Mid-market and build-to-rent properties to be exempt from rent controls

The regulations follow a commitment made during scrutiny of the Housing Act and in the Housing Emergency Action Plan.

In summary, the proposals set out that the exemptions for the Build-to-Rent sector are as follows:

• The property must be: (1) built, converted or renovated, (2) form part of a relevant development, (3) constructed after 31 August 2021 and (4) included in the landlord’s entry on the Landlord Register.
• The property must remain continually within the rental market from first occupation. If it has been used for anything other than rental, then it would no longer be considered exempt.
• The exemption will apply to groups of six or more properties

Mid-market rent properties that will be subject to exemptions are:

• 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.

Housing secretary Màiri McAllan said: “Scotland needs more homes. These regulations provide the confidence and clarity needed for investment in our housing sector, providing homes for families across Scotland.

“The regulations laid demonstrate our commitment to ensuring Scotland has the affordable homes we need.

“So does our announcement last week that we intend to launch a new housing agency, More  Homes Scotland, which will be squarely focused on bringing simplicity, scale and speed to the delivery of homes in Scotland.”

The Scottish Property Federation described the move as “vital” to incentivise the sector to deliver high-quality, professionally managed rental accommodation.

Director David Melhuish said: “This is a critical signal to the real estate sector and wider investor community that Scotland is once again open for build-to-rent and mid-market rent 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. With the right support, build-to-rent and mid-market rent have the potential to deliver new homes at both scale and pace across Scotland.

“We not only urge all parties in the Scottish Parliament to recognise the importance of this opportunity and support these Regulations to unlock new investment and accelerate the delivery of much-needed rental homes but also continue to foster a positive investment climate as we head into the May elections and beyond.”

Welcoming the announcement, Gillian McLees, CIH Scotland director, said: “CIH and other stakeholders across the housing sector argued for these exemptions to provide certainty for investors and boost the supply of much needed affordable housing.

“Our research published last year with Shelter Scotland and SFHA showed a need for significant increases in the supply of social and affordable homes across Scotland. We must deliver 15,693 social and affordable homes, including mid-market rent, every year for the next five years to tackle homelessness and address the housing emergency.

“Exempting high quality, professionally managed and long-term rental homes from rent controls will ensure that Scotland is an attractive place for investors. It will boost the supply of much needed homes, support job creation and most importantly increase housing supply and choice for households across Scotland.”

Richard Meade SFHA CEO added: “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 Mid-Market Rent will not inadvertently fall under rent controls intended for the private sector.

“Our Mid-Market 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. 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.

“Everyone should have access to a safe, warm affordable home, because we know that allows people and Scotland to thrive, and MMR plays a crucial role in helping us to achieve that vision. We are pleased that government listened and provided the certainty needed so that more people will have the chance to access MMR properties in the future.”