November 5, 2015
[PRS CHAMPION’S REPORT TO JHPDG] Paper JHPDG 2015/16 25
Subject: Delivery of new homes at scale through the private rented sector – Action 32
Purpose:
1. The JHPDG should acknowledge and support the work streams underway in Section 2, with 2
items of particular note:
a. The development of a unique Rental Income Guarantee Scheme (RIGS). A second slice
Scottish Government (SG) guarantee to be in place for five years for qualifying market-led
private sector developments of over 50 units.
b. There is a potential for an unintended outcome in the drafting of the Private Housing
(Tenancies) (Scotland) Bill, see Action 30. As drafted there is a danger that the potential
investor pool for purpose built PRS stock, will withdraw interest due to losses incurred in their
Purpose Built Student Accommodation (PBSA) investments. The negative impact will be
greater than the incentive of a RIGS proposal.
Actions underway
2. The PRS Working Party, who support the work of the PRS Champion, explore opportunities
and tackle barriers to the development of a quality new build PRS sector in Scotland. There is
the potential to pull all the cohesive work streams together in the form of a PRS Prospectus in
2016. In May 2015 a range of cohesive recommendations were tabled in a report to the
Cabinet Secretary. The PRS Working Party three sub-groups are working through the
response, received the following month, as follows:
a) Land & Planning
i) Input to planning workshops and the imminent Planning Delivery Advice, emphasising the
need for flexibility surrounding Section 75 contributions, amendments to design/ building
standards, the desire for Local Authorities (LA) to introduce planning guidance(in a similar
manner to PBSA sector) and to potentially include a tenure blind approach to any on-site
affordable housing requirement
ii) Following up on the letter from the Chief Planner of 7 October to all LA Heads of Planning
iii) Progress public sector land opportunities for new build PRS with LA Chief Estates
Surveyors and other parties controlling surplus public sector land (NHS, MoD, Police/
Prison Service etc)
b) Finance & Data
i) Developing a RIGS proposal with SG, based on the outline submission of 25.09.2015
ii) Meeting with SG analytical services team to fine tune the HNDA tool
iii) Working with RICS Scotland to develop an Information Note on valuing purpose built PRS
stock, on the basis of net income rather than discount to vacant possession
c) Regulation & Tenancy
i) Submitting written evidence to the Infrastructure and Capital Investment Committee on
the new tenancy bill
ii) Understand the impact of the 20 year rule on financing structures and inform any
potential exemption proposals
November 5, 2015
[PRS CHAMPION’S REPORT TO JHPDG] Paper JHPDG 2015/16 25
Summary of key issue and brief background
3.
a) There is a potential for an unintended outcome in the drafting of the Private Housing
(Tenancies) (Scotland) Bill, see Action 30. As drafted there is lack of certainty in providing rented
accommodation for the following academic year for providers of PBSA stock, indeed this lack of
certainty also extends to students and Universities. For current institutional grade stock this lack
of certainty will increase voids, reduce values and lead to a loss of confidence from institutional
investors in rental accommodation. These are the same potential investor pool for purpose built
PRS stock. The negative impact will be greater than the incentive of a RIGS proposal
b) There are a number of live BTR sites being delivered, most at planning in Aberdeen, Dundee,
Edinburgh and Glasgow. Greater support and promotion is required to get additional sites into
the pipeline At least two known BTR developments are on site – in Aberdeen (292 Dandara units
funded by LaSalle Investments on behalf of British Coal Pension Fund)and in Edinburgh (113 units
being provided by Threesixty Developments, part of Knightsbridge Student Housing and funded
by Oaktree Capital). A number of institutions and investors have put investment decisions on
hold pending greater clarity from the Private Housing (Tenancies) (Scotland) Bill.
Issues that need attention now
4. See ‘Summary of key issue and brief background above’
Conclusions and recommendations
5.
In summary:
a) to continue to support the PRS Working Party and the three sub-groups, with appropriate positive
communications regarding the new purpose built PRS stock
b) to note the significant work stream regarding a Rental Income Guarantee Scheme (RIGS)
c) to ensure the new Private Housing (Tenancies) (Scotland ) Bill supports the needs of investors as
well tenants, lenders and landlords
d) to support a new build PRS Prospectus should this be a delivery output
Gerry More, PRS Champion, Homes for Scotland
5 November, 2015