There are two reasons why we do not agree with the overall policy aim to control rent levels in the private rented sector. Firtly, the policy could lead to a reduction in supply. 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.
Secondly, it 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 their 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.
Increasing Private Residential Tenancy rent
The Bill prevents a landlord of a Private Residential Tenancy from increasing rent in any year by more than the Consumer Price Index (CPI) plus one per cent. We do not agree with these proposals as any cap would need to be reviewed monthly.
Legislation introduced in December 2017 under the Private Housing (Tenancies) (Scotland) Act 2016 already contains a limit on rent increases and further rent controls should not be introduced. Under Part 4 of the legislation, 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.
Furthermore, if the tenant disagrees with the rent rise, they can take the matter to a Rent Officer who will ultimately decide if the proposed rent is fair and accurately reflects other market rents. Due to this provision in existing legislation, we do not see any reason as to why further rent controls should be introduced.
Rent Officers to maintain or lower rent levels
We are concerned about plans to only allow Rent Officers to maintain or lower rent levels. By not allowing rent levels to increase via this process, some landlords may not be able to increase rents where justified in cases where the tenant appeals.
We are aware of instances in the social rented sector, where the First-Tier Tribunal concluded that a social rent increase had not gone far enough, and thus the tenants received a higher rent by decision. There is little to no substantive evidence to amend the powers of Rent Officers to only maintain or lower rents in the private rented sector.
Fair open market rent
Overall, our concerns that by implementing these proposals, landlords who would have otherwise not increased rents, may feel that they now have permission to do so on an annual basis. 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.
Furthermore, it is likely that in areas with low demand, tenants will end up paying more for housing than they would have done previously. Pauline McNeill MSP who introduced the Bill thinks the monthly rent charged for a property, the number of occupiers, and the number of bedrooms and living apartments should be entered into the Scottish Landlord Register.
There are two reasons for concern about expanding the landlord registration:
- We question whether exact rental figures should be attributed to individuals on a public database. If the Bill is to come into force, we believe that the database should attribute the average data in the area that the property is located, rather than the rents set by individual landlords.
- Concerns surround the additional burden on local authority staff when resources are already stretched. By asking local authorities to process more documentation and diverting much-needed resource for enforcement, this would create more of a burden on local authorities. The Scottish Government has previously stated that local authorities already struggle to process online applications and are finding it difficult to provide support for applicants with complex circumstances, therefore local authorities are unlikely to process rent charges and documents from landlords.
The financial impact of Fair Rents (Scotland) Bill
The proposed Bill would significantly increase costs for private tenants and landlords as well as the Scottish Government and local authorities. Propertymark is concerned that a less profitable private rented sector will mean that landlords exit the market, resulting in less choice for tenants and putting further demand on local authorities and the social rented sector. The proposed Bill aims to create a better balance of power between private landlords and tenants giving greater financial protection for tenants, when, it will achieve the opposite for many.
Proposed Bill will have a negative impact on equality
We believe that the proposed Bill will have a negative impact on equality. As discussed throughout our response, rent control will result in a reduction in the private rented sector. Without enhanced housebuilding for social rent, a reduced private rented sector will in turn, mean that to mitigate risk the landlords will only take on the best and most reliable tenants.
Subsequently, tenants out of work such as single parents, people with severe disabilities and pensioners will be deemed as more of a risk for landlords. The vulnerable and low-income people without access to the social rented sector, that rent controls are designed to help, will need to find an alternative. This could mean them turning to the rogue and criminal operators, who actively flout their responsibilities including registering themselves, making them very difficult to track down.