By Scarlett Land and Development
As the Build to Rent sector continues to grow, so does the range of new funds entering the market seeking opportunities. Now that the market has been established, lower risk funds are looking to purchase and fund new housing projects. One segment is entrants who have a mandate to provide social returns through delivery of affordable and sustainable housing in areas of need.
Housing and Build to Rent can tick many boxes required as part of a social impact mandate which often include sustainable returns through addressing a social need, increasing supply, affordability, and choice of housing. These funds have the mandate to invest in areas of need (where there is a supply and demand imbalance) to ensure the capital is focussed on creating a positive impact on local communities.
Scotland, and especially Edinburgh, is witnessing increasing unaffordability arising from a significant under supply and growing demand. The result has been more focussed policy from the City of Edinburgh Council through the Edinburgh Local Development Plan (Policy Hou 7). The requirement is for developments of 12 units or more to include provision for affordable housing, amounting 25% of the total number of units. In the case of new Build to Rent projects rent levels for these affordable units must be in line with the Local Housing Allowance (LHA) which is based on the Broad Rental Market Area (BRMA) 30th percentile.
Social impact funds welcome this policy and often seek to increase the provision of affordable housing in Build to Rent above the 25% required to help improve local affordability and meet their affordability investment mandate. In terms of rent review provisions, the funds also commit to growth on affordable units in line with the government rent policy which further ensures better alignment between occupiers, Registered Social Landlords (RSLs) and any incoming funds and provides a long-term solution to housing affordability.
This is another clear illustration of the fast-evolving living sector in Scotland which highlights the motives and benefits of inward investment into the local housing sectors. These new entrants should be welcomed to help increase viability of new housing projects particularly considering rising costs and economic headwinds.
A full listing of Scotland BTR and an interactive map of BTR schemes can be viewed here.
Published in the Citylets News Blog 19.08.22