Further evidence has emerged that the Scottish Government’s rent freeze will dampen investor interest in the build to rent (BTR) sector in Scotland.

A report by property agent Rettie & Co warns that this could lead to the postponement of thousands of new units for rent.

Its comments follow First Minister Nicola Sturgeon’s statement in last week’s Programme For Government which included an immediate freeze on rents to enable tenants to cope with rising energy bills.

There was an immediate backlash from landlords and agents who say they also face rising costs and need the flexibility to fix rents accordingly. There have been several reports of investors putting projects on hold and of possible legal action against the government.

One large landlord accused the government of using the policy as a cover for a failed housing policy. New Homes For Scotland CEO Jane Wood told Daily Business in her first interview last week that the rent freeze will have a detrimental affect on the market and that rising costs will affect the provision of affordable housing.

Scottish house builder Springfield Properties today announced it was temporarily suspending its expansion into the private rented sector until it receives clarification on what the government proposes.

Rettie & Co’s latest BTR Briefing for Scotland shows that until now the sector has been booming, with a 25% rise in the number of operating and pipeline BTR homes to over 13,000 over the year.

Glasgow continues to lead the way, with about 7,400, followed by Edinburgh (4,300) and Aberdeen (1,100 homes).

It says there are still relatively few operating BTR homes. However, a number of large schemes have now been built-out and others have moved forward in planning and financing in the last year.

The total value of such schemes in Scotland is now around £3.5 billion.

“There is potential for the sector to grow much more – BTR (operating and pipeline) only represents around 2% of all households in Glasgow and Edinburgh, whereas it represents nearly 6% in Manchester,” says the report.

John Boyle, Rettie & Co.’s director of Research & Strategy commented, “As in the rest of the UK, the BTR sector has continued to grow in Scotland in the last year and, despite the pandemic, developer and investor commitment to the sector remains strong.

“Once fully up and running, BTR will become a major provider of housing in Scotland and generate significant economic impact.

“The Scottish Government’s rent freeze announcement, however, has created a lot of uncertainty in the sector and further clarity on how this is going to work and over what timespan is quickly needed.”