New group formed to support PRS

Homes campaign demands ‘framework’ to help tenants

Rented propertyA new campaign group is putting forward a pioneering framework for Scotland’s private rented sector (PRS) to give tenants a better deal and address the country’s chronic lack of housing.

The formation of PRS 4 Scotland by a group wanting an affordable and well-invested PRS comes as the Scottish Government finalises its Housing Bill.

Their goal is to unite all sections of the industry, including housing associations, institutions and tenants behind a unique, evidence-based framework as the basis for a distinct Scottish PRS ‘supply and tenure’ model that others can follow.

PRS 4 Scotland includes agents, landlords, portals and investors led principally by DJ Alexander, Rettie & Co, Lettingweb, LetScotland and Braemore and has been established in response to the Scottish Government’s consultation into a new tenancy regime for the sector.

There are about 330,000 properties within Scotland’s PRS. An estimated 80,000 properties are occupied by families, another 14,000 are HMO licensed providing accommodation for around 60,000 people, with a further 130,000 rented by couples and individuals.

Proposals include a call for two new tenancy agreements to take account of the flexibility wanted by some tenants and the long term security wanted by others.

It would use tax powers to treat landlords who are committed to long term tenancies as businesses, and a designated ‘PRS planning status’ to encourage housebuilding by putting PRS on a similar planning footing to student accommodation.

It is based on a robust body of research showing what works and what does not work in the sector. PRS 4 Scotland argues that the current ‘one size fits all’ tenancy model does not meet the needs of landlords or tenants.

Dr John Boyle, an economist and spokesperson for PRS 4 Scotland, said: “Scotland’s Private Rented Sector (PRS) should be providing more long-term, stable, high-quality rental options for our growing tenant population, but that aim has been undermined by low levels of house building – a critical lack of supply.

“Yet the current debate around the future of the PRS in Scotland has been focused on calls for rent controls, without sufficient analysis of how these would work in practice to address Scotland’s housing crisis, or recognition of the harm they would do to tenants and landlords in practice.

“What’s needed a holistic supply and tenure model appropriate for Scotland, which addresses the necessity for investment in rental properties as well as the needs of tenants across the income spectrum. Our ‘framework’ offers a basis to do this.

“There is a great deal of consensus around raising standards in the private rented sector and many of the reforms proposed in the government’s consultation. That said, there is still a danger that the process is knocked off track by a single-minded focus on rent controls. We need to use this opportunity to take account of both tenant and landlord concerns and aspirations and create an innovative and world leading PRS that genuinely answers Scotland’s housing needs.”

 The PRS 4 Scotland ‘Framework’ consists of:

1. A collaborative approach to tenancy agreements including the creation of two new distinct tenancy agreement options, which alongside the existing agreement, to tailor conditions to the diverse needs and circumstances of PRS households, whether students, young professionals, families, short term tenants or people relying on housing benefit.

  • Flexible/short-term tenancy agreement (FTA) –This tenancy can be adapted to reflect the needs of the tenant (student, professionals on short term contracts etc) and the length of the contract and notice period agreed between tenant and landlord at the outset of the agreement.
  • Long-term tenancy agreement (LTA) – This tenancy would predominantly be aimed at those intending to stay put for 5, 10 or even 15 years, include a long notice period and provide benefits for both the tenant (discounts) and landlord (tax incentives) based on the long-term stability of the tenure.
  • Standard tenancy agreement (STA)Based on the existing tenancy agreement, this would also include the reforms outline in the consultation document for a 12 week notice period, clarity around the grounds of repossession and annual rent reviews.

2.  A responsive, innovative investment environment that sends a clear message to the investment community that their investment in the sector is sought to fund more supply.  This can be achieved through the introduction of longer term tenancies, designed specifically to give investors greater stability and predictability and tailored investment vehicles.

In particular, policy needs to be used to shift incentives for PRS investment away from capital gain through house price growth toward annual dividends derived from steady rental incomes. This would be achieved using tax powers to treat individual PRS landlords, who are committed to long term tenancies, more like businesses, benefiting from incentives such as the offset of interest and amortisation in return for sustainable, long-term returns.

3. A tailored planning system with a new ‘PRS Planning Status’ While incentives for groups to ‘build to hold’ are in place, particularly for the student housing market, similar schemes don’t exist for those seeking to invest in PRS developments. As a result the majority of institutional investment in the sector is aimed at the development of student accommodation. 

4. Evidence-based policy is essential and there is a fundamental need for coherent statistics and data on the complete PRS market in Scotland.   A new body, composed of representatives from government, the PRS, and academia, would address this and ensure credible statistics inform businesses, investors and policymakers going forward on the best solutions for PRS policy.

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