Build-to-rent in Scotland: the impact of building safety

After several difficult years, Scotland’s build-to-rent (BTR) sector has reasons to be more optimistic.

The exemption of qualifying BTR from rent control has restored a measure of income certainty and there remains a substantial consented pipeline in Edinburgh, Glasgow and other key locations. The latest BTR report by Savills for RE:UK noted that Scotland’s planning pipeline has grown 3% to 10,552 homes. However, confidence in the occupational market is only one part of the equation. For developers, funders and contractors, the harder question is whether schemes can be made deliverable in the face of cost and programme risks, along with paramount building safety obligations and a new residential levy which does not sit easily with the BTR model.

High-rise delivery and Scotland’s Compliance Plan Approach

Building safety is a defining issue for Scottish BTR. Many schemes are multi-storey urban residential buildings, often with complex façades, mixed-use ground floors, extensive plant, amenity spaces and phased occupation strategies. That makes them precisely the type of project where design coordination, evidence of compliance and clarity of responsibility matter throughout the construction period, not just at completion.

Scotland’s new Compliance Plan Approach is intended to strengthen the existing building warrant system by creating a more planned, recorded and auditable route to compliance. The first phase focuses on high-risk buildings and is being introduced through guidance before future legislative change. For applicable projects, the approach moves the industry away from a reactive end-of-project scramble and towards a project-specific compliance plan, clearer evidence requirements and in due course, a Compliance Plan Manager role, to oversee how compliance is demonstrated.

From a BTR perspective, this should be seen less as a legal technicality and more as a delivery discipline. Funders will want confidence that completion, occupation and stabilisation dates are credible. Contractors will want clear procedures for inspections, design changes, substitutions and evidential sign-off. Developers will need to ensure that the design team, contractor and supply chain understand who is responsible for producing and preserving the information required to secure completion certification and lawful occupation. 

The earlier these issues are discussed and embedded into appointments, building contracts, design responsibility matrices and programme planning, the less likely they are to become a late-stage blocker.

The Scottish Building Safety Levy: a difficult fit for build-to-rent

The Scottish Building Safety Levy adds a layer of uncertainty for BTR. The levy is intended to help fund cladding remediation and will apply to new residential development, including BTR, from 1 April 2028. The Building Safety Levy (Scotland) Act 2026 sets the framework, with Revenue Scotland responsible for collection and Scottish Ministers able to set rates, reliefs and detailed rules. Indicative rates (see here) and relief and exemption proposals have now helped the market understand the likely direction of travel, including exemptions for certain affordable housing and island developments and a levy-free allowance for smaller volumes. But the commercial impact on larger urban schemes remains significant.

The absence of transitional arrangements is particularly important. Projects already in planning, design or procurement will be caught if the taxable building control event (i.e. acceptance of a completion certificate or permission for temporary occupation) occurs after 1 April 2028. That matters for BTR,  because these schemes have long lead-in periods and are often underwritten years before practical completion. If the final levy cost is not fully known at funding commitment, it becomes another contingency item in an already pressured appraisal. 

There is also a structural mismatch between the levy and the BTR funding model. A housebuilder may at least have sales revenue flowing through phased completions. A BTR developer is creating an investment asset, with returns generated through rent over time and value dependent on stabilised income. There is no immediate sales receipt from individual units to absorb a new tax at completion. In that sense, the levy risks taking momentum out of the very form of housing delivery that Scotland is trying to restart. There is some recognition of that funding model in the current Scottish Government consultation on the operation of the levy (see here). That proposes potential payment flexibility for completed BTR units with a building warrant granted before 5 June 2025 (the date the Building Safety Levy (Scotland) Bill was introduced), with increased time to meet levy liabilities. However, it is not currently proposed that the same flexibility would apply to BTR developments receiving building warrants after that date.

The uncertainty is not only about rates. Developers and funders will need to monitor how reliefs, exemptions, valuation assumptions, payment timing, returns and enforcement are finalised. Contractors should also be alert to the indirect consequences: if a levy change affects viability, funding conditions or employer approvals, it may influence commencement, procurement pacing and change control. The levy is therefore not simply a tax issue – it impacts project delivery too.

Where does this leave the market?

Managing new legislative changes in relation to building safety and the Scottish Building Safety Levy, whilst maintaining fundable programmes, is critical. For developers, that means assessing or re-assessing levy and compliance risk before committing to procurement. For funders, it means looking at the assumptions sitting behind programme, completion certification and occupation. For contractors, it means managing an increased pressure on pricing and programming. Managing these changes will allow parties to make the most of the opportunity for Scotland’s BTR market to regain momentum.

This article is the third in a series by the Living Sector team at Burness Paull on the outlook for the build-to-rent (BTR) sector in Scotland, which you can find here.

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