Injection of confidence in Scottish rental sector

Investment in these sectors, which have a major role to play in addressing Scotland’s housing emergency, has slowed due to uncertainty over whether rent controls will be introduced.

A couple of publications by the Scottish Government this month have provided the welcome news that BTR and MMR are likely to be excluded from rent controls, albeit this depends on the progress of the bill through its remaining stages in the Scottish Parliament.

The Scottish Government’s Housing Emergency Action Plan confirms there will be a long-term system of rent control, subject to parliament passing the legislation. It also commits to investing in affordable homes whilst “working to create the optimum conditions for wider investment to be made in our housing sector with confidence and certainty” and unlocking new investment opportunities. It also states: “In principle, we intend to exempt, where appropriate, mid-market rent and build-to-rent properties, to protect and promote investment in those sectors.”

This appears to be an effort by the Scottish Government to bring back some much-needed confidence to the BTR and MMR sectors in Scotland. Investment in these areas is key to meeting Scotland’s housing needs.

However, the use of “in principle” and “where appropriate” by the Scottish Government here are worth noting, and it remains to be seen how broad any exemptions would be.

The public consultation on which sectors should be excluded from rent controls closed on 18 July. Chapter one of that consultation focussed on potential exemptions for BTR and MMR, and the Scottish Government has this week also published an initial report on the responses received to that chapter, again seemingly in an effort to accelerate the necessary decisions.

If BTR and MMR developments are to be exempted from rent controls, there will of course need to be a definition of what would constitute a qualifying development and detail around the extent of the exemptions.

While the Scottish Government’s initial statement of intent in this area is undoubtedly helpful as an indication of the direction of travel ministers favour, much will depend on the progress of the bill through its remaining legislative stages.

Investors and developers will eagerly await more detail on the scope of the proposed exemptions, and the types of developments which will qualify for an exemption.

There has not been any similar commitment made this week about the exemption status of PBSA.

An amendment to the bill to include PBSA within rent control measures was passed at stage two, which came as a shock to the industry. The Scottish Government said at that point that it does not consider PBSA to be appropriate for a rent control regime, and highlighted representations it has received that this amendment has had a detrimental impact on investor and delivery confidence in this sector. The general expectation remains that this provision is unlikely to survive stage three of the bill’s passage through parliament.

The devil is always in the detail, but for now, this would seem to be a tentative, but positive step towards improving Scotland’s housing supply.

Peter Chambers is a partner and head of real estate at Burness Paull​