Scotland sets out rent control exemptions for build-to-rent and mid-market homes

The Scottish Property Federation (SPF), which represents developers, said the rent control exemption was “a vital move” to incentivise the development of rental homes.

It added that the regulations will help to provide the sector with confidence to diversify and develop, potentially including more single-family suburban rental homes, an area that has grown considerably in other parts of the UK in recent years.

The SPF claimed that Scotland’s 2022 rent freeze put 17,000 new homes and £3bn of new investment at risk.

Meanwhile, Scottish housing associations had lobbied for their MMR homes to be exempt from the rent control regime, arguing they were already let below market rates.

The new regulations set out for the exemption of BTR homes from rent controls are as follows:

• The property must be built, converted or renovated; form part of a relevant development; be constructed after 31 August 2021 and be included in the landlord’s entry on the Landlord Register.
• The property must remain continually within the rental market from first occupation.
• The exemption will apply to groups of six or more properties.

Regulations exempting MMR homes from rent controls include:

• Where the landlord or a third party receives, or has received, funding from the Scottish government or local authority and there are conditions attached to that funding which restrict the landlord’s ability to increase the rent.
• Where the terms of the tenancy agreement for the property restrict the landlord’s ability to increase the rent.
• In both cases, those restrictions must operate to prevent the rent increasing above the median of market rents in that area.

David Melhuish, director of the SPF, said: “This is a critical signal to the real estate sector and wider investor community that Scotland is once again open for BTR and MMR investment.

“There is a clear and growing need for large-scale, high-quality, professionally managed, energy-efficient new rental homes.

“After several years of uncertainty, we believe these regulations now provide a genuine platform for major investment in this residential sector.”

Richard Meade, chief executive officer of the Scottish Federation of Housing Associations, said: “We’re in the midst of a housing emergency and the answer to that is to provide far, far, more affordable homes.

“We’re therefore pleased that our housing associations have been listened to and that MMR will not inadvertently fall under rent controls intended for the private sector.

“Our MMR homes are an increasingly important part of the housing market, often housing key workers and young people who can’t afford private rented accommodation or access a social home.

“Importantly, they are already effectively rent-controlled by being tied to local housing allowance.”

He added: “Tenants of MMR properties, as well as being able to live in an affordable home, also enjoy all the benefits of living in a social home often managed by housing associations. That should be protected, not put under threat.”

Last month, developers welcomed the Scottish government’s announcement of a new agency to drive housebuilding “of all types”. More Homes Scotland will be set up next year and will be fully functional by 2028-29, the administration announced, subject to the outcome of the next Scottish parliamentary election.

The agency’s key areas of focus will include large-scale affordable housing schemes, rural and island housing, land acquisition and release and infrastructure work to progress stalled sites. It will also work with the Scottish National Investment Bank to “make best use of private finance”.