New Scottish Tenancy Regime could deter major investors

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New Housing Tenure Scotland:

One housing adviser has said that the new rules on renting in Scotland will hit planned institutional investment.

The adviser, a member of the Scottish government’s advisory group on property, has expressed fears that the new rules on residential tenancies would “torpedo” institutional investment in Scotland’s build-to-rent sector.

Under the new rules the traditional fixed-term tenancy arrangement is to be a thing of the past, where tenants will get unlimited length security and landlords get virtually none.

Under the new tenure a landlord will no longer be able to ask a tenant to leave simply because a fixed term has ended. If the landlord wants to end the tenancy at any time he/she will need to justify this action by giving the tenant/s one or more of the 18 specified reasons for ending a tenancy contract – 8 mandatory grounds and 10 discretionary grounds on which a tribunal is to decide.

Although the housing charities have campaigned on these changes and have welcomed them, their introduction is not being universally welcomed, and as has been pointed out, they could have unintended consequences on the letting market.

The Scottish government has been trying to attract institutional developers to move into the rental housing sector which is seen as a way to relieve some of the shortages. Scotland currently has only around 2 per cent of its housing stock owned in this way, this compares to 5 per cent plus and growing in England.

The Scottish government launched a rental income guarantee scheme, designed to reduce the risk for and encourage investors. However, John Boyle, director of research with Rettie & Co, one of the companies involved in the Holyrood advice framework, has said that the new tenure rules could impact the benefits of the scheme.

Mr Boyle has said:

“Institutional investors want long term tenants, which the new legislation promotes, but now the tenant has long-term security while the landlord does not. For big funds there’s a risk to reputational damage in all this so it’s a further obstacle to getting them to invest in Scotland.”

Scottish Housing Minister, Kevin Stewart, argues, the new tenancy agreement benefits tenants as well as landlords and “sits alongside our commitment to deliver at least 50,000 affordable homes during this parliament”.

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