Plans for new tenancy agreement in Scotland could deter investors

15 May 2015

Policy area: Residential Investment/Management

The Scottish Property Federation (SPF) has warned that government intervention in the private rented sector could damage investment in Scotland’s build to rent sector

The Scottish government is consulting on a new tenancy for the private rented sector (PRS). The consultation proposes the removal of the no fault ground for repossession, which will mean that landlords can no longer reclaim their property at the end of a tenancy, and the introduction of rent controls.

In response to the consultation, the SPF explains how the key challenge for the residential sector is choice and supply, and that the proposals risk deterring institutional investors and possibly even large scale landlord-developers, which will exacerbate the shortage of housing.

It warns that the proposals will most likely lead to a reduction of PRS stock and that it risks Scotland being perceived as a less competitive and attractive place for investment.

The SPF also highlighted how the recent Better Renting for Britain Campaign, signed by 41 company chief executives, recently outlined how there is £30bn investment poised to enter the sector, if the government provides favourable conditions.

David Melhuish, director of the Scottish Property Federation, commented: “A large-scale, professionally managed private rented sector will play an important part in helping to ease the current housing shortage. Scotland’s build to rent sector is in its early days, and we need to do everything we can to encourage institutional investment and large scale build-to-rent housing development, not scare it away. While we are supportive of a new, streamlined tenancy regime, it is crucial that it is not done at the expense of investor confidence.

Hazel Sharp, Director of Allsop Residential Investment Management (ARIM) and Chair of the SPF Residential Investment and Management Committee, said: “There are more opportunities in England than there is capital to invest, by a considerable margin.  Our investor clients tell us that they would struggle to make a compelling case to invest in Scotland whilst the government still believes that rent control is the answer to a problem which is a lack of supply. 

"Unless Scotland is positively differentiated prospective investors will withdraw any interest in Scotland, and we will be left with fewer homes for rent, lower standards, less choice and consequently higher rents.  This would be disastrous for the private rented sector and its tenants, exacerbate the crisis in housing supply, and damage the wider Scottish economy."