Rent controls are back. From March 2016, local authorities will be able to apply to Scottish government to establish rent-pressured zones, which will be able to put in place a cap on rent increases for sitting tenants.
The Private Tenancies Bill is intended to introduce a measured, limited power to deal with areas of very high rental pressure in the residential markets.
Some industry representatives feel the measures offer some certainty following two years of intensive consultation and research on the issue in Scotland. Yet there is a feeling that the government has sought to placate various pressure groups and political opponents at the expense of scaring off those who want to invest in Scotland’s PRS.
The government has appeared to recognise this with a vague promise of exploring a rental income guarantee, which could be welcome news, but we will need details soon in order to maintain investor interest.
It also will not address the problem of how RPZs will be defined. Areas such as Aberdeen, which is commonly cited as subject to high rental pressures but which has seen some cooling off in the PRS market recently, will be left with considerable uncertainty for investors on whether their proposals will be potentially in or out of an RPZ.
If we miss the current boom in PRS investment, it will be a disaster for not just the embryonic Scottish PRS but also ultimately the tenant. The reason for this is well understood by Scottish ministers, evidenced by housing minister Margaret Burgess recognising that the long-term solution to high rental pressure is simply the delivery of more homes for rent. Without this boost to supply, upwards pressure on rents will continue to increase. If the concerns of smaller landlords come true, then the Bill may actually presage a decline in the Scottish PRS rather than an increase.
Another concern is that there will be political pressure on Scottish ministers to go further than the proposed measures in the Bill. Scottish Labour has already indicated that it feels the Bill is not radical enough, and that current proposals are the thin end of the wedge.
The BPF’s recently published build-to-rent manifesto shows over 14,700 new homes for rent in England, with more than 7,000 now completed. By way of comparison, none have been completed thus far in Scotland. Only Edinburgh stands proud as having schemes consented, though Aberdeen also has one in the pipeline.
The real test of the new Scottish legislation is actually a rather simple one: will the proposals increase or decrease appetite for new build to rent PRS in Scotland? We fear it is the latter.
David Melhuish is director of the Scottish Property Federation
