The traditional buy-to-let landlords, who once played a key role in providing long-term rental homes to the market, have all but disappeared. In recent years, the majority of new landlord clients Rettie have worked with have been existing homeowners moving abroad or south of the border. As such, they need to rent their homes while they are away. These people are known as ‘circumstantial landlords’.
The Scottish Government have all but completely eradicated long-term property investment in Scotland’, but it appears they may be supporting at least some new supply to the market, but for all the wrong reasons.
Who Are Today’s New Landlords?
A circumstantial landlord is someone whose circumstances change leading to the need to rent out their home. Generally, these individuals are dissatisfied with their current circumstance, and have found better paid jobs, more exciting career opportunities, or are seeking better work/life balance elsewhere. Because their move is not intended to be a forever move, they’re not ready to sell their home so decide to rent it.
In the short term, this provides a valuable source of rental housing at a time when availability is low. But there is an important caveat: these properties are not being introduced to the market as long-term homes.
A Short-Term Solution That Skews the Data.
These properties only enter the market temporarily. When the owners return, they move back in by ending their tenancies. Or if they decide to stay abroad permanently, they often opt to sell their property to free up the capital, rather than remain landlords from a distance.
For tenants, this creates a rental market where much of the new stock comes with an inherent degree of uncertainty. Renters in these properties may find themselves needing to relocate sooner than they had wished if the landlord’s plans change prematurely.
However, from a statistical perspective, these properties look like a healthy addition to the market. Every time a relocating homeowner lists their property for rent, it registers as a ‘new-to-market’ rental property. But what these statistics don’t capture is the temporary nature of these lets.
This could be creating a misleading picture. While industry professionals have been raising the alarm over the chronic undersupply of long-term rental homes, government figures may not fully reflect the severity of the situation. These circumstantial landlords may be providing just enough new listings to deflect scrutiny, giving the impression that rental supply is holding up better than it actually is.
Where Does This Leave Tenants?
While circumstantial landlords provide an invaluable short-term boost to supply, they don’t offer the long-term security that many tenants are looking for. Without a steady flow of new and committed investors into the sector, the mismatch between supply and demand will only continue to grow, especially for lower income families who need permanent rental homes.
With Scottish tenancies having no fixed term periods, any landlord who needs to sell a property, or move back into it, can terminate their lease any time after a tenancy starts, subject to either 4 or 12 weeks-notice. Life, as we all know, is unpredictable, but for tenants, the potential for their landlord to have a need to recover their property if their new life abroad doesn’t work out as planned, or works out better than planned, can be very unsettling.
The Grand Irony: A Market Shaped by Policy.
The current situation is the direct result of policy decisions and not without some irony. The Scottish Government has discouraged private landlords from investing in the rental sector by introducing an 8% Additional Dwelling Tax, stricter regulations and rent controls. Policies which have stopped long-term investors entering the market.
And yet, paradoxically, at the same time, it’s possible that their wider policies have led to an increase in rental supply, from disillusioned Scots leaving the country.
From a policy perspective, it’s easy to look at the number of new listings coming onto the market and argue that things aren’t as bad as industry professionals suggest. But the statistics may not tell the full story.
Long-term rental supply is shrinking. But as long as circumstantial landlords continue to add short-term stock to the market, the true scale of the problem risks being masked.