New data shows a sharp decline in Scottish build-to-rent projects. What is causing the slowdown, and what does it mean for landlords, developers, and investors?
The build-to-rent (BTR) sector in Scotland has seen strong growth over the last decade, offering modern rental homes for a market increasingly dominated by long-term renters. But fresh figures reveal a worrying trend: new-build rental construction has fallen by 26% over the past year.
With only 1,896 BTR units under construction in the first quarter of 2025, questions are growing about the future of rental supply north of the border. Investors, developers, and policymakers are all grappling with the same issues: rent controls, political uncertainty, and shifting economic conditions.
In this article, we explore why new rental projects are stalling, how this affects the broader market, and what steps the industry can take to adapt.
A Sector Under Pressure
The 26% fall in BTR construction is not a blip. It reflects a deeper unease among investors and developers operating in Scotland.
Several key factors have combined to suppress confidence:
- Policy interventions, including rent caps and eviction bans
- Ongoing uncertainty around future regulations
- Higher borrowing and construction costs
- A cooling rental market in key urban centres
While demand for quality rental accommodation remains strong, the risks associated with delivering new projects have grown substantially over the past 24 months.
Rent Controls: The Elephant in the Room
In 2022, the Scottish Government introduced emergency legislation to cap rent increases for existing tenants at 0%, later revised to a 3% cap. Eviction protections were also strengthened during the same period.
These policies were originally framed as temporary responses to the cost-of-living crisis, but extensions and hints of permanence have unnerved investors.
For build-to-rent developers, rent certainty is critical. Without the ability to adjust rents in line with operating costs or inflation, investment returns become harder to predict. This, in turn, makes securing finance for new projects more difficult.
Major investors have warned that Scotland risks losing billions of pounds in potential housing investment if confidence is not restored. So far, those warnings appear to be materialising.
The Wider Economic Context
Beyond political factors, broader economic headwinds are also playing a role.
- Higher interest rates have made development finance more expensive
- Inflation has pushed up labour and material costs
- Planning delays and land price inflation are adding further challenges
In a market where margins are already tight, these additional pressures can tip projects from viable to unviable. Developers who might previously have pursued Scottish schemes are now turning attention to English cities, where political conditions are perceived to be more stable.
Regional Impact: Where the Shortfall Hits Hardest
The drop in BTR construction is not evenly distributed.
- Edinburgh and Glasgow, traditionally strong rental markets, are seeing notable pullbacks in new project starts
- Secondary cities, such as Aberdeen and Dundee, are even more vulnerable, with several planned developments mothballed indefinitely
- Suburban and commuter belt schemes have become rarer, as smaller projects struggle to achieve economies of scale
This regional slowdown is especially concerning because demand for rental housing remains high in urban centres. Students, young professionals, and families continue to seek flexible, high-quality accommodation — but supply is failing to keep pace.
Implications for Landlords, Tenants, and Investors
The consequences of falling BTR construction will ripple across the property ecosystem.
1. Reduced Choice for Tenants
With fewer new rental units coming online, tenants face a more constrained market. Competition for existing stock will intensify, potentially pushing up rents on new tenancies despite overall caps on renewals.