Rent control plans threaten Scotland’s burgeoning PRS market

1 Sep 2015

Policy area: Residential Investment/Management

Plans to introduce a power for local rent controls in ‘high-pressure’ rental areas in Scotland could deter investment in Scotland’s private rented sector (PRS) and curtail much-needed housing supply, according to the Scottish Property Federation (SPF). 

The SPF issued the warning as First Minister Nicola Sturgeon outlined plans to introduce local rent controls through a Private Tenancies Bill as part of the SNP’s legislative programme for the next eight months.

Over the last few months, Scotland has seen significant, high-quality investment into the build to rent sector, with La Salle Investment Management making a £1bn push into the sector in Aberdeen and Grosvenor submitting plans for 400 purpose built rental units in Edinburgh.  The EDI group has also announced plans for PRS at India Quay, Edinburgh, as has Whiteburn Projects in Dundee.

The SPF is concerned that even the possibility of rent controls could sound the death knell for future investment in the build to rent market. Build to rent has the potential to rapidly boost Scotland’s housing supply, which needs to be increased dramatically across all tenures if the current housing shortage is to be resolved.   

David Melhuish, director of the Scottish Property Federation, commented: “We will consider the detail of the Bill carefully when it is published but we have been trying to encourage investment into Scotland’s purpose-built rental market for a long time, and it has been great to see momentum build over the past few months with some big investments in housing taking place. A clear message we have had from the industry, however, is that the mere prospect of rent controls, could be enough to spook potential investors bring us back to square one again.

“If the Scottish Government wants to increase housing supply, then the introduction of rent controls is not the way to do it. The purpose-built private rented sector has the potential to deliver a large amount of new homes across Scotland, and we should be doing everything we can to encourage investment in this sector rather than regulate this sector before it has had chance to take root.”