Industry apprehensive about Scotland’s rent control plan

A diverse range of property professionals are wary about Scotland’s plan to control rents.

Rent controls will come into force by the end of 2025 after a deal was struck between the Scottish National Party and the Scottish Green Party.

Evictions could also be banned in Winter, while tenants will receive new powers.

So far there’s a lack of concrete details about the proposals, which will be consulted on by the end of 2021.

However, rent controls are already stoking apprehension among landlords and mortgage professionals, though members of the charity housing sector are more sympathetic.

Scottish Association of Landlords
John Blackwood

John Blackwood, chief executive of the Scottish Association of Landlords, said: “This announcement will make many members question whether they wish to continue providing housing in the private rented sector, with policy proposals like a Winter ban on evictions and rent controls that are likely to affect the viability and security of their businesses.”

Councils can already control rents in their area by requesting Scottish ministers to designate a Rent Pressure Zone. If a zone is established rents can only be increased by 1% per year for five years.

However these powers are rarely used.

According to Blackwell this is partly due to a lack of rent data, which councils would need to send to the government as evidence that rents are out of control.

In many cases it’s difficult to be sure how much landlords are charging in a given region, and there’s an over-reliance on anecdotal cases of sky-high rents rather than concrete evidence.

To deal with this issue he suggested making it a requirement for homeowners registered with the council to provide rent data.

This may remove the need to introduce new rent control legislation, as the old rules could simply be more properly enforced.

Blackwood added: “Nobody wants rents to go out of control.

“It’s not in anyone’s interest as it makes it unaffordable for the tenant and landlords end up having to evict them, which takes money and time.

“That’s not a productive relationship for anyone to be in.”

He pointed out that more legislation doesn’t always improve things for tenants.

Under the tenancy regime introduced in 2017 landlords can only raise rents once a year.

However Blackwood said more landlords have been raising rents every 12 months after this came into force, while previously many didn’t raise them for years.

Liz Syms
Mortgage expert

Liz Syms, owner of Connect Mortgage Club, agreed that rent controls could make life more challenging for landlords north of the border.

If house prices rise and rental growth fails to keep up due to rent controls, landlords could find it harder to borrow money when looking to remortgage, because affordability is assessed by lenders based on the income landlords will receive from tenants.

She said: “Affordability is based on the amount of rent at the outset, so controlling the amount that the rent increases once the mortgage is in place should not have an effect in theory.

“It may have a longer-term effect on potential borrowing levels when refinancing with a tenant in situ, however.

“Longer-term, it could mean that landlords are not able to access all the available equity in their property if property prices increase more than the rent.

“However, there are some landlords who have long-standing tenants and do not increase rents, who many now benefit from structured yearly increases.”

Housing charities

A spokesman for charity Homeless Action Scotland argued that alternative measures would do a better job of keeping rental growth in check, while rent controls could result in there being more issues with rogue landlords.

He said: “Rent controls may have a positive impact on affordability but as with many things the devil is in the detail.

“The best way to put downward pressure on rents is by building homes for social rent and taking the heat out of the private rental market.

“The wrong regulation might increase the number of rogue landlords and that would be a retrograde.

“A legitimate concern is that any ill-judged change to the law would result in an increase in landlords who choose not to comply with any legislation whatsoever.”

Alison Watson

Alison Watson, director of fellow charity Shelter Scotland, seems more supportive of the proposal, and is open to the Scottish government examining how the private rented sector operates in Scotland.

She said: “The cost of rent is a driving factor in housing inequality in this country.

“It is central to the housing emergency which forces hundreds of thousands of people to live in homes that either don’t meet their needs or which force them to cut back on other essentials such as heating or even food.

“A thorough examination of a system to slow the soaring cost of having a decent home is long overdue and Shelter Scotland is keen to play a part in finding a fair way forward for tenants.”

Other Scottish government proposals

Rent controls aren’t the only proposal from the SNP and the Green Party that could make life more challenging for landlords, but could give tenants a boost.

The government has pledged to impose additional penalties and compensation on landlords for illegal evictions.

A rent guarantor scheme could be introduced for estranged young people.

Tenants will gain new rights, with two examples being greater flexibility to decorate their home and to keep pets.

A new housing regulator for the private rented sector will be created.

Meanwhile there will be greater restrictions on evictions over Winter.

John Blackwood of the Scottish Association of Landlords is worried about the latter policy in particular.

“We don’t support banning evictions during Winter.

“Tenants could choose to stop paying the rent in the run up to Winter knowing they can’t be evicted.

“We think if tenants breach a tenancy agreement landlords should be able to repossess the property and investors should have confidence that they can get their properties back if it’s justified.”

What happens next

After the consultation period the Scottish government will publish a final Rented Sector Strategy and introduce a Housing Bill in the second year of this parliamentary session (from May 2022 to May 2023).

The government has pledged to “implement an effective national system of rent controls, with an appropriate mechanism to allow local authorities to introduce local measures”, however the industry is waiting on more details.

The government will analyse the pros and cons of various forms of rent controls in a consultation period, before legislation and implementation comes by the end of 2025.

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