Blog: A new era of private renting in Scotland: introducing the Private Housing (Tenancies) (Scotland) Act 2016

Heather Pearson

Real estate expert Heather Pearson says reform in Scotland’s private rented sector will make renting a viable long-term housing option. 

An encouraging shift in the right direction for the housing sector was announced at the beginning of December, in the form of a new private residential tenancy agreement under the Private Housing (Tenancies) (Scotland) Act 2016.

It comes as part of a raft of policy being introduced by the Scottish Government to promote a new era of tenure in the private rented sector.

Buying a property and becoming a homeowner is not easily achievable, nor desired by everyone and the gap is clear to see: in March 2016, 38% of the Scottish population were either living in socially rented accommodation or renting privately, according to Government statistics.

However, the new private residential tenancy agreement will go a long way in promoting the private rented sector as a viable long-term housing option for many, particularly families, as current economic circumstances mean there are generations who will never afford homeownership.

The Act outlines three main aims: to enhance security for tenants, simplify the tenancy system and, according to the Government, provide appropriate safeguards for landlords, institutional investors and lenders. A prominent factor of the new legislation is the removal of the ‘no-fault’ grounds for termination, giving tenants the reassurance that unless certain specified grounds for eviction arise, the landlord will be unable to terminate their tenancy ‘on a whim’.

The intention is that tenancies will be open-ended, and will last until the occupant wishes to leave the property. The security that comes with the new regulation is an extremely positive step, and one that will be welcomed by tenants, particularly those raising children. Families who before might have been living in uncertainty, can now feel secure in the knowledge that their landlord will need to have a good reason to evict them.

Long waiting lists for social housing homes in certain areas of Scotland also mean that the private rented sector is the only option for many and this has influenced much of the terms of the new private rented tenancy agreement. The increased security this delivers will help attract a range of tenants with varying circumstances.

The policies promoting the private rented sector as asset class sitting with equal status beside homeownership and social housing, with the increase in regulation and standards, has the potential to completely change the type of landlords we have in Scotland.

Statistics say that currently 80% of housing in the private rented sector in Scotland is owned by parties with fewer than 5 properties. The Scottish Government focus is on attracting professional landlords and institutional investment to improve the quality and choice within the private rented sector and we are starting to see signs this is happening.

Many social housing providers already have private rented homes as part of their housing stock and have plans to grow this part of their business, alongside their social housing stock, to provide a range of housing options.

In addition, build-to-rent initiatives and bespoke private rented sector developments are emerging in the main Scottish cities. How they will adapt to some of the other aspects of the changes coming including repairing standards, energy efficiency and the potential of rent pressure zones to cap rent increases, remains to be seen but no-one would argue the importance of ensuring that the private rented sector is a sustainable and secure housing option.

The policy changes and regulation on its way for the housing sector is a sure sign of the Government’s commitment and ambition to improving housing in Scotland.

It is still early days to determine how the introduction of the new private residential tenancy will play out, but for tenants, it is an extremely positive step and will undoubtedly be welcomed.

One thing it will ensure is more structure and regulation around the private rented sector: a place where 760,000 people in Scotland call home and will undoubtedly improve the quality of living and security for long-term tenants in the sector.

  • Heather Pearson is a Real Estate Partner at international law firm Addleshaw Goddard