Last week at the Propertymark Regional Meeting in Edinburgh, a lot of focus was given to the Scottish Government/Green Party proposals for the introduction of Rent Controls across Scotland.
It was generally felt that, as the Green Party had included this in their manifesto, Rent Controls were definitely coming and the discussion should be around what these will look like rather than if they will happen.
Rent in Scotland has been steadily rising over the last 10 years, particularly in the major cities, and the introduction of an effective national system of rent controls is intended to slow this increase, making rents more affordable and tenants less likely to be priced out of their chosen area due to rising rent costs. There is a concern in parliament that continued rent inflation will squeeze lower income tenants out of neighbourhoods which will, in turn, lead to a shortage of labour in high-productivity areas.
Displacement of tenants due to rising rents can also have damaging psychological and social consequences on individuals and communities as people are forced to move further from their area of choice thus incurring commuting costs and loss of familial support.
But is blanket Rent Control the answer?
The Scottish Government already has a localised rent control policy in place called Rent Pressure Zones. Currently local councils can apply to become a Rent Pressure Zone if rents are rising too fast in their area, and the government can apply rent caps if the application is accepted. There are currently no Rent Pressure Zones in Scotland. Is this because local councils don’t feel rents are rising too high in their area? Is it because there is no evidence of accommodation being unaffordable in their area or is it because they are unaware this is available to them to control? Surely not.
Rent caps will undoubtably be welcomed by tenants, but will this prove a nemesis when there are less properties to choose from and more people searching? Currently, in the highlands at least, rental properties come in all shapes and sizes, in a variety of locations, with a mix of services available. There is something for everyone at every level of budget.
How will a blanket rent control policy deal with this?
Will it be on postcode area? Geographical area?
How will access to facilities be factored? You might say access to facilities is not relevant but it’s very relevant to the price paid when the house is purchased by the landlord, therefore it should be relevant to the monthly rental charge.
Currently, the Landlord or Agent decide on the rent to charge and the tenant decides if this is affordable for them. If it is then they apply for the property and, after a few checks, the tenancy is agreed. The landlord is then able to increase the rent only once in every twelve months and, if the tenant doesn’t agree with the rent requested, they can appeal to the Rent Officer and the First Tier Tribunal. The downside to the appeal is that the Rent Officer or First Tier Tribunal can also decide that the rent is too low and can recommend a greater increase to bring the property into line with other similar sized and located properties.
This is felt to be the main reason there have been very few applications for rent reviews in recent years. This is something that could be altered within the Rent Control policy with Rent Officers only reviewing the rent increase requested by the landlord. A simple yes or no, it’s a fair increase or it’s not. This would be very welcomed by tenants to give them the ability to challenge their rent increase should they choose to do so. But this doesn’t require a blanket Rent Control Policy, it only requires an amendment to the legislation currently in place.
Housing in Scotland (and probably UK wide) is reaching crisis point and introducing Rent Controls is like taking a sledge-hammer to crack a nut. The result will provide access to the nut, but there won’t be much nut left to enjoy. The Private Rented Sector requires support to enable more landlords to enter the sector and provide more affordable homes. More landlords and more homes available will, by default, lead to an organic process of rent control. In every area of retail, when supply outstrips demand prices are lowered to achieve the sale. Surely the answer is to encourage more supply rather than penalise further the supply that already exists.
Rent Controls will undoubtedly be introduced and we can only hope that the decision makers follow the evidence prior to making decisions which will have far-reaching effects for tenants, landlords and agents for many years to come.