In September 2022, the Scottish government, responding to rising living costs, implemented a temporary freeze on rents for existing tenants. Following the freeze, a cap on rent increases was introduced, limiting them to 3% annually, significantly below the UK’s prevailing inflation rate. This policy, intended as a relief measure for tenants, will remain in effect until March of the following year.
Impact on Landlords
Many landlords, like Ian Walker, a long-time landlord in Edinburgh (interviewed in the FT), have expressed concerns about these policies. Walker, who inherited eight flats in Edinburgh’s New Town, is considering selling his properties due to what he perceives as a hostile environment for landlords. This sentiment is echoed by other landlords, leading to a decrease in the number of rental properties available in the market.
The Broader Implications of Rent Controls
Research from Hamptons estate agency indicates that Scotland is the only region in Great Britain where property sales by landlords have increased compared to the previous year. This trend is largely attributed to the rent cap, which, while popular with tenants, is seen as a driving force behind the reduction in available private rentals and subsequent increases in new rents.
Government and Expert Perspectives
Patrick Harvie, the Scottish Green minister responsible for tenants’ rights, defends the rent cap as a necessary balance between tenant protection and landlord rights. However, John Blackwood, chief executive of the Scottish Association of Landlords, argues that government policies are disproportionately affecting landlords, leading to a decrease in rental properties.
The Rental Market and Its Future
Recent figures show a notable rise in rents for new tenancies, with Scotland experiencing the fastest rent increase in the UK. This is partly due to landlords attempting to compensate for the rent cap on existing tenancies. Additionally, some Scottish local authorities report a significant decrease in available rental properties, exacerbating housing challenges.
The New Housing Bill
The Scottish government is planning a new housing bill, potentially expanding rental caps to changes in tenancy. This move is seen as a further restriction on landlord freedoms and is likely to impact the private rental market significantly.
The Voice of Tenants
Tenant groups, like Living Rent, argue that rent controls are necessary for affordability, especially given the recent increases in new market rents. They advocate for further measures to cap rents between tenancies and reduce overall rental costs.
Housing Development and Future Prospects
Despite challenges, Scotland is leading the UK in housing completions relative to its population size. However, experts like John Boyle of Rettie & Co suggest that housing development, particularly in the build-to-rent sector, could be accelerated if fewer risks were involved.
A Balancing Act
The Scottish property market is at a crossroads, with landlords and tenants facing unique challenges. The government’s rent control policies, aimed at protecting tenants, have led to unintended consequences, including a reduction in rental property supply and increased rent for new tenancies. As Scotland navigates these changes, the balance between protecting tenant rights and ensuring a healthy rental market remains a critical issue. Landlords like Walker are caught in the middle, making tough decisions about their future in the market. The upcoming housing bill and its potential impact will be closely watched by all stakeholders in the Scottish property market.