What can Scotland learn from other countries about build-to-rent?

React News recently asked What can the UK learn from other countries about build-to-rent? In particular, the insight contrasted the BTR sector in the UK with the sizeable BTR sector in the US which has been established much longer – in the US over 40% of the rental market is under institutional ownership compared to only 3% in the UK where private individual landlords are much more common.

Scotland has its own distinct BTR market within the UK and given the housing crisis in some parts of Scotland, the BTR sector could be embraced as a market which can help address the shortage of homes.

Typically, US schemes are much larger than the BTR complexes seen here, offering tenants a range of technology-lead services including specific apps for residents - the larger scale schemes allowing more scope for on-site support.  In Scotland, the challenge is to provide quality BTR homes at a cost which investors find attractive and at rents which, while affordable, will still allowing room for good investment returns; perhaps lessons can be learned from the US with tech solutions employed to help drive down operational expenditure and provide an occupier-focused experience.

The elephant in the room is of course that Scotland has rent controls – a new concept for the market to grapple with; but rent control is not at all uncommon across Europe - Ireland, Italy and parts of Germany and France to name a few have rent controls in place and the BTR market continues to thrive across the continent.

Rent controls in and of itself should not deter BTR investors in Scotland - they may even encourage innovative solutions to address the housing shortage. While in some European countries, like Spain, BTR schemes are usually very large with many amenities including gyms and public lounges, in other countries, including Germany, BTR schemes are commonly more basic with fewer amenities. This means that the BTR product is more affordable and thereby available to a wider demographic of home-seeker.

There is an opportunity for different ‘levels’ of BTR schemes in Scotland to attract a diverse mix of tenants and incomes if the planning framework is right. While many of the new Scottish BTR schemes in Glasgow and Edinburgh offer a high spec and ample amenities, there is also room for schemes with something more akin to an entry-level spec at rents which will attract a wide range of occupier –such schemes will have fewer on-site amenities, but that residents are more likely to spend on local gyms, cafes and other off-site facilities to help grow the local economy.

In short, rent controls may be something of a paradigm shift in Scotland, but they’re by no means unusual on the continent and further afield, where the BTR market continues to thrive. A new normal needn’t be a barrier to a successful BTR market in Scotland.

Our living sector lawyers are on hand to help should you want to discuss anything in relation to BTR schemes or around your real estate needs generally.

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