Edinburgh City Council could become the first local authority in Scotland to become a private landlord.
Their plan is to build up to 1000 houses per year, which they intent to rent out privately at a market rent on a commercial basis using a company called Edinburgh Homes.
The profits make from their “landlording” enterprise would be ploughed back into council services.
As reported by the Edinburgh Evening News, a Scotsman Newspaper, City chiefs claim that a lack of house-building by the private sector has left a major shortage of housing in the Scottish capital which in turn has forced up the cost of buying or renting a home.
They now believe that the authority is well placed to step in and fill the gap, helping to bring down prices and raise standards in the process and make money for the City Council at the same time
The company, Edinburgh Homes, would go out to attract private investment funding for the new building, awarding contracts to local construction firms to build the homes before the new company takes over and lets, manages and maintains them for profit.
Building is expected to start in the Fountainbridge district of Edinburgh, where they will be built alongside new affordable homes.
Councillor Cammy Day, Council Housing Leader, told the Edinburgh Evening News that the authority would continue to build houses for rent in the traditional way, but those for the private rented sector would be aimed at professionals and others able to pay higher rents. He said there would be a mix of houses and flats of different sizes.
He went on to say:
“We recognise there is a market in the private rented sector that will bring in income for the city.
“The private sector is not building very much, so we can get into that, build some more houses, and recycle money back into the council.
“We would aim for about 1000 a year. It has been done elsewhere and it seems to work well. It will make a profit for the council which will be reinvested into council services.”
“The other side of that is about bringing up the quality of the private rented sector. There are a huge number of good private landlords, but there are also some who are not so good.”
The initiative, which Edinburgh claims follows a similar scheme in Manchester, has been welcomed by some in the property rental sector (PRS). But others were more cautious, saying that councils should stick to social housing.
John Blackwood, chief executive of the Scottish Association of Landlords (SAL), told the Edinburgh Evening News that councils should instead concentrate on building more social housing.
The association, based in McDonald Road, Edinburgh represents hundreds of individual landlords, who may have only one or two properties, as well as many larger letting agents.
“There is a need for more housing across Scotland and we welcome new investment in new homes, but we do have concerns about local authorities competing in the private rented sector and the effect that might have on local landlords and letting agents.
“We need to look at housing across the board – people cannot buy the way they did before.
“But local authorities and housing associations have not been investing in new social housing.
“We would rather they invested their energies in building more social housing, which is often for the most vulnerable in society, rather than getting involved in the private rented market which tends to be for those who can afford it more than others.”
The Manchester scheme referred to above had families move into the first of the new council-built private homes earlier in the year. 240 new homes are being built for sale and rent in the Gorton, Wythenshawe and Chorlton areas of Manchester.
But Tory councillor Jason Rust has said he is sceptical about the plan. “This sounds like a major change of direction,” he said.
“We’re all aware of the issues faced by younger people trying to rent in Edinburgh, but we need to be very careful about the position of existing landlords, many of whom may be letting out just one property.
“The council also has some regulatory responsibilities for private rented housing, so we would also have to ensure there was no conflict of interest.”
Green housing spokesman Steve Burgess has said:
“Private rents in Edinburgh are too high and rising fast. In turn, tenants often get short-changed with shoddy management and poor conditions.
“So anything that can give the worst private landlords a run for their money has to be worth looking at.”
David Alexander, Managing director of letting agency DJ Alexander told the Edinburgh Evening News:
The project will only work… “if it is not subject to political interference and, crucially, the new company is given the freedom to charge market rents”.
“Otherwise this would be seen as unfair competition, which would undermine confidence in the local market among existing and potential new private landlords, leading to a net drop in rental accommodation to rent, even taking into account the additional properties provided by Edinburgh Homes.
“This is called the “law of unintended consequences”, and great care to avoid it will be required.”
Featured Image (Above) shows canal barges at Fountainbride, Edinburgh
— LandlordZONE (@LandlordZONE) April 16, 2015