Cost of Living Crisis
In April 2025, the temporary emergency rent caps came to an end in Scotland and new long-term measures were sought by a number of stakeholders. These long-term measures were proposed in the Housing (Scotland) Act 2025 (“the 2025 Act”), but questions arose on whether this should apply to all residential lettings.
In early 2026, Scottish Ministers laid before the Scottish Parliament a new statutory instrument titled The Private Housing Rent Control (Exempt Property) (Scotland) Regulations 2026 (the “Regulations”). The Regulations specify two distinct categories of private rented housing that will be exempt from the forthcoming rent control regime introduced under the 2025 Act and are now expected to come into force on 1 April 2026 if approved by the Scottish Parliament.
At the heart of the regulations is clarity on which types of properties will not be subject to rent controls once the permanent regime for designated rent control areas is operational. The Regulations focus on two key categories: mid-market rent (MMR) properties and build-to-rent (BtR) developments.
Mid Market Rent Properties
Mid Market Rent is a form of affordable housing offered to those that do not qualify for social housing and cannot afford private market rent. In practice, MMR schemes are often created with Scottish Government or local authority funding, with contractual conditions that limit rents so they stay at or below the median market level or in line with Local Housing Allowance benchmarks. These conditions inherently restrict how quickly or how much landlords can increase rents.
Under the new regulations an MMR property will be exempt from rent controls subject to certain conditions.
MMR properties that will be subject to exemptions are:
- Where a landlord or a third party receives, or has received, funding from the Scottish Government or local authority and there are conditions attached to that funding which restrict the landlord’s ability to increase the rent.
- Where the terms of the tenancy agreement for the property restrict the landlord’s ability to increase the rent.
- In both cases, those restrictions must operate to prevent the rent increasing above the median of market rents in that area.
This ensures that homes already offering affordable rents for targeted groups are recognised as fulfilling a housing policy objective without being caught by additional statutory caps.
Build-to-Rent Properties
Build-to-rent developments are a distinct segment of the private rental sector. Typically constructed or converted on a larger scale — six or more properties in a single development — these homes are designed exclusively for long-term private rental rather than for sale. To qualify for exemption, a build-to-rent property must have been completed after 31 August 2021, continuously let on private residential tenancies, and properly registered with the Scottish Landlord Register. If a property ceases to meet these criteria (for example, if it is converted to owner-occupation or used for short-term lets), the exemption can be lost.
Both categories were defined carefully in the Regulations to give certainty to investors and housing providers, as well as to protect housing supply growth. Stakeholders such as the Chartered Institute of Housing Scotland welcomed the move, arguing that clear exemptions will help boost investment in professionally managed housing and support the delivery of more homes.
The Effect
These exemptions sit within a broader policy framework established by the 2025 Act, which introduces a new system of rent control areas. Under this, local authorities will be able to designate geographical areas where private rents are subject to statutory limits — typically tied to inflation plus a small margin, with a ceiling. These controls emerged against the backdrop of a declared housing emergency in Scotland and wider concern about affordability and housing supply.
In practice, exemptions for MMR and BtR properties in the Regulations aim to balance tenant protection with the need to ensure continued investment in rental housing — recognising that too rigid a regime could deter development in a market already grappling with shortages.
Housing Secretary for Scotland Mairi McAllan emphasised the importance of balancing these aims, stating, “Scotland needs more homes. These regulations provide the confidence and clarity needed for investment in our housing sector, providing homes for families across Scotland.”
