Scotland rent control puts off investors and disrupts BTR pipeline
Rent controls and political uncertainty are affecting investor appetite to fund and deliver build-to-rent homes in Scotland, according to a report by the Scottish Property Federation and researcher Rettie & Co.
The Assessment of Scotland’s Rent Freeze and Impacts report details the impact of Scotland’s six-month rent freeze and recently introduced 3% rent cap on the BTR market.
It includes interviews with 14 institutional investors, which have £15bn of BTR assets combined. Nine of those interviewed said investing in Scotland was unattractive, with four viewing the country as uninvestable under current conditions.
Rent controls and political uncertainty are affecting investor appetite to fund and deliver build-to-rent homes in Scotland, according to a report by the Scottish Property Federation and researcher Rettie & Co.
The Assessment of Scotland’s Rent Freeze and Impacts report details the impact of Scotland’s six-month rent freeze and recently introduced 3% rent cap on the BTR market.
It includes interviews with 14 institutional investors, which have £15bn of BTR assets combined. Nine of those interviewed said investing in Scotland was unattractive, with four viewing the country as uninvestable under current conditions.
The current BTR pipeline sits at around 17,000 properties, but 67% are in planning, including 6,000 properties with planning permission where construction is yet to begin on site.
The latest developer pausing plans in Scotland is Get Living, which has put its £200m Glasgow scheme on hold.
Get Living chief executive Rick de Blaby told EG in an interview earlier this month: “If you have a choice of putting £200m in a location that has rent control and £200m into a location that hasn’t, I am afraid you are going to pick the one that hasn’t.”
The report further states that investors are calling on the Scottish government to incentivise investment in the BTR sector by creating a stable policy environment that removes the risk of ongoing market interventions and reduces the risk premium.
Investors are asking for a positive planning policy, including supporting density for BTR, dealing with planning applications quickly, and for the Scottish government to work with the sector to foster confidence and trust for urgently required housing investment.
David Melhuish, director of the SPF, said: “The impact of the emergency legislation on the BTR market over the past six months is clear. The lack of long-term policy certainty means investors largely view Scotland as a risk, compared with more stable locations in other parts of the UK.
“This situation is a disincentive to investment and, as a consequence, investors are going to continue to divert capital elsewhere. The rental market in Scotland, and crucially renters, will continue to bear the brunt as new housing supply is constrained and demand for accommodation soars.
“At a time when we need more housing, and a quality rental sector, investment in Scotland is reducing. The industry and the Scottish government should be working together to ensure build-to-rent investment is flowing into the country.”
Dr John Boyle, director of research at Rettie & Co, said: “Our work clearly shows the potential for BTR in Scotland as part of the answer to the housing crisis. However, the sector has been stymied by what investors consider to be high levels of political risk.
“The recent emergency legislation has elevated these risks and less supply will come forward as a result, which will have consequences for affordability and availability of properties for rent in Scotland.”
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