Edinburgh is set to become the first local authority in Scotland to move into the private landlord business, building up to 1,000 houses a year for commercial rent.

The Edinburgh Evening News claims the city council is about to set up an arms-length company called Edinburgh Homes.

The paper says Edinburgh Homes would attract private investment to fund new developments, while contracts would be awarded to construction firms to build the homes before the new company lets, manages and maintains them.

The first homes are expected to be built at a site already earmarked for development at Fountainbridge, where they would go up alongside new affordable homes.

“We would aim for about 1000 a year. It has been done elsewhere and it seems to work well. It will make a profit for the council which will be reinvested into council services” says a council spokesman.

A report to next week’s meeting of the authority’s health, social care and housing committee notes concerns about a rise in the cost of housing if the demand for private rented accommodation is not met and says the purpose of the new company would be to build “good quality, well managed homes”.

The report says: “Since the 1970s house building has failed to keep pace with demand. This, and the relatively easy availability of credit for house buying (until 2008), are the main reasons that the cost of buying or renting a home in the city is too high for households on low to moderate incomes.”