Dr Andrew Watson

Scotland has pursued two very different approaches to professionalising the private rented sector. The evidence raises questions about the success of both.

Over the last decade, the Scottish Government has pursued the professionalisation of the private rented sector (PRS) through what can be described as a bifurcated model. One branch promotes ‘facilitated professionalisation’ by courting Build-to-Rent (BTR) investment through policy incentives (the carrot). The other imposes ‘mandated professionalisation’ via cumulative regulatory reform aimed at raising standards (the stick). While regulation is generally applied sector-wide, it has largely been designed with the small-scale landlords who make up the bulk of the sector in mind.

BTR has been strongly encouraged in Scotland on the assumption that large-scale institutional investment brings professionalism, high-quality management and new supply. Policy support has included a PRS champion, the Rental Income Guarantee Scheme, favourable tax treatment and, more recently, efforts to attract further institutional capital.

Yet BTR remains a very small part of Scotland’s housing system. Just over 5,000 units are currently operational, equivalent to roughly 0.2% of Scottish dwellings. The planning pipeline is considerably larger, but only a relatively small proportion is progressing. Recent completions have also significantly outpaced new starts, suggesting that BTR is likely to remain a residual part of the Scottish housing system over the short and medium term.

The reasons for this are multifaceted. Construction and financing costs, return requirements and overall development viability all matter. However, industry commentary also consistently points towards a lack of policy coherence and regulatory uncertainty as important constraints on investment. The debate around rent controls is particularly illustrative of this tension. In short, the carrot has not always been substantial enough to offset the impact of the stick.

The second branch presents a different set of challenges.

‘Mandated professionalisation’ assumes that compliance is a proxy for professionalisation and relies on cumulative regulatory reform spanning property conditions, tenant rights, management quality and other areas. Many of these reforms address genuine problems and mandated professionalisation may be a blunt but sometimes necessary response to poor practices and standards, which are evident within pockets of small-scale landlordism.

However, the approach means that small-scale landlords experience regulation primarily as a constraint, while institutional landlords experience it as part of an enabling environment.

Registered landlord numbers fell by just over 12% between 2016 and 2025. It would be wrong to attribute the decline solely to regulation. Scotland has an ageing landlord population, interest rates have changed substantially and other factors have undoubtedly played a role. Nevertheless, a growing body of evidence points towards the expanding regulatory environment as a significant factor in landlord exit and investment decision-making.

Nor is there clear evidence that the regulatory expansion has produced substantial improvements in housing conditions. Scottish House Condition Survey data show relatively little movement in key measures of disrepair between 2018 and 2024, while PRS properties continue to record higher levels of disrepair than other tenures. These measures cannot substitute for full policy evaluation, but they do raise important questions about effectiveness.

There is also a more fundamental problem. Despite frequent use of the language of professionalisation, the Scottish Government does not explicitly define professionalism or professionalisation. BTR tends to be treated as inherently professional because of its organisational form and scale, while small-scale landlords are expected to demonstrate professionalism largely through regulatory compliance. Yet professionalism encompasses considerably more than either scale or compliance.

Overall, the bifurcated model appears to have been ineffective.

A more coherent approach would begin by defining the challenges professionalisation is intended to address and what professionalism should actually look like. Policymakers also need a better understanding of existing levels of professionalism across the sector and the institutional and organisational arrangements required to support improvement.

That could enable the creation of clearer pathways to professionalism which reflect the differing characteristics, constraints and capacities of different landlord types. It would also allow incentives and obligations to be better balanced, supported by clear objectives, improved data collection and mechanisms to monitor whether policy is actually working.

A more professional PRS would benefit tenants and landlords alike, but achieving it will require a more considered, coherent and inclusive policy approach than bifurcated professionalisation can deliver.