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BTR Set to Support Government and Local Council Net Zero Housing Targets – Article by SLD

By Scarlett Land and Development

The demand for net zero housing has never been stronger. The Scottish Government has set ambitious targets to become a net zero country by 2045 and, as set out in Building a Net Zero Future, it requires that all new build properties have zero emission heating systems by 2024.

At the same time, dramatically rising energy costs means that tenants increasingly demand housing that is cost efficient to run.

Finally, institutional investors, responding to investor and public expectations, have ambitious ESG targets that require Build to Rent (BTR) investments to meet multiple green credentials. These include embodied carbon assessments, no fossil fuels for the generation of heating and domestic water, EV charging points, PV panels, green roofs and reduced CO2 emissions etc.

NB: as a result, refurbishment projects are increasingly attractive to institutional investors due to the ability to capture embodied carbon by utilising the existing structure of the building.

This combination of the government targets, tenant demands and institutional requirement is entirely commendable but comes at a significant cost to developers, which adds an additional layer to already rapidly rising construction costs and has a negative impact on project viability. These added costs need to be absorbed by all stakeholders (landowner, developer, fund and tenant) if the supply of new housing is not to be curtailed.

The role of BTR in helping to meet net zero housing targets

As the BTR market matures with institutional capital pouring into the ‘living’ sectors, the opportunity for new rental housing (private and affordable) to help meet net zero and environmental targets cannot be overstated. The BTR market will be in a strong position to help compliment national housing targets without relying on public initiatives.

It is an exciting time to be involved in the living sector with more entrants every week seeking to diversify real estate investment into energy efficient residential projects – whether social, affordable, or private rented projects.

As recently witnessed at Western Villages in Edinburgh, having a clear alignment of objectives by both public and private bodies is invaluable to delivering net zero social, affordable, mid-market and private housing. This green agenda continues to align corporate entities to public housing targets so as to achieve housing fit for today’s rental markets.

A full listing of Scotland BTR and an interactive map of BTR schemes can be viewed here.

Published in the Citylets News Blog 09.09.22