How would rent controls affect the market?

Buy-to-let landlords may be forced to pull out of investing in the private rented sector in Scotland if proposals to cap rents are introduced.  Would the same happen in England?

David Alexander, the managing director of DJ Alexander, acquired by the Lamond Group last month, has welcomed the consultation paper on a better deal for tenants north of the border, published by the Scottish government, but he has once again expressed concern about the potential for rent controls being introduced.

Alexander warned prior to Christmas that buy-to-let landlords could exit the market if the Scottish government presses ahead with rent controls, and now he is calling for greater recognition for the crucial role that the private rented sector (PRS) plays in providing homes for the people of Scotland.

The latest Scottish Housing Survey published in 2019, reveals that 14% of the Scottish population – around 340,000 households – live in the PRS. This has nearly trebled since 1999 when just 5% of the population lived in privately rented homes.

Over the same period the percentage of Scots living in social housing has declined from 32% in 1999 to around 24% in the latest period (roughly 590,000 households). The remaining 62% are owner occupied properties.

Alexander commented: “Demonising the PRS will not resolve Scotland’s housing problems and, if anything, it is likely to make it worse. The private rented sector is an essential part of housing provision in Scotland. What always seems to be forgotten is that many thousands of people choose to live in the PRS because of their lifestyle, location, convenience, and simply because it suits them.

“Legislators need to be wary of playing to the gallery in producing the simplistic argument that private renting is bad while social housing is good. Both parts of the rented sector, along with owner occupiers, serve differing needs of the population and you interfere with these systems at your peril.

He continued: “It is of great concern that the Scottish government consultation paper ‘New deal for Tenants’ mentions rent controls and was launched without a supporting quote from any landlord organisation or letting company. Rent controls have never worked anywhere in the world and invariably lead to higher rents for new tenants and fewer properties on the market resulting in more housing shortages in the medium to long term.”

“The fact that the PRS has grown significantly over the last 20 years is important and reflects tenants voting with their feet and moving into properties where they want and can afford to live. That social housing has declined by a comparable amount over the same period simply reflects changing demands in society.”

“All politicians promise enormous housing plans to meet the changing needs of the population, but they rarely keep up with the shifting patterns of society. If you take a city like Edinburgh, you can see that in the decade between 2009 and 2019 the population increased by 13.3% against a Scottish average of 4.4% over the same period. It had the second largest population increase of anywhere in the UK after Manchester which rose by 14.3%. Edinburgh has the fourth highest number of people who are economically active in the UK at 74.6% behind Leeds, Bristol, and London. It also has the second highest average hourly pay outside London. Obviously covid will have interrupted this growth but there is little doubt that once Europe overcomes Covid EU citizens will return to the UK and one of their main destinations will be Edinburgh.”

Alexander added: “Planning for housing this rapid upturn in population is difficult and the PRS is adept at providing homes for people in a relatively short turnaround. I, therefore, believe that constructive dialogue, greater cooperation, and meaningful debate on how best to create the best private rented sector is the way forward rather than simple soundbites aimed at rallying the faithful while doing little to deliver on the housing needs of the population. Less rhetoric in 2022 and more communication is what is required.”



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