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By Mathias Flattin, Co-founder of Crayon Partners, as published in Insight/Out magazine #39.
London’s housing market is sending a rare signal: record unsold supply on one side, a wall of creditworthy households locked out of mortgages on the other. Rent-to-own sits precisely at that intersection.
Buying a home in a European capital now absorbs roughly fourteen years of average income, more than double the figure recorded in 2001. In the United Kingdom, the effect on younger cohorts has been stark: homeownership among the under-35s has fallen from 57% at the start of the century to 39% today.
This is not a story about people who cannot afford a home. It is a story about firefighters, teachers, engineers and nurses who can comfortably service a mortgage but cannot assemble the lump sum required to obtain one.
The deposit as the binding constraint
Mortgage underwriting has tightened structurally since 2008, and loan-to-value discipline now means first-time buyers must save tens of thousands of pounds for a deposit before a lender will even engage. Over the past two decades, house prices have far outpaced incomes: in England, the median home now costs close to eight times average earnings, up from around five in the early 2000s.
In the London region alone, around 1.2 million households rent privately, and roughly 540,000 of them want to buy within the next twelve months but cannot: a target demand pool estimated at some £253 billion of residential real estate. From a capital-markets perspective, this is a mispriced pocket of demand: solvent counterparties, willing to pay, blocked by a timing problem rather than a solvency problem.
Affordable-housing programmes expand supply and shared-ownership schemes fractionalise title, but neither dissolves the deposit barrier. Even Help to Buy, which helped over 370,000 households in a decade, was pulled in 2022 on budgetary grounds: the ceiling every public scheme eventually hits. Private capital has no such ceiling, and the model itself is simple: rent, then buy. A clear route from tenant to owner, with zero asterisks.
What rent-to-own actually does
The rent-to-own model tackles the constraint head-on. A household signs a tenancy at market rent, with a purchase price for the home fixed from day one. A defined portion of each rental payment is set aside and capitalised, so that over two years the tenant accumulates the deposit they could not save on the open market. At the end of the period, they exercise an option to buy at the pre-agreed price, using the accumulated sum as their down payment.
Three features distinguish this from a conventional lease. The purchase price is locked at the outset, shielding the household from the very house-price inflation that is pricing them out. Rent stops being a pure expense and becomes a savings mechanism, converting an outflow into equity. The abstract goal of getting on the ladder becomes a concrete, dated plan.
A rare window for institutional buyers
What makes the strategy timely is the state of the London new-build market. The city is in the grip of a demand-side freeze rather than a supply shortage. In London alone, industry data put unsold new-build stock at around twenty-nine months of supply in early 2026, a record. Absorption has collapsed: roughly 2,800 homes were sold in the second quarter of 2026, against a structural need closer to 22,000 a quarter. In these conditions, developers increasingly turn to bulk exits. The share of new London homes sold in bloc rose from about 7% to 12% in a year, and those transactions are clearing at discounts of 15% to more than 20% against unit-by-unit value.
Acquiring entire buildings, vacant, lets a buyer capture that discount at the point of maximum developer motivation, when few others are willing or able to transact at scale. For an institutional allocator, it is also a rare countercyclical entry into UK residential, a large and historically resilient asset class, at a moment when the cycle is doing the discounting rather than the underwriting.
Securing tomorrow’s buyers, today
The same discipline that has frozen today’s buyers is temporary: over five million UK borrowers face higher repayments by the end of 2028, and the two-year fix at 90% loan-to-value sits above 5.3%. As rates normalise and this cohort re-qualifies, the households currently locked out will return to the mortgage market. The supply side, meanwhile, is emptying: housing starts are down around 84% over the decade, with only some 14,000 completions expected across 2027 and 2028.
Rent-to-own lets an owner position ahead of both curves. By signing creditworthy tenants today at a fixed price, the strategy effectively secures « tomorrow’s buyers » two to three years before they re-enter the market, and does so while acquiring the underlying stock at a trough discount. Buy into weak demand, contract the end-buyer in advance, and sell into a shortage.
A category, not a product
For private markets, rent-to-own is best understood as a category, not a single product: it sits where residential Real Estate, Private Credit and Impact meet, pairing a tangible, income-producing asset base with a credit-like cash-flow dimension and a clean, countable social outcome. That mix is what makes it interesting to a jurisdiction like Luxembourg, whose competencies in vehicle design, governance and structuring for international investors are exactly what such a strategy demands.
Aligning returns with outcomes
Most real estate impact is really environmental: better EPC ratings, lower energy use, a path to net zero. The “S” is harder to underwrite, and this is one of the few property strategies that targets it head-on. Homeownership is among the most durable engines of social mobility we have: it builds wealth that compounds across generations, roots families long enough for schooling and community to take hold, and tracks with better health and stronger neighbourhoods. Better still, the impact is countable, which matters to allocators wary of impact-washing: it is measured in households crossing from renting to owning, precisely the creditworthy, middle-income households, many of them key workers, that policy claims to serve but leaves shut out.
This is also where returns and outcomes align: the strategy performs when a tenant becomes an owner. None of this is simple; it demands genuine operating capability and professional financial coaching of tenants toward exercising their option within two years. But it reframes a problem policymakers have wrestled with for a decade as one private capital is equipped to solve: not a shortage of homes or of income, but of the single lump sum, and the credit history, that stands between renting and owning.
If most cars are now bought through leasing or rent-then-buy schemes, the biggest purchase of our lives surely deserves a financing model of its own, one that digital and AI-driven underwriting finally make workable at scale. Expect the model to spread across the rest of Europe, and with it a new asset class to finance, offering investors a fresh route into residential.
