On 26 March 2024, the Scottish Government published their Housing Bill. But what does this mean for rent controls and the future of the private rental sector?
The Scottish Government introduced and published on 26 March 2024 its Housing Bill. The Parliamentary process for enactment is generally about 2 years, so who knows?
Time will tell, but I now suspect that recent events in Edinburgh will mean that the proposals outlined in the Housing Bill will be softened if not quietly dropped altogether as the Parliamentary process gets underway and the next election gets closer to us. Time will tell what will happen to the future of Scotland’s private rental sector.
Here is a bit more detail on what is currently proposed in Scotland’s new Housing Bill and thus a look at what we might expect for the future:
- The future of Scotland's rent controls
- What does Scotland's Housing Bill mean?
- Could Scotland's Housing Bill be better for the private rental sector?
The future of Scotland's rent controls
The Housing Bill Introduced in March of this year focused on rent control for the private rental sector. So, what was suggested?
- There should be a national system of rent controls and a mechanism for local authorities to introduce local measures called Rent Pressure Zones
- However, Scottish Ministers are to be the final decision-makers in this mechanism.
- Rent control areas are in place for fixed periods, which could be continued based on an assessment of need.
- There will be a focus on all rent increases, not just “In Tenancy” rent increases. This means that for the first time, rent increases on a vacant property on change of tenant would be capped.
- Rent increases are permitted once per 12 months subject to the rent cap.
- There would be safeguards proposed for a landlord to have “Above Rent Cap” increases where significant improvements have been made to a property.
- There will be exemptions for “New to Market” properties.
The Bill is wider-ranging than just rent control, and there are proposals to change other areas. This includes a focus on Energy Efficiency requirements and the Repairing Standard including a tightening of standards around keeping lead out of drinking water.
What does Scotland’s Housing Bill mean?
So where does all this leave us as agents and landlords in Scotland?
My thoughts are that despite it all, and that whatever the Government does, against all the odds, the Scottish rental market will continue to thrive and produce excellent yields together with good capital growth for landlords.
Scotland is a beautiful place to live and work, so those wanting to make their home here or to invest in private rental property stock will find their way through this Government-created maze.
I hope that will be accomplished without a descent into a “Grey Market” for rentals, which is a very distasteful prospect to me and I hope for every good agent in Scotland, as the creation of a grey market for rentals will be deeply damaging and contrary to the interests of landlords and tenants alike.
There have been palpable sighs of relief about the current position coming from certain quarters within our industry. The relief is because they think the current rules might have been even worse.
They could have been, and there is probably worse to come. But this does not mean we should accept a bad law because another bad law might have been even worse.
If agents and landlords think the current law is bad, then we need to say that very loudly and keep on saying it until the bad law gets changed or is repealed.
In December 2023, The Scottish Association of Landlords surveyed their members and responses suggested that a staggering 21,760 homes had been lost to the sector during that year.
While I am not sure I accept the magnitude of these findings for many reasons, not least of which is that my business is growing our portfolio, I am in no doubt that some landlords have given up and have chosen to exit, which means less choice for tenants and more upward pressure on rents.
Landlords exiting is only half the story; there are new landlords coming in, and it is the net position that matters in terms of greater or reducing supply.
Could Scotland's Housing Bill be better for the private rental sector?
Of course, it could. A free modern and successful economy does not need such draconian and restrictive measures. This is something which we as stakeholders must remind the Scottish Government of at every chance.
Perhaps without the Green Party in Government, this task will be easier and the subsequent conversations will lead to better outcomes for landlords and tenants in Scotland. I hope so.
If the Scottish Government want to reduce rents, there is only one sensible answer which is to take measures to encourage greater supply. The Private Rental Sector has an important role to play and is the only mechanism by which the Government can increase the housing supply at zero cost to the public purse or without any impact on public borrowing.
The Scottish Government need to reevaluate the rent control element of the new Housing Bill and give more thought to what the sector needs. Currently, the most important thing in the Scottish housing market is to regain the confidence of existing landlords and persuade others that the time is right to enter the market and bring more rental stock with them.
A free market and the laws of supply and demand will solve all sorts of problems. There is a rent that is right for a modern super-insulated apartment in a well-heeled city centre location as there is a rent that is right for an old stone cottage on a Highland Estate, with sash windows, a basic kitchen and lovely log fires; both are very different but can make a wonderful home with a rent determined by supply and demand that is appropriate for the type of property concerned.
Kevin Davidson-Hall will discuss the future of Scotland's Housing Bill in a future blog. Please note that the views of this guest article do not necessarily represent the views of Goodlord.
