No more rent controls! Politicians warned of supply shortage

4 January 2021 | Renting

No more rent controls! Politicians warned of supply shortage

Propertymark is making it clear that rent controls are not the way to operate an efficient lettings market.

In a formal response to consultation on the Scottish Government’s Fair Rents Bill, currently going through Scotland’s devolved parliament, Propertymark says there are two reasons why it does not agree with controlling private rent levels. 

The first is that the policy will reduce supply.

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“This is because, as landlords become more tightly regulated letting property will become a less attractive investment. Furthermore, as rent controls take away autonomy from landlords to set their rent levels, further red tape to what is already required to let property in Scotland, will further discourage investment into the sector” it says.

Secondly, Propertymark believes such controls will have a negative impact on housing quality and existing housing stock as many areas’ rent levels will be insufficient to enable landlords to maintain properties. 

“Property conditions in the private rented sector have vastly improved over the last decade – rent controls are likely to have the opposite effect and reverse the advancements made since deregulation” it suggests.

The Bill prevents a landlord of a private residential tenancy from increasing rent in any year by more than the Consumer Price Index plus one per cent.

This is despite the fact that under the Private Housing (Tenancies) (Scotland) Act 2016 there is already a limit on rent increases. Under this law, rent cannot be increased more than once in any twelve-month period and the landlord must give the tenant at least three months’ notice before any increase can take place.

Propertymark is also concerned about the unintended consequences of the new proposals – specifically, that landlords who would have otherwise not increased rents, may feel that they now have “permission” to do so on an annual basis, as the measure sets out the principle of a once-a-year increase. 

“Whilst rents will be capped to increases that reflect CPI, this does not mean that a tenant’s income will also increase to reflect this. Consequently, this will mean that some tenants will pay higher rents without the market demand to reflect an increase” says Propertymark. 

“Furthermore, it is likely that in areas with low demand, tenants will end up paying more for housing than they would have done previously.”

The organisation also objects to insisting that the monthly rent charged for a property, the number of occupiers, and the number of bedrooms and living apartments should be entered into the publicly-accessible Scottish Landlord Register.

This post has originally been featured in Letting Agent Today.