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Evaluation of the National Mortgage to Rent Scheme



8.1 This chapter examines a range of issues concerning social landlords' role in Mortgage to Rent. It starts by looking at the range of landlords involved and then addresses the issue of finding a landlord, which can be problematic, drawing on case file and landlord perspectives. Evidence on dwelling quality from the database and from landlord interviews is considered, before the specific issue of the treatment of repairs in MTR is addressed. There is a further discussion of rents and affordability and of other management issues, and applicant household perspectives on these issues are considered alongside the views of landlords.

Landlords Involved in MTR

8.2 82 social landlords were identified as being involved with settled cases up to March 2008. This is clearly quite a wide spread of involvement in what is not a very large scheme. Table 8.1 shows the thirty landlords which account for three-quarters of the cases. The first five, accounting for a quarter of cases, have taken or offered to take between 30 and 50 cases each.

8.3 There is clearly some relationship between landlords taking a lot of cases (Table 8.1) and localities generating a larger takeup (Table 4.4); for example Melville HA is based in Midlothian, while East Lothian Council covers its own area. It is not clear which way the causality runs here, but having a supportive landlord willing to take cases is an enabling factor for initial applications to be converted into settled cases (we report below on the problem of being unable to find a landlord).

8.4 We showed in Chapter 5 that a surprisingly common reason for cases not proceeding was the inability of the MTR team to find a willing social landlord, affecting 10% of cases not settled. We therefore go on to address this part of the process in some detail.

Table 8.1: Social Landlords involved in MTR Cases



Valid Percent

Cum %

Melville HA








Tenants First Housing Co-op




East Lothian Council




Ore Valley








Manor Estates HA




Sanctuary Scotland




Paragon HA




Almond HA




North Lanarkshire Council








Link HA




Ayrshire Housing




Dumfries & Galloway Hsg Ptshp




Fife Special HA




Abronhill HA




Atrium Homes




East Dunbartonshire Council




Albyn HA




Antonine Housing Co-op




Arklet HA




Loreburn HA




Loretto HA




North Ayrshire Council




Abertay HA Ltd




Bridgewater HA




Dunbritton HA




Grampian HA




Midlothian Council




Source: Analysis of Allocation of Cases Database

Finding Landlords to Take on Properties

Invitation to landlord

8.5 The majority of prospective landlords invited to participate in the scheme are RSLs (housing associations), but local authorities also participate. Landlords are considered one at a time, and in many of the case files examined more than one landlord was involved because some later declined to participate. But a further scrutiny shows that for more than one half of the applications which were later withdrawn, landlords could not gain access to property easily to estimate costs. This might suggest that in some of these cases the underlying problem is that the applicant is not that committed to the scheme. Landlords may wish to participate only under certain conditions, such as excess repair costs being borne by the scheme.

Landlord willingness

8.6 The main issue preventing acceptance of individual properties by participating landlords has been the extent of repairs, especially where there is insufficient equity to fund repairs beyond the scheme limit of £6,000. Nevertheless, it is relatively rare for the repairs to be so expensive as to prevent completion with, for example, one local authority landlord having refused only one case in 10 months. This was a house which was described as "in a dilapidated state", needing around £35,000 of repairs and where there was no equity available to pay for this. In another case, an RSL had not accepted one property because it was an 'Orlit' house (a type of steel frame construction which had been local authority housing and subject to defect problems requiring widespread demolition). Another had been refused which had DIY work without appropriate permissions which would have cost over £27,000 to rectify and there was no free equity available, leaving the RSL with a potential bill for around £18,000. Other particular examples from the case files included a timber-framed 1950s house, an existing shared ownership property (involving a different RSL), outstanding factoring fees on common areas, and a flat above a take away restaurant on a busy road which was seen as potentially difficult to let.

8.7 None had refused applications on the basis of specific or general characteristics of the households except where the household would immediately be overcrowded and require rehousing.

8.8 Financial issues can affect local authority willingness to take on an application. A local authority which has been involved in the scheme has done so on the basis of using ring-fenced homeless prevention funding to meet its share of the capital cost of acquisitions. The removal of this ring-fencing has raised the prospect that the authority may have to reduce the number of purchases it makes in future. Another local authority has allocated finance from its general capital budget to MTR purchases and believes that there is no threat to the continued use of this budget for MTR, as it is viewed as a good use of resources in increasing the stock of affordable rented housing in the area.

8.9 Small landlords found the current levels of subsidy the most problematic. A large housing association was able to financially support the scheme at current levels and at lower grant rates as it was national in scope and could pool costs. However, a small community housing association found it difficult to support involvement in the MTR scheme at the current time because of reductions in grant rates on a new development site in their pipeline; forward funding is now required and so money reserved for MTR has to be diverted. In the context of housing associations being required to demonstrate greater efficiencies they felt they had to reconsider the number of referrals they could consider.

"I wouldn't say that we're getting more than we can cope with, but we're getting to the point where we have to seriously consider what we do with this scheme in the future...With the financial issues no we don't have any issues with that at all, we're quite a large organisation…but administratively speaking it can be quite onerous." (Large RSL)


8.10 One RSL which had not participated cited the difficulties in managing and maintaining scattered property which would be acquired through MTR as a reason. In addition the RSL believed that a single provider in an area provided a better service for the customer and so did not wish to become involved. This perhaps indicates a misunderstanding of the central role played by the MTR team and may indicate that greater awareness-raising amongst RSLs could increase the number who are willing to become involved. Locational issues are discussed further below.

8.11 Amongst landlords who have taken a number of properties, location was only a minor factor inhibiting acceptance of particular properties. One RSL stated that it would accept properties across the whole city; local authorities had stock throughout the city or council area and were used to pepperpotted developments because of Right to Buy. A rural association had purchased properties in most of the main towns in its area. It would be comfortable with properties in most locations throughout the region as it had some property in most villages. One RSL found that, although it had initially been reluctant to take properties in an area of the city with a poor reputation, it had now taken on 5 and had had no problems; it was therefore more relaxed about such areas now.

Communal repairs

8.12 One RSL refused a property in a multi-storey (due to issues of communal maintenance, cladding and responsibility for lifts). On the other hand it was happy to accept individual flatted properties in tenements even though there was often no factor and communal repairs were dealt with by waiting for the council to serve a statutory notice and organise the repairs. Although this is not an ideal system for the association, it has been common practice for many years in tenemental areas of Edinburgh where RSLs are in minority ownership.

8.13 However, there were cases where housing associations had declined to procure a MTR property due to issues of outstanding communal repairs. Some properties that were coming through in Glasgow were 4-in-a-block properties that presented particular repair and management issues. One association had taken one property where the GHA owned the other units and undertook the communal repairs, to which the other association paid a contribution. However, sometimes these properties invited management problems because the other flats were all in private ownership and no-one had previously conducted communal repairs, so the association faced the prospect of having to assume factoring and repairing responsibilities for whole block not just the individual property.

"Another issue is that - we try not to cherry pick and try and help where we can - but where we know we're taking on a can of worms in terms of management issues we have to say no." (Large RSL)

Quality of Housing

8.14 We can refer to several indicators of quality of housing. Table 8.2 looks at central heating and double glazing, important aspects of contemporary housing standards and important for comfort, amenity and affordability. At least 85% have full central heating, 5.2% have partial CH while 7.4% definitely have none (compared with 5.8% of mortgaged owners in Scotland in 2002 - SHCS). Lack of CH is more common among the ineligible category - this may be a further reason for social landlord reluctance. The main fuel source is gas in 79% of cases, with 18% using electricity (most commonly storage radiators).

8.15 Double glazing is fully present in 81% of properties, with another 5% having partial presence and at least 12% with none. Again, ineligible cases are more likely to fall short on this criterion.

Table 8.2: Central Heating and Double Glazing by Case Status (percent)





In Process


Cent Htg

Not known





























Dbl Glazing

Not known






























Source: Analysis of MTR Administration Database.

8.16 Presence of central heating and double glazing is increasing over time within the MTR caseload. This may in part reflect broader improvements in the nation's housing stock. On these indicators, Highlands and Islands cases are more likely to fall short whilst those in Lothian, North East and Rural South are less likely to be deficient. Flats are much more likely to be deficient, although lack of double glazing also characterises detached houses in the scheme.

8.17 85% of MTR properties have a garden - substantially higher than the proportion in the social rented sector in Scotland as a whole. However, only 11% have a garage, which would compare unfavourably with typical owner occupier homes. Only 1.7% of MTR homes have specific adaptations for disability.

8.18 The average cost of repairs required to bring up to the standard required for normal social rented letting is £5,450. Average repair costs were rising over time up until 2006; this could reflect both a changing mix of properties and rising general construction-related costs. They tend to be rather higher in the Central Belt than in the peripheral rural regions.

Landlord Views on Type and Condition

8.19 Property types vary but interviewees noted that a disproportionate number had been built by social landlords and were therefore similar to their existing stock. One stated that about 60% of around 30 cases settled had been former local authority RTB properties. One RSL noted that most of the properties it had bought under the MTR scheme were properties it had built as Shared Ownership units e.g. two of the three it bought in 2007/08 were SO. Some advisers felt many of the MTR applicants were the first purchasers of these properties, but others found that people had bought them on the open market as these properties were relatively inexpensive. They were 'ideal' candidates for MTR, as the landlords acquired a modestly priced property with some subsidy that fitted in with their portfolio, and were more than likely to qualify under the value limits for the scheme. Some associations operated over several authorities or even across Scotland so the appraisal process included an assessment of whether the property would provide problems in terms of housing management or maintenance.

8.20 The repairs allowance of £6,000 is adequate in most instances and advisers and landlords did not think that repairs or property type resulted in many cases failing to proceed. One adviser stated that the number will be in single figures annually, "with only one case so far this year 18."

Repairs Process and Costs

8.21 The surveyor appointed by the MTR team to carry out the initial Scheme 2 survey of the property identifies repairs and also estimates the cost of work necessary to bring the property up to the Scottish Housing Quality Standard ( SHQS). The landlord also has the property surveyed to establish the repairs it believes are necessary to bring the property up to a lettable standard. There can then be a process of negotiation if there are discrepancies between the two figures, which can arise because of the use of actual contractor quotes and/or the application of different (typically higher) standards by the RSL. The MTR team and solicitors noted the variation in costs for similar work from different landlords. One of the RSLs stated that the SG surveyor often undervalued the level of repairs necessary, but another RSL surveyor indicated that the Scheme 2 survey came with prices that these sometimes overvalued and sometimes undervalued the cost of work.

8.22 Beyond the allowance of £6,000 which is available under the MTR scheme to pay for eligible repairs, work may be paid for from equity available on the property. This could reduce the equity retained by the MTR applicant or money being returned towards scheme subsidies after the sale. Sometimes there would be insufficient equity after paying off creditors and the purchasing landlord, lender or applicant would then be approached for the cost of any additional repairs.

8.23 Landlords pointed to typical repairs including rewiring and necessary improvements to the kitchens and bathrooms to bring them up to the landlord lettable standard. There will also be minor repairs such as door handles. There may also be 'improvements' the resident has carried out which would have to be removed by the owner before the property could be let to someone else. (One council will keep an allowance for this in case it is not done).

8.24 There are some cases where the extent of these unfunded repairs is such that the landlord decides not to proceed, but landlord interviewees said that this was rare. One RSL noted that occasionally repairs become apparent after the property has been bought e.g. a central heating boiler had to be replaced in one case. RSLs and local authorities stressed that they used the inspection of the property as part of their risk management strategy to guard against the possibility that they would have liability for significant expenditure in the medium term.

8.25 As mentioned in 8.18 the average repair cost is £5,450. Landlord interviews found significant variety in the average cost of repairs ranging from £3,000 to £6,000 with both high and low extremes.

" Problem with the £6000 repairs subsidy level with repairs, what you would get is absolutely essential repairs, but our surveyors see kitchens that are in bits. We're buying the property, taking on the repairing obligations, [we have to] build up a fund on properties so that when repairs are necessary, but if properties are taken on with repairs needed in a couple of years there will be insufficient money generated to pay for them, so they have to be identified at the outset…You haven't built up that fund so essentially the other tenants are paying for those repairs that should have been done earlier." (Small Housing association)

8.26 A small association would only allow a given deficit on revenue against costs for the property (e.g. £1200) in the first year, whereas a larger association may have the capacity to extend this financial cap. There were more general concerns about the potential future repair costs of typical stock coming forward.

"The area in which we operate, the properties that come forward are mainly ex development corporation 1960s built houses, who've gone through the Right to Buy, they're all Right to Buy, the last thing people who are in financial difficulties do is spend money on their house. The assumptions the Scottish Government use are the same or similar to new build…I think out of the last few we've had to knock back about 50% we just can't afford it" (Small Housing association)

8.27 This comment betrays a lack of understanding, as the SG grant allowances are based on rehab property, not new build.

8.28 The treatment of repairs is broadly seen (by landlords) to be fair to both the landlord - which needs to have a lettable property - and fair to the owner, although recognising they have financial difficulties. However, an independent stakeholder (AiB) expressed the view that rates for repairs seemed to be approved at a very high level and suggested these might be capped in some way. There was also significant criticism of repairs costs from some of the applicants, as reported below.

8.29 One complaint raised by an RSL was that the tenant is immediately eligible for the Right to Repair once the property is bought by the association. This had meant a tenant was able to claim compensation for work which had been outstanding since before the purchase and which the association felt it had dealt with in a reasonable time.

Rent Setting and Affordability

8.30 All landlords spoken to used their standard rent policy to determine rents for MTR properties. All used a points system, for example, giving points for size and amenities which were then translated into a rent level. This meant that the rents were the same as for their other tenants.

"I don't believe in having different rents for different people, if you've got the same amenities you pay the same rent." (Housing association)

Market Rents?

8.31 There was very little support amongst landlords or others for charging a market rent. Some national stakeholders believed it would be acceptable in principle, so long as it was affordable to the applicant. No landlords or advisers were in favour of introducing market rents, other than one larger association who would consider them if grant rates were cut drastically and it was the only way to make the purchase stack up. One RSL (a charity) could only charge market rents through a subsidiary. A possible option of an intermediate rent level is picked up later (in Chapter 10).

8.32 Several stakeholders including advice agencies believed that because many applicants were in work they may have incomes of a level that meant they would not get full housing benefit and there was a danger they would get into problems with debt again. It was also pointed out that if the scheme relied on HB to meet rental cost there would be no saving to the government and therefore the tenant's position was being made worse for no benefit to the public purse.

Grant Rates

8.33 A larger association found that all the MTR properties stacked up suitably over a thirty year period as the scheme stands now using social rents, but could accommodate lower grant rates as it has been developing at lower rates than are commonly available in Scotland anyway:

"there's always a balance issue the more you charge for the rent the less grant you'd get, but I think if grants were to reduce perhaps we'd have to consider higher rents but I think the thing with grant rates that's coming out of Firm Foundations means that we would hope social landlords like ourselves who have been developing at far lower grant rates than are available in Scotland that we've be able to accommodate reductions in grant rates anyway, without having to drastically raise rents. But yes if it [grant rates] were very low market rents are probably something we'd have to look into" (Large RSL)

8.34 There was a concern that charging increased rents on these properties reduced the grant rate and had the potential to mean that more private finance was required, rather than generating additional income to fund repairs.

Rental affordability among settled applicants

8.35 The prevailing experience of people who have settled through MTR is of paying rent without any affordability difficulties, living in a property which meets long-term housing need and where the occupant is very settled, with no aspirations to move or to re-enter owner occupation.

8.36 The older age of the settled applicants means that many were unlikely ever to work again. Almost half of settled applicants relied on benefits or the state pension for their income. Around 2 in 5 settled applicants interviewed received Housing Benefit towards their rents, with around a quarter in receipt of full Housing Benefit (consistent with evidence from the MTR database).

8.37 Some settled applicants were still experiencing financial difficulties and a few of these were in technical Housing Benefit ( HB) arrears (because their HB had not yet been settled) or actual arrears because they were unable to pay the rent. 1 in 10 said they were paying more in rent than they had been paying for their mortgage and around 1 in 10 were paying more than a quarter of their disposable income in rent.

"I still have debt that I'm trying to pay off. It cleared some of my feet. It took the big thing - the mortgage - off me [but] I'm just barely scraping through."

"I'm thinking now that it (selling) might have been a better option because I'm now £100 more (a month) in rent than in mortgage. So in the long run it hasn't helped me financially."

8.38 In some cases, settled applicants were also still paying considerable amounts towards debts but hoping that impending Trust Deed or Bankruptcy arrangements should resolve their financial difficulties.

8.39 These examples illustrate that MTR does not necessarily remove the financial difficulties for all participating households.

Management and Maintenance

8.40 None of the landlords have found the MTR properties more difficult or expensive to maintain or manage, although as discussed below, there may be issues of arrears (for which there are no comprehensive data).

8.41 Bringing properties up to a lettable standard at the time of purchase helps in this respect, as does the high proportion of former social rented properties taken back through MTR. Where stock is more scattered than new build there are examples of good practice, where the landlord includes the MTR property in cyclical or planned maintenance of its "ad-hoc" properties. Improvements carried out by residents can be a problem; one RSL describing a case where a conservatory was of such poor quality and condition that it had the tenant sign a disclaimer stating that the RSL would have no responsibility for its maintenance.

8.42 Generally there have not been additional management issues or costs. Expectations in terms of specification and quality of, for example, kitchens and bathrooms, can sometimes be higher than the RSL can provide.

8.43 There were few management issues produced as a consequence of acquiring properties and tenants through the MTR scheme and it was not felt there were many difficulties for the owners making the transition from owner to renter. Few MTR tenants had moved (only 3 of 17 in one local authority), requested transfers or mutual exchanges, and only one person was reported to have made enquiries with regard to the Right to Buy. This is consistent with the household interview evidence which suggests a predominantly stable, settled group of households. All of the landlords intended to keep the properties in the long term as additions to their stock.

8.44 However, there were some concerns with regard to the incidence of rent arrears amongst MTR tenants, although associations had small numbers and most were not able to gauge to what degree their perceptions that these tenants are more likely to fall into rent arrears matched the data. One RSL was able to provide data showing disproportionately high levels of arrears problems. Of the 23 MTR tenancies: 5 have been referred for court action for rent arrears; 5 have been served with notice but these did not proceed to court; one is still in arrears but no court action taken to date; one has moved on leaving former tenant arrears; and one had management issues relating to sub-letting and was now quitting the property. Therefore a minority, 10 of 23, had had no payment or management problems.

8.45 We cannot say for certain that this example is typical. However, we can hypothesize that the group of people who get into the MTR scheme are to some extent 'self-selected' as a group who had previously in many cases taken on secondary debt, over-stretched themselves and experienced payment difficulties and problem debts. This picture is supported to a considerable degree by the evidence in Chapter 5.

Repairs, management and maintenance issues from households' perspective

8.46 Overall, settled tenants were satisfied with their experience with their new landlord. For many, having the responsibility for ongoing repairs and maintenance taken on by the landlord was 'a weight lifted'. Some older tenants in particular had experienced considerable financial difficulties because of the need to finance property repairs and improvements.

"I think that Mortgage to Rent is far more advantageous if people are in financial difficulties. They probably find it easier to pay a rent and have no financial responsibilities."

"I just phone up and get my repairs done. It's been fantastic. It's changed my life round completely."

8.47 However, there were some settled applicants who were very dissatisfied with the way their landlord had dealt with the early period of the tenancy. Some felt they had forfeited considerable amounts of equity for repairs or improvements that had either not been done at all or had not been done to the quality expected for the price paid. This meant that some respondents, although satisfied with the work of the MTR team and the process, were very dissatisfied with the overall outcome.

8.48 1 in 6 applicants interviewed felt that the level of repair costs estimated by the landlord was far too high. Some people felt the list of repairs included items that were unnecessary or over-priced. The depth of feeling varied, with some people expressing 'disappointment' but a couple of more vehement respondents accusing 'government robbery'. Repair costs and subsequent equity are clearly a contentious area.

"It turned out that there was £11,000 worth of repairs needing done to the house but as far as I'm concerned there is no way that £11,000 has been spent."

"They marked down silly repairs that we could have done ourselves at a fraction of the cost. And once your repairs are so much, you don't get anything back."

8.49 Comments of this kind need to be weighed against the evidence, from past research (e.g. Leather, Munro & Littlewood 1999) that home-owners are often not aware of defects with their homes and do not necessarily prioritise basic structural repairs when undertaking work themselves. In addition, work undertaken on a DIY basis or through informal contracts may be of poor technical quality.

8.50 Where repair costs are likely to affect equity levels, this likelihood needs to be communicated to applicants at an early opportunity. A number of those who were unhappy with the loss of equity had said 'I'd hoped' or 'We'd expected' in relation to equity, suggesting that people can have unrealistic expectations about the likely outcome.

8.51 A few of these respondents felt that the Scottish Government should have more of an 'aftercare' role so people could appeal against unreasonable repair costs or complain about incomplete repairs or sub-standard work.


8.52 More than 80 social landlords have been involved with MTR so far, but a smaller number are more regularly active and account for a majority of cases. Most of these are housing associations, although a few local authorities have been active.

8.53 Finding landlords for MTR cases is often a challenge. Reasons for landlords declining MTR purchases range from common problems of securing access to undertake surveys, common problems of repairs costs in excess of the £6,000 subsidy limit, non-conventional build methods/defects, unsuitable occupier 'improvements', common repair problems in flats, and in some cases a reluctance to take on a 'scattered' portfolio or operate outside a normal 'patch'. Some local authorities and small associations had or foresaw financial limitations on participation.

8.54 The quality profile of MTR properties is generally reasonable and in line with what would be expected given its age and background. Many are ex- RTB and as such social landlords tend to regard these as a familiar and valued 'product'. Quoted repair costs on average tended to lie within the £6,000 limit. These have been increasing over time, from £3,720 in 2003 to £5,420 in 2007. There was consensus amongst stakeholders that the £6,000 subsidy cap for repairs was reasonable, and did not lead to a large number of ineligible applications. There were some discrepancies, inevitably, between MTR and landlord survey cost estimates. Having two surveys, with the associated discrepancies, also contributes significantly to delay, as shown in Chapter 6. Landlords see the treatment of repairs as generally fair, but not all occupiers do. Ongoing management and maintenance was seen as generally unproblematic.

8.55 Rents are invariably based on existing social landlord rental policies. There was little support for market rents, partly because of fairness/comparability issues and partly because of the potential for continuing financial problems., However, some larger associations could contemplate lower grant rates with charging a somewhat higher rent for MTR.

8.56 Most MTR tenants feel able to pay their rent without difficulty, with 2 in five receiving HB assistance. A significant minority of these tenants however still experience financial difficulties with payments and debts. From the landlords' perspective, there was also some worrying evidence of a high incidence of arrears for this group, although it is unclear how widespread this experience was.

8.57 There are clearly very significant repairs outstanding on some properties which make them very unattractive options for landlords. Examples of the types of repairs (e.g. new kitchens) needed which lead to landlord refusal could be flagged up in the guidance to applicants to help manage expectations.

8.58 Applicants were often disappointed with the repairs process. Respondents who have had very bad experiences felt that the Scottish Government should have more of an 'aftercare' role so people could appeal against unreasonable repair costs or complain about incomplete repairs or sub-standard work. Repair costs are a very emotive issue for some applicants and an operational area that needs attention. It is easy to dismiss complaints about repairs because 'everyone complains about repairs'. However, the Scottish Government should aim to ensure that the MTR scheme does not lead to unfair practices.

8.59 In addition, or as an alternative, the MTR approach to repairs might be simplified, perhaps in the context of a framework agreement with landlords, using a fixed/capped allowance based on the Scheme 2 survey (possibly with scope for exceptions). Part of the motive here would also be to speed the process and facilitate finding landlords. This suggestion is developed further in Chapter 10.