UKAA Scotland Hub Discussion Evening – Rent Controls: Six Months On
On 29th of March 2023 the Rent Control: Six Months On panel discussion, organised by the UKAA Scotland Hub, was held at Shoosmiths office in Glasgow. The panel discussion focused on the impact that temporary rent control measures have had on the Scottish rental sector, and possible solutions that would address the chronic undersupply of homes in Scotland.
Gillian McLees, Chair of UKAA Scotland and Director of BTR at Rettie and Co, chaired the panel discussion. She was joined by Dr John Boyle, Director of Research and Strategy at Rettie and Co, William Kyle MRICS, Fund Director at PfP Capital Limited, Lyndsey O’Connor, Real Estate Partner at Shoosmiths, and Gwynn Thomson, Director of Investment at Sigma Capital Group plc.
Lyndsey O’Connor opened by discussing the current temporary measures and the outlook and timeline for these remaining in place. With the recent election of Humza Yousaf as First Minister, and the continuation of the SNP – Greens pact, she highlighted that the premise is permanent rent controls coming in the future. She put forward that the debate therefore must now turn to good policy design and that in order for investor confidence to grow, certainty and stability are required.
The themes of certainty, stability, confidence, and trust were reoccurring throughout the discussion, particularly when the topic turned to the effect that temporary rent controls had on institutional investors. Gwynn Thomson and William Kyle both gave accounts of the immediate decline in investment in Scotland once the measures were announced, with deals to deliver homes collapsing within hours of the announcement. The way in which the measures were brought in, and without warning, was of particular concern.
“[it’s a] breakdown of trust now. What are they [the Scottish Government] going to do next? There’s a dialog, and they speak, but do they listen?”
Gwynn Thomson, Director of Investment at Sigma Capital Group plc.
Dr John Boyle then shared his insights into the current situation on rent controls and their impact within the housing market. He highlighted that there are arguments for and against rent controls. On one hand they can improve affordability, stabilise neighbourhoods, improve wellbeing, and allow more money to be spent in other parts of the economy. At the same time however, they reduce housing availability, investment, labour mobility, and they require enforcement which is costly.
Dr Boyle also outlined the current BTR pipeline, stating that, while the pipeline has shown consistent growth in Scotland over the last 10 years, only 11% of the pipeline is complete and operational, 21% is under construction and the remaining 68% is either in the planning system or on hold. He later explained that the necessary socio-economic drivers needed to encourage BTR investment in Scotland are already present, and that the biggest issue at the moment for investors is political risk.
William Kyle discussed how the importance of BTR at scale in delivering housing numbers was underestimated, and that the temporary rent controls introduced in September 2022 had a significant impact on these developments being delivered. Gwynn Thomson agreed and spoke of the clear preference among institutional investors to invest in projects in England, rather than in Scotland, due to the current climate of rent controls and lack of trust in the Scottish Government.
This turned discussions towards the housing crisis and shortage of available homes across Scotland. Concerns were raised from the audience about the availability crisis of homes across all tenures, but particularly within the social housing sector. Gillian McLees commented that her team at Rettie and Co are on the frontline, speaking with people who are victims of the housing crisis. She stated that the team often receives calls from people who are desperate to find accommodation, and that their stories are devastating.
Finally, the panel turned to possible remedies for the current situation, and ways in which rent controls might work in future. Dr John Boyle emphasised the need to be cautious when considering case studies from Europe as example of rent controls working, with there being plenty of examples where rent controls have had a significant negative impact on the stock availability issue.
“[The] affordability problem is a symptom of the availability problem. We have to do something about the availability [of homes], which means we have to do something about the supply.”
Gillian McLees, Chair of UKAA Scotland and Director of BTR at Rettie and Co
William Kyle spoke of the need for a cross-party housing group to come up with genuine solutions. All panellists agreed that in terms of a rent cap, there is no magic number that that would solve the current issues we are facing, and that the situation is more complex than that.
“This panel discussion held by UKAA Scotland was a robust debate, covering some of the most pressing issues facing the build to rent industry and indeed, our members in Scotland today. It highlights once again the UKAA’s view that an increase in supply of homes is the fundamental answer to the challenges of rent controls. We welcome open dialogue with the Scottish government on behalf of our members, on this matter.”
Brendan Geraghty, CEO, UKAA
