On the face of it rent controls may seem to many people to be fair enough. By introducing targeted rent controls in Rent Pressurised Zones such as Edinburgh and Aberdeen, the Scottish Government intends to introduce a measured, limited, power that will relieve rental pressure in specific residential markets. The trouble is that rent controls may actually worsen Scotland’s housing crisis. Indeed, the root cause of the problem is that is the level of demand for new homes does not come close to the amount of supply that is delivered.
There is a market emerging that could help address the shortage of homes, one which the Scottish Property Federation (SPF) has supported for a long time – build to rent. These are purpose-built rental blocks that are designed to suit the need of modern-day renters. Build to rent units are professionally managed, and offer attractive, long-term yields for institutions such as pension funds.
Not only are bespoke, purpose-built private rented sector (PRS) properties attractive to tenants and investors, but they should also be attractive to government, and it can bring new homes to the residential market, quickly.
This is not just a pipe dream – Edinburgh-based SIGMA are proving how PRS can support quickly delivered, affordable, rent-based communities in the north-west of England given strong partnerships with local authorities. This market has really taken off south of the Border, where there are over 3,500 build to rent units completed, and over 10,000 more in the pipeline. Yet the Scottish Government’s answer to this is: rent controls. In our view this is a mistake. The SPF firmly believes that the introduction of rent controls will not help this nascent new source of homes to develop in Scotland. In fact, it may well stop it from going beyond a handful of schemes that are currently in their construction and planning phases.
Why? Because investors will be wary of market intervention that could be triggered unexpectedly and could deter other investors. The Scottish Government does appear to be trying to target the use of the proposed rent control powers – but the extent of the areas to be covered by rent controls and even their levels of control remain uncertain. This will not encourage investors to commit to large scale funding of new build-to-let homes and without new build, we will not ultimately meet the need for homes, of any tenure.
l John Hamilton, chairman of the Scottish Property Federation and chief executive of Winchburgh Developments