The growth of private residential landlords in Edinburgh and the impact of recent changes in the policy and financial environment

Abstract

The private rented sector in the UK has dominated, shrunk to the periphery and then re-emerged in the course of the last century. A complex set of influencing factors have acted as gears accelerating and decelerating this form of tenure. These factors have many sources. Some arise from government housing policy and resulting legislation, others from tax system. The market acts as a further source: demand, supply, property asset values, lending liquidity and policy, and general macro-economic growth and stability are all to be found influencing the housing market and with it the private rented sector. There have also been socio-cultural influences at play over the last century societal perceptions towards landlords and the emergence of the property-owning democracy psyche are two examples. The complexity of what exactly underlies and sustains the private rented sector presents researchers with an opportunity to investigate and seek to understand a range of phenomenon related to this tenure and its role in housing a part of the population. Having this understanding is important because housing represents a fundamental need and which form of tenure will supply housing needs in future is a highly significant. This study aims to contribute to understanding of the residential lettings sector, specifically in Scotland, through exploring a range of aspects, reviewing the past, evaluating the present and assessing the future. The main conceptual approach guiding this investigation of the PRS is the market maturity thesis. This concept which has been commonly applied to other markets and indeed other property markets such as commercial property has not been fully developed for application to the residential lettings sector. This research aims to begin closing this noticeable gap through the development of a model of market maturity that is appropriate for the residential lettings market. The model recognises that housing is both a basic human need and an investment market. Today’s private landlords increasingly resemble the general population in a way they certainly did not a century ago. Whether it be those seeking a better performing investment or those becoming a landlord through happenstance, the small-scale landlords on whom this now significant form of tenure depends are part of the community rather than a class apart as they once were. Seeking out the voices of these immersed subjects and hearing their interpretations of the role of the landlord and of the changing environment in which they play this role is an important research endeavour. That this study is set in Scotland is also highly significant as very recent policy and legislative developments in this jurisdiction have seemingly set the private rented sector on a different course to the rest of the United Kingdom. As well as an extensive review of literature both contextual and theoretical, the research includes two interview studies, one with private landlords as participants and the other a key informant study drawing on the expertise of highly knowledgeable professionals. A rich triangulated understanding of issues related to the Scottish residential lettings sector is generated by this approach. Furthermore, there is a case study conducted on Edinburgh to test the appropriateness of the proposed model and to evaluate how far the Edinburgh market can be viewed as mature. Overall the research finds that the Edinburgh market, and to some extent the Scottish market as a whole has not yet reached maturity. The main reasons for this are the lack of economic equilibrium, doubts over user acceptance and a lack of certainty over investor acceptance among institutional investors. The proposed model proved to be a useful starting point for testing cases; however, the need for further refinement is recognised. The research also proposes the policy implications of the findings.