Exempting build-to-rent (BTR) developers from future rent controls in Scotland could result in a two-tier market and an unworkable system, warns one property boss.

As the Housing Scotland Bill continues its progress through the Scottish parliament, one area which has just been brought forward for consultation is whether certain parts of the PRS should be eligible for exemptions from the Bill’s proposed rent cap, explains David J Alexander, managing director at letting agent DJ Alexander.

The consultation – which ends on 18th July – considers that landlords could be allowed to increase rents above the rent cap where there have been improvements to their property or where rents have consistently been charged at below market rates. There is also a proposal that build-to-rent (BTR) developers could be exempt from rent controls as they are typically long-term investors and provide a steady supply of homes over a prolonged period.

Legitimate

“This favourable treatment of BTR could produce a two-tier market with legitimate criticism from non-BTR landlords and investors,” says Alexander. “But it is not just the policy that matters but the implementation. If every property is exempt that has had some upgrading or had below market rent increases, then the administration of this proposal would be enormously costly and largely unworkable.”

Financial

He believes the Scottish government should make more effort to provide financial incentives for landlords and property investors and encourage housebuilding to grow the PRS. Less intervention and more of a light touch is needed, says Alexander, and points to the more radical approach in the Republic of Ireland where the government is encouraging PRS investment, removing or modifying rent controls and encouraging speedy growth.

A report by the Organisation for Economic Co-operation and Development recently suggested landlords in Ireland should be able to “reset” rents between tenancies – whenever they get in a new tenant to a property – to stop the exodus of investors from the market and boost the supply of rental property.

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