Mid-Market Rent Proposal
Perth and Kinross Council · 25 March 2026
Back to Housing and Social Wellbeing Committee — 25 March 2026 and its agenda
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Our vision is a Perth and Kinross where everyone can live life well, free from poverty and inequality ___________________________________________________________________ Committee or Board: Housing and Social Wellbeing Date of Meeting: 25 March 2026 Report Title: Mid-Market Rent Proposal Report Number: 26/75 Report Author: James Ross, Team Leader, Housing Strategy, Economy, Development and Planning Organisational Lead: Joint report by Elaine Ritchie – Strategic Lead – Housing and Communities / Serge Merone – Strategic Lead – Economy, Development and Planning ___________________________________________________________________ 1. Purpose 1.1 The purpose of this report is to seek approval of Mid-Market Rent as an additional affordable housing model for the Council. In addition, to the extent it is within the Committee’s remit to do so, the report seeks approval of a recommendation to establish a Limited Liability Partnership (LLP) to enable the Council to directly deliver Mid-Market Rent, beginning with an initial tranche of 13 new homes at Westfields, Rattray. 1.2 Sections 1. Purpose 2. Recommendations 3. Background/Context 4. Main Issues 5. Proposals 6. Conclusion 7. Impact Value Assessment 8. Appendices 2. Recommendations It is recommended that Housing and Social Wellbeing Committee: 2.1 Agrees that Mid-Market Rent (MMR) is adopted as an affordable housing model for the Council, delivered through a Limited Liability Partnership (LLP).
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2.2 Notes the proposal of the Strategic Lead – Economy, Development and Planning, in consultation with the Strategic Lead – Legal and Governance, to prepare a further report to the Council setting out the detail of the proposal for approval at a future meeting. 2.3 Authorises the Strategic Lead – Economy, Development and Planning in consultation with the Strategic Lead – Finance and Business Support to submit to full Council a proposal to borrow £1.38m from the general fund and then lend this to the LLP to acquire 13 new build affordable homes at Westfields, Rattray, subject to satisfactory due diligence and acceptable security arrangements. 2.4 Requires the Strategic Lead – Economy, Development and Planning to report on the progress to Housing and Social Wellbeing Committee at a future meeting. 3. Background/Context 3.1 Mid-market rent (MMR) is a type of affordable housing aimed at households on low to moderate incomes who may struggle to access suitable rented accommodation. MMR homes are let under a Private Residential Tenancy (not a social tenancy), but rent levels are set at or below Local Housing Allowance (LHA) rates to ensure they remain more affordable than typical private rents. In practice, MMR acts as a tenure that bridges the gap between social rent and private rent. Applicants must meet specific eligibility criteria to be offered an MMR tenancy – criteria that can be decided by the landlord to meet local housing need. 3.2 MMR is recognised nationally as an important element of affordable housing delivery. Housing to 2040, Scotland’s long term housing strategy, includes a commitment to deliver 110,000 new affordable homes by 2032. Of these, 70% are to be for social rent, with the remaining 30% delivered through low-cost home ownership and MMR. This report’s proposal contributes to the 30% non-social rent share via MMR. 3.3 The Perth and Kinross Local Housing Strategy (LHS) 2022-2027 sets out the strategic housing priorities for the area. The LHS includes a target to deliver 210 new supply affordable homes per year, with 70% for social rent and the remaining 30% delivered through alternative tenures such as MMR and low- cost home ownership, reflecting national policy direction. 3.4 Within Perth and Kinross, three Registered Social Landlords (RSLs) currently provide MMR properties, with a fourth expected to deliver homes over the next five years. Kingdom Housing Association manages 124 MMR properties across Abernethy, Perth, Scone, Blairgowrie, and Crieff. Hillcrest Housing Association manages 87 MMR properties across Perth and Blairgowrie. LAR Housing Trust manages 16 MMR properties in Blairgowrie.
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3.5 In addition, the current Strategic Housing Investment Plan (SHIP), includes Places for People (PfP) to deliver new MMR properties in Scone, which will add to the existing total of 227 properties. 4. Main Issues 4.1 In Perth and Kinross, demand for MMR continues to grow, particularly in areas with high housing pressure, above-average rents, and limited access to low-cost home ownership options. Current supply through partner RSLs is not keeping pace with need. 4.2 The Council must therefore adopt a more active and flexible delivery approach if MMR outputs are to meet the expectations outlined in the LHS and Strategic Housing Investment Plan (SHIP). 4.3 The Council cannot directly deliver MMR because a Private Residential Tenancy cannot be issued by a Local Authority and so currently, the delivery of MMR through the Strategic Housing Investment Plan relies entirely on RSLs that operate MMR, via their subsidiaries. 4.4 Benefits of the Council delivering MMR are that it: Provides an affordable option for those that are unlikely to be allocated a social tenancy. Many of whom approach our housing options service for help. Thereby reducing pressures on services and providing a viable alternative in areas with high private rents. Delivers greater flexibility and choice for those looking for their first, or last, home. Households can be offered a home with 1 bedroom more than social housing allocations would allow. Offers greater security of tenure than compared to the private rented sector. As an established landlord with a strong track record in property management and high-quality repairs, the Council offers tenants greater stability and reassurance than individual private landlords. 5. Proposals 5.1 The Outline Business Case sets out three potential options available to the Council to deliver MMR, a summarised version of this is provided as appendix 1. Following detailed appraisal, Option 3 has been identified as the preferred option. The three options considered are: - Option 1: Do Minimum / Existing Framework - Option 2: Leasing Arrangement with an RSL - Option 3: Establish a Limited Liability Partnership (LLP) 5.2 The development of the Outline Business Case has been informed by contributions from Housing Strategy, Housing, Legal Services, Finance, and procurement. In addition, external legal support has been procured from Burness Paul to provide specialist advice.
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Officers have also engaged with Edinburgh, Fife and Stirling Councils to learn from their experience of delivering MMR, as well as partner RSLs referenced in the report. Support has also been provided by the Scottish Futures Trust, who have supplied guidance and template documentation. 5.3 A suitable site has been identified for the first phase of MMR delivery. Construction is due to commence in 2026/27 at Westfields, Rattray, a location already approved within the Strategic Housing Investment Plan (SHIP). 5.4 Subject to Committee’s approval, it is anticipated that establishing the LLP will take approximately six months and external business adviser, Burness Paul, will support the full set-up process, ensuring all legal and governance requirements are met including subsidy control, conflict management, insurance, Health and Safety compliance and lettings/management arrangements. It would be important to ensure that allocations/eligibility avoid indirect discrimination and are line with Council’s priorities. A budget has also been set aside to procure external financial advice, ensuring compliance with all relevant financial regulations and the implementation of financial controls. 5.5 A financial appraisal has been completed for the initial tranche of 13 new homes, which will form the LLP’s first stock. The current appraisal confirms that £1.38m will be required, alongside Scottish Government grant funding (£1,213,864), commuted sums (£220,000), and Council Tax second / empty homes income (£260,000), to support the acquisition. Further sensitivity analysis will be carried out. This capital contribution would be paid on completion of the new homes and repaid by the LLP to the Council over a 30- year period. Once the initial investment has been repaid, any surplus generated will be reinvested in delivering additional MMR properties through the LLP. 5.6 Initial discussions have taken place with Scottish Futures Trust regarding the potential role of its investment subsidiary Scottish Futures Trust Investments Limited as the LLP’s second member. Further consideration of alternative second-member options will continue subject to Committee’s approval, with a final partner to be confirmed prior to the LLP being formally established. The selection of the second partner will be guided by criteria set by the Council such as public purpose alignment, governance capacity or no dividend leakage conflicting with affordability. 6. Conclusion 6.1 There is a clear and growing need for Mid-Market Rent (MMR) homes in Perth and Kinross, particularly for households who are unable to access social housing yet are priced out of the private rented sector. Current delivery arrangements are not sufficient to meet this demand, particularly in high-pressure areas. 6.2 The Outline Business Case demonstrates that establishing a Limited Liability Partnership (LLP) provides the most effective, flexible and sustainable mechanism for the Council to directly deliver MMR, while remaining compliant
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with legal and regulatory requirements. This approach enables the Council to take a more active role in addressing local housing need and delivering on the ambitions set out in the Local Housing Strategy and Strategic Housing Investment Plan. 6.3 The proposed first phase of delivery at Westfields, Rattray will provide 13 new MMR homes, supported by a robust financial appraisal. The required £1.38 million Council borrowing, to be on-lent to the LLP, will be fully repaid over a 30-year period, including principal and interest, ensuring the Council’s investment is protected. Any future surplus generated by the LLP will be reinvested to support further MMR delivery. 6.4 Approving the recommendations within this report will allow the Council to establish a scalable and financially sustainable model for MMR delivery, increase access to affordable housing, relieve pressure on housing services, and provide greater housing choice and security for residents across Perth and Kinross. 7. Impact and Value Assessment Impact and Value Assessment 8. Appendices 8.1 Appendix 1: Business Case 8.2 Appendix 2: Mid-Market Rent FAQ’s