Industry body for the build to rent sector says investors are already ‘pausing and or withdrawing from the market’

Plans to extend rent caps in Scotland into 2024 will harm investor confidence and hamper delivery of new rental homes, according to the The UK Apartment Association (UKAA).

Patrick Harvie, MSP and minister for zero carbon buildings, active travel and tenants’ rights, today announced the Scottish government’s intentions to extend a rent cap of 3%, which was due to lift at the end of this September for a further six months. 

The extension would mean most in-tenancy private rent increases would continue to be capped at 3% and that enforcement of evictions would continue to be paused for six months for most tenants, except in a number of specified circumstances, until spring next year.

Private landlords would be able to apply for increases of up to 6% to help cover certain increases in costs and increased damages for unlawful evictions of up to 36 months’ worth of rent would continue to be applicable.

If approved, these measures would be extended for a final six month period and would expire at the end of March 2024. The Scottish government stated this would be the “final” extension of the rent cap, and that a further extension could not be sought for legal reasons.

“As the cost of living crisis continues, these measures are giving important support to tenants, providing them with much-needed stability in their housing costs and additional eviction protections,” Harvie said. 

The UKAA, the body representing the build to rent (BTR) sector in the UK, responded to the announcement saying rent control was “undermining confidence” and “some investors are already withdrawing from the market”.

“For the BTR industry to deliver the long-term quantity of good quality, professionally managed homes needed to help tackle the critical housing crisis in Scotland, confidence is required of investors, developers, contractors, and all those involved right through to the customer. This confidence is built through clarity, certainty, and consistency – all of which are undermined by rent control,” the UKAA said in a statement.  

>> See also: Gove intervenes in two more planning applications on design grounds

>> See also: Croudace announces new group chief executive

The UKAA said in its statement that it “opposes rent cap in any form as it lowers confidence and inhibits the BTR industry’s ability to deliver customer, community and investor value.”

It added: “Investors invest for the long term, for stable returns and if rent control is in play, it can disrupt and harm the certainty of those returns.

“The limited BTR stock in Scotland has been well received by the market to date but following the rent cap announcement, investor confidence has been affected. Some investors are already pausing and or withdrawing from the market entirely which can only harm the delivery of these much-needed, good quality homes.” 

The BTR pipeline in Scotland stands at nearly 9,000 homes according to the UKAA.

Harvie added: “The necessity of these measures is being kept under review and we will continue to assess whether they remain justified, balanced and proportionate based on the financial pressures rented households and landlords are facing.

“We are also looking at how to transition out of the emergency measures, and we continue to listen to and work hard with stakeholders to develop and deliver rental sector reform.”