Politicians’ recent rent control proposals face criticism from David Alexander, CEO of DJ Alexander Ltd, Scotland’s largest lettings agency. Alexander argues that the suggested changes in the Scottish Government’s Cost of Living (Tenant protection) (Scotland) Act 2022, currently under consultation, are excessively complex, unwieldy, and costly. According to him, these measures may not prove beneficial for either tenants or landlords.
The chief executive contends that the proposed regulations might be more burdensome than helpful, raising concerns about their practicality and potential negative impacts on the rental market in Scotland.
The proposed changes aim to shift from temporary rent controls to establishing lasting restrictions on potential increases, scheduled to take effect from the end of March this year. This adjustment introduces a nuanced approach by determining rents based on the lowest of three distinct benchmarks: open market rent, a landlord’s suggested new rent, and a ‘reasonable’ increase calculated from a novel taper system, which involves comparing it with a percentage of the prevailing market rent.
Under the proposed tapering system, the acceptance of a proposed increase hinges on the difference between the tenant’s existing rent and the market rent being less than six percent. In such cases, the increase would be permitted, provided it does not surpass the market rent. Moreover, if the market rent stands at least 20 percent higher than the proposed rent, a ten percent increase would be deemed acceptable. This intricate framework aims to strike a balance between protecting tenants from exorbitant rent hikes and acknowledging the dynamics of the market. By introducing a tiered approach, the proposal seeks to ensure fairness in rent adjustments, aligning them with the prevailing market conditions and preventing arbitrary or excessive increases. Such measures, if implemented, could contribute to fostering a more stable and equitable rental landscape for both tenants and landlords.
Alexander notes, “I acknowledge the intention behind the current consultation to avoid a sudden legislative vacuum at the end of March. However, market interventions in the past eighteen months have not proven beneficial to tenants; instead, they have been detrimental to their interests. Recent data from the Scottish Government reveals that between 2010 and 2022, rents in two-bedroom properties exceeded inflation in only four out of 18 areas. Glasgow and Edinburgh experienced the most significant increases, while the Scottish average remained below inflation. Fast forward a year, and six areas in Scotland now have rent increases above inflation, with the national average surpassing the consumer price index.”
“In the past year alone, average rents have risen across all property sizes, ranging from 11.7% for one-bedroom to 14.3% for two-bedroom units. Every property type, whether one to four bedrooms or a room in a property, has witnessed double-digit rent increases since the introduction of the Cost of Living legislation in October 2022. These increases far exceed the average annual rent hikes over the preceding 12 years by a factor of at least three.”
He continues: “By intervening in the market tenants have paid more in rents than they would have had no such intervention taken place. The current proposal of giving a 6% increase is more than the historic annual increases have been and this idea would be extremely difficult to monitor and implement. Deciding the market value of the rent of every property would be almost impossible to do. Different streets adjacent to one another will have different market values, while Edinburgh and Glasgow are completely separate markets to the rest of Scotland.”
“Rural and urban areas are not the same. Volumes are not the same, seasonality can play a part in rent levels rurally in a way they wouldn’t in a city or town location. The number of variables involved means that this would require an enormous team of people to work on it and even then, it would be doubtful if it worked. We already have a system involving the first-tier housing tribunal which rules on whether a rent increase is fair. This proposal will add further layers of bureaucracy with no gain for landlords or tenants.”
And he concludes: “Unfortunately this consultation paper seems like a further attempt to impose controls on the market which are unnecessary. This policy would be costly to implement, unwieldy to manage, and not beneficial to either landlords or tenants. A far simpler solution would be to let the market return to normal, not impose external controls on rent levels, and the result will be lower rent increases than we have seen in the last eighteen months when rents rose at a much higher annual level than in the previous 13 years. The only long-term solution to rising rent prices is to encourage investment and growth in the private rented sector (PRS) while simultaneously funding a substantial growth in the supply of social housing. The greater the investment in the PRS the more stability will be created in the housing market.”