Rent Controls in Scotland - a sigh of relief (for BTR, at least)?

There has been much speculation in the residential development market in Scotland over the last few months over whether the proposed rent control measures in the Housing (Scotland) Bill (the Bill) will apply to build-to-rent (BTR), mid-market rent (MMR) developments, and purpose-built student accommodation (PBSA). 

A couple of publications by the Scottish Government this week 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 that there will be a long-term system of rent control, subject to Parliament agreeing the Bill. 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 scale 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/ MMR sector in Scotland, which has been damaged by the uncertainty over the application of rent controls to this sector. However, the use of the words “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 1 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 on this.

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

So, while the Scottish Government’s initial statement of intent in this area is undoubtedly helpful as an indication of the direction of travel they favour, much will depend on the progress of the Bill through its remaining 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 2, which came as a shock to the industry. The Scottish Government said at stage 2 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 3 of the Bill’s passage through Parliament. 

The devil is always in the detail, but for now, investors and developers can perhaps enjoy a (cautious) sigh of relief. 

If you would like to discuss how rent controls might affect your business, our market leading living sector and housebuilding teams would be delighted to help – please reach out to Peter Chambers or your usual Burness Paull contact. 

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