Housing change

Build to rent plans flip to student accommodation

Montrose Terrace
Student accommodation, like this scheme in Montrose Terrace, remains in short supply

Rent controls have been blamed for two Edinburgh developers swapping their plans for build to tenanted homes for student accommodation.

The Scottish Government policy capping rents has deterred investors and led to the change of strategy, according to industry sources.

One developer refurbishing a derelict call centre for 86 apartments and another building 90 homes as part of a city-centre regeneration will now reserve them exclusively for students in a city where demand for such accommodation remains unmet.

The change follows the SNP-Green government’s emergency legislation in October 2022 designed to protect tenants coping with cost of living crisis. The new law imposed a 0% cap on rent increases.

Last spring it was raised to 3% and extended for six months. Then it was extended again to March 2024, but with included a change that tenancies in student accommodation would not be covered.

A number of developers have publicly stated that the legislation has caused them to halt their plans, while landlords of tenanted housing have been selling up.

Savills says Scotland is the only part of the UK where sales by landlords have risen in the past year — up 1%, compared with a 17% drop in markets outside London. A survey by the Scottish Association of Landlords shows that 56% of its members are planning to cut the size of their portfolios.

Bruce Patrick, a development and investment specialist for Scotland at Savills, the estate agents, said: “You must have somebody willing to fund your development. Everybody understands that Edinburgh and Glasgow are good places to do build-to-rent. They’re full of young people, affordable, there are great sites available, you can get planning. But until investors come back to the market it’s not going to get built.

“It’s the rent controls,” he said. “We’re seeing some investor capital that would be chasing build-to-rent flipping to purpose-built student accommodation.”

Scarlett, a city developer, said 1,713 student accommodation beds are at the planning stage in the city, compared with only 120 in build-to-rent.

More than 44,000 students do not live in purpose-built accommodation, according to Savills. The University of Edinburgh pulls in thousands of wealthier international students who want to rent premium studio apartments, which are considered particularly lucrative for investors.

James Dalgliesh, planning convener for the City of Edinburgh council, said: “An increasing number of applications coming forward at the moment are for student accommodation and, although we understand that there is currently a large demand from developers to build this type of accommodation, there is also a wider housing emergency.

“With 5,000 households in temporary accommodation there is an urgent need to build more homes, particularly affordable homes … We intend to review our guidance around the council’s student accommodation planning policies this year.”

Patrick Harvie, the Green MSP and the Scottish government’s tenants’ rights minister, said: “Our emergency legislation has led the way at a time when rents have been rising across the UK, striking an important balance between protection for tenants and recognising that landlords’ costs may be changing as well. The introduction of a rent control system can be aligned with encouraging investment.

“Later this year, we will introduce a housing bill to deliver a new deal for tenants, including the introduction of long-term rent controls for the private rented sector and create new tenants’ rights.”

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