13 Nov 2025
By Stephen Dick, Partner, Commercial Real Estate, Gilson Gray
Are the Rent Control Exemptions contained in the Housing (Scotland) Bill passed by the Scottish Parliament in late September 2025 finally some good news for Developers?
I think the answer has to be yes, after a period of damaging uncertainty and sites being mothballed as a consequence, particularly for those involved in Student Accommodation (PBSA), Build-to-Rent (BtR) and Mid-Market Rental (MMR) projects. The uncertainty around rent controls has previously led to a significant drop in supply and investment into these sectors.
Rent Control Designation Procedures
The Housing (Scotland) Bill introduces a framework for rent control areas aimed at curbing unaffordable rent increases in the private rented sector in those areas. Central to this framework are the procedures for designating rent control areas.
Under the Bill, local authorities are required to assess rent conditions in their areas. These assessments must be reported to the Scottish Ministers who then decide whether a rent control area should be designated. The designation process involves consultation and must be justified as necessary and proportionate to protect tenants’ social and economic interests.
Once an area is designated as a rent control area, restrictions on rent increases apply to both existing and new tenancies. The Bill sets a rent cap formula of Consumer Price Index (CPI) + 1%, with a maximum cap of 6%.
Local authorities are also empowered to gather data from landlords and tenants, including rent levels and property conditions, to support their assessments. This data collection is crucial for ensuring that rent control measures are evidence-based and targeted effectively.
Exemptions from Rent Control
Not all properties within a designated rent control area will however be subject to these restrictions. It has now been confirmed that the system will not apply to PBSA, BtR and MMR projects.
PBSA is explicitly exempt from the rent control provisions introduced in the Bill. This exemption is significant because it provides regulatory certainty for developers and investors in the student housing sector. PBSA developments typically require substantial upfront capital and long-term financial planning and rent controls could have disrupted this investment by limiting revenue potential. By exempting PBSA the Bill should restore investor confidence, should stimulate future developments, especially in university cities like Edinburgh, Glasgow, Dundee, Aberdeen and Stirling, and avoids disincentivising new supply which is crucial given the continuing demand for student housing.
BtR properties will be similarly exempted from rent control measures through secondary legislation. This exemption is designed, again, to restore investor confidence in BtR developments, which typically involve large-scale, and, like PBSA, professionally managed rental housing. Developers and institutional investors have long argued that rent caps would likewise undermine the financial viability of BtR schemes, which rely on predictable rental income to justify upfront capital. By excluding BtR from the rent caps the aim was to preserve long-term investment from developers and investors into these much needed projects.
Mid-market rent homes – typically offered by housing associations or developers at below-market rates – will also be exempt. These properties serve working households who don’t qualify for social housing but struggle with private sector rents.
Conclusion
The exemptions acknowledge the differences in the different property sectors and avoids a one-size-fits-all approach that was having unintended consequences. While tenant advocacy groups have expressed concern that the exemptions will weaken the effectiveness of the rent controls, the Scottish Government has sought to balance affordability with housing supply and investment incentives. For Developers, the exemptions should come as a welcome relief. They finally offer a degree of certainty especially after a significant slowdown in new housing schemes due to earlier rent control proposals. They should make the exempted sectors more attractive again for long-term investment leading to the restart of many previously stalled projects.
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