Build to Rent (BTR), or institutional investment in the private rented sector (PRS), is now emerging as a major new way of providing housing across the UK.

This type of housing is common across Europe and the US where, by way of example, around 25 million people live in the BTR sector. However, to date, this sector has made little impression in the UK and Scotland.

But there are now clear signs that this is changing, with significant new BTR developments across England, most notably in London and Manchester. As things stand in Scotland, only 2% of the UK total of 84,000 units planned or completed is located here.

The attractiveness of BTR for investors is easy to see – it reduces construction risk, greatly enhances the speed of delivery, is not tied to mortgage affordability, is more efficient from a management perspective, and can improve place-making. For tenants, BTR provides quality, purpose built housing and a greater level of amenity.

To investors, the main Scottish cities are attractive in a BTR context, with higher yields, lower capital requirements and potential for market growth that outstrips many other UK cities. Demographic growth is also fuelling demand, while housing supply remains very weak.

Despite Scotland annually reaching record population levels, we are currently only building around 17,000 new houses per year, 30% down on where we were pre-recession and about half of the level that the Scottish Government targeted in its 2007 Firm Foundations policy paper.

Scotland now has its first operational BTR scheme with the 292 units at Forbes Place, just outside Aberdeen, and there are over 2,500 units now planned in Edinburgh and Glasgow. Rettie & Co have advised on the purchase of Springside in Edinburgh, where a mixed-use scheme by Moda and Apache will deliver over 500 rental units. Scotland also has a number of mid-market rent (MMR) schemes, essentially affordable BTR, including Harbour Point in Edinburgh, where 96 units generated over 3,400 applicants and so demonstrating the sheer scale of demand.

Political “noise”, especially over the prospects for Indyref2, and possible impacts on currency and taxation, has been a factor in BTR investors holding back on Scotland. This is not for reasons of political partisanship, but simply because of the investor dislike of uncertainty.

These concerns were alleviated to an extent after the UK general election, after which Indyref2 seemed a more distant prospect, but have re-emerged as various Scottish councils have signalled support for rent pressured zones (RPZs) or, in effect, rent controls, after the recent council elections. Bluntly put, investors do not like being told how to price their assets.

The Scottish Government has been trying to woo the BTR sector, with measures such as a rental income guarantee scheme (RIGS) under consideration. However, it does appear that with the prospect of rent controls and other tenancy reforms, the government is using the brake and accelerator at the same time and, in so doing, is stalling the sector. These issues are soon to be debated at two major conferences in Edinburgh – the Scottish Property Conference this Wednesday and the Build to Rent Forum on 12 October, where government, industry and academics will meet to discuss housing issues.

Government and industry need to work together to tackle Scotland’s long-standing housing problems, which is fundamentally driven by supply shortages. Lessons can be sought from Manchester, where effective political leadership has shown the way forward in establishing sectors like build to rent and boosting housing supply. Steve Sheen from Manchester City Council is set to discuss how this has been achieved at the forthcoming Scottish Property Conference. Arguably, we need some of this kind of leadership here.

• Dr John Boyle is director of research and strategy, Rettie & Co

This article was originally published in The Scotsman