Rental income guarantee scheme to support build-to-rent market.
Housing Minister Kevin Stewart has announced the launch of a Rental Income Guarantee Scheme (RIGS), to boost new investment in private rented housing.
Developed in consultation with the sector, the scheme, which is the first of its kind in the UK, will reduce some of the risk that investors see in the emerging build-to-rent market, with potential to attract £0.5 billion of investment and support delivery of around 2,500 new, high quality private rented homes.
RIGS guarantees 50% of any gap between actual and projected rental income of a development which will provide greater certainty of rental income to investors and landlords during the initial years of letting.
Mr Stewart said:
“RIGS is a unique scheme, which will boost this emerging sector. As the first of its kind in the UK, the Scottish Government is clearly demonstrating our commitment to the private housing sector.
“This scheme will help deliver new, high quality private rented homes for tenants, which are modern, energy efficient and professionally managed. And it does so in a way that provides assurances for investors, while ensuring good commercial practice and the incentive for investors to let these homes.
“RIGS is just one part of our More Homes approach to increase housing across all tenures. It can deliver potential investment of £0.5 billion, building 2,500 new homes, along with wider economic benefits. And it clearly shows that Scotland is open for business.”
Nicola Barclay, Chief Executive of Homes for Scotland, which led a Scottish Government commissioned project on how to expand the Build to Rent sector, said:
“The announcement of the Rental Income Guarantee Scheme will provide investors with greater confidence during the early stages of development, when letting risk is likely to be highest and is just one of the levers the Scottish Government has put in place to help boost a tenure which has such an important part to play in meeting the diverse housing needs of our growing population.
“As well as the significant investment and development opportunities on offer, expanding build-to-rent will help increase choice, flexibility and affordability for tenants. Most importantly, perhaps, it also has the ability to transform customer experience of the private rented sector through the delivery of new high-quality, purpose-built and professionally-managed accommodation.”
Barry White, chief executive of the Scottish Futures Trust who will manage the scheme, said:
“The launch of RIGS has sent out a clear message which demonstrates Scottish Government’s commitment to the Build to Rent sector as an important way to deliver much-needed quality housing.”
RIGS is open for applications from 12 October, and managed by Scottish Futures Trust on behalf of the Scottish Government.
Through RIGS, Scottish Government will underwrite 50% of any gap between 95% and 75% of agreed rental income, within a defined band. For example, if actual revenue in any year is 65% of projected revenue, the eligible shortfall will be 20% (95% less 75%), with SG covering 10% of the projected revenue.
RIGS is part of a wider package of support for the Build-to-Rent market, which includes:
- Recent new Planning Delivery Advice on Build-to-Rent
- A Comparative Tax Advantage in Scotland – with tax relief on multiple dwellings, with an exemption on the Additional Dwelling Supplement (not available in England)
- A modern tenancy system, set to be introduced in December 2017
Commissioned by the Scottish Government, Homes for Scotland has also published a new ‘Opportunity Document’ . This sets out the key features of the Scottish buil-to-rent sector and highlights the investment opportunity in Build-to-Rent in Scotland to attract this new investment. The document is available here: www.rigs.rent
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