initial projects, the Fire Safety Act was not in place, but they were adamant about making sure there was dual access to units, which helped to future-proof their product from new safety legislation.

Near term, which living sectors are you focused on, in terms of investor activity and value creation?

JA: To date, we have not seen institutional capital at any scale invest in the development of master-planned communities in Australia, even though it accounts for 40–50 per cent of new housing supply.

So far, this sector has been dominated by private or listed developers. Such projects require long-term planning because of the extended time frame to redevelop the land, which is one of the reasons why institutional real estate investors have stayed away from the sector.

However, over the next decade we anticipate demand for such mass-planned community projects may grow. A few factors could drive this interest, including growing recognition of the degree to which housing is undersupplied in Australia, the streamlining of planning processes, and rising preference for detached housing here.

ELB: As housing affordability pressures persist, manufactured and senior housing in the US may be positioned to play an increasingly important role in delivering housing that remains accessible, resilient and investable.

Manufactured housing has historically delivered stable net operating income over long periods, with consistent income growth supporting resilient long-term performance. While new development has been minimal for over a decade, zoning reforms could unlock new supply and create conditions for development.

BJ: We see potential in the institutional growth of purpose‑built student accommodation across continental Europe. It’s a large market of around 19 million students that remains fundamentally underserved, with the sector still in its early stages compared to the US, UK and Australia. We anticipate new investment and institutionalisation over the next decade, which could create conditions for scaled platforms.

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