Consultation launched as government eyes cliff edge in housing supply.
Confidence is growing that build-to-rent assets in Scotland are to be exempted from the rent caps legislation that is currently passing though parliament.
The Scottish government has launched a consultation on how “powers within the Housing (Scotland) bill could be used to exempt certain types of properties from rent control”, and is specifically seeking views on purpose-built BTR, alongside mid-market rental housing.
Insiders are confident this will turn into a full-on exemption for the sector, as the key architects of the original rent control scheme have been excluded from government, while new development in the country has come to a standstill.
A brief history of Scottish rent caps
The Scottish government proposed making rent caps a permanent fixture of the rental market in 2024 when it launched the Scottish housing bill, which would even have stopped rents being raised between tenancies when units were vacant.
The impact on development was almost immediate, with the pipeline of new schemes coming to a standstill. However, a falling out between the Green/SNP ruling coalition led to some hope, notably after the removal of the policy’s key architect, Green Party MSP Patrick Harvie, from the driving seat.
While it was too late to rewrite the bill, it was still open to amendments. SNP deputy first minister Kate Forbes is now reportedly leading the bill, and she, according to one commentator “is economically very literate”, while the SNP are more concerned with affordable housing.
They said the noise from government around the consultation was very positive for BTR, and likely to only go one way.
While plans could still change before the consultation closes, developers and builders have welcomed the news.
Robin Blacklock, of Dowbrae real estate consultancy, says:
“Industry has been calling for clarity, consistency and certainty ever since the damaging rent freeze of 2022 and the subsequent Housing Scotland bill proposals.
“The consultation highlights an intent to exempt BTR and MMR from the proposed rent regulations and this move is welcomed – if the proposals are adopted in the form suggested then it will go a long way towards creating an investable landscape in Scotland once more.”
No supply
Despite the potential U-turn, the damage to the supply of housing in Scotland has been done.
The Scottish Property Federation (SPF) estimates between £2.5bn and £3bn of investment was put at risk due to rent controls, and that the supply of new BTR has gone down by 26%. Separate analysis from Scarlett Land & Development says that across all of Scotland, there are only five schemes being built, all of which are to complete this year. Once they have completed, and despite another 19 with planning permission, there will be no others under construction.
“The fact that we have seen a 0% increase in new planning applications for Scottish build to rent this past year shows how absolutely critical this consultation is to restarting investment in Scottish build to rent,” says SPF director David Melhuish.
Even if the consultation does provide an exemption for BTR, it will be some time before there is a meaningful supply of homes to the market. The consultation will run for another 81 days, while the housing bill is due to be approved before parliament no later than early 2026.
Schemes would then take two to three years to build out, even assuming a contractor and finance could be found immediately.
The fact we have seen a 0% increase in new planning applications this past year shows how critical this consultation is to restarting investment in Scottish build-to-rent”
David Melhuish, SPF
Will Scarlett, director of Scarlett Land and Development, says its hoped by November 2025 there will be certainty on the future of Scottish BTR, where:
“purpose-built, new-build schemes, that are professionally managed, are exempt from rent control. However, even if that is the case, the supply taps will take several years to be switched back on. The reason is, of course, that since rent control was introduced in September 2022, funders have been unwilling to commit to the Scottish market. Meanwhile, build costs have escalated and the number of contractors has diminished.”
For the handful of developers that have bought and built and in Scotland since the furore over rent caps began, the softening of tone will be extremely good news. However, for the wider market and new investors, the U-turn will take some time to translate into new opportunities and homes.
The consultation is available here.
Author: Alexander Peace – Green Street News – 28 April 2025
Link: btr-exemption-from-scottish-rent-controls-looking-increasingly-likely