Scottish Government has struck a balance on rent controls, but policy has not been tested: Propertymark

The Scottish Government has struck a balance on rent controls, but the policy has not been tested yet, Timothy Douglas, Head of Policy and Campaigns at Propertymark, stated during an evidence session today, 28 January 2025 to the Scottish Parliament’s Local Government, Housing and Planning Committee on rent control measures to guide its upcoming consideration of Stage 2 amendments of the Housing (Scotland) Bill.

The Housing (Scotland) Bill was introduced on 26 March 2024 and will require local authorities to study rent levels in their jurisdictions at least once every five years and will grant powers to Scottish Ministers to implement rent controls and issue limits on rent increases.  

The legislation is at Stage 2 of the legislative process in the Scottish Parliament, which proceeds Stage 3 and then Royal Assent, by which it will then become an Act of Parliament.

On 31 October 2024, Paul McLennan, Scotland’s Housing Minister, said that rent caps will be linked to inflation. During Tuesday’s session, it was confirmed that caps will increase via the Consumer Price Index plus 1 per cent (up to a maximum of 6 per cent), something that Mr Douglas said provides clarity and allows for a more consistent approach. This is because it enables landlords to ‘plan for the future with a greater degree of certainty.’

The Consumer Price Index broadly reflects the changing cost of living and is increasingly used by government departments as the link for welfare payments. It is used in the social rented sector as well as being applicable under the Rent Pressure Zone measures.

However, he stressed that there is still widespread frustration and bewilderment amongst Propertymark members that despite a shortage of homes to rent, the housing emergency, a freeze in Local Housing Allowance rates, punitive taxes on landlords, the Scottish Government raising Additional Dwelling Supplement to 8% – based on average property price in Scotland average landlord would pay over £15,000 – the only policy intervention to help tackle affordability remains to introduce rent control.

He also argued that restraints on setting rents between tenancies may thwart investment, especially in older properties that need substantial investment to preserve quality standards, and landlords may not be able to meet the costs. The gap between tenancy agreements is normally when a landlord will incur potentially significant capital expenditure in redecorating and upgrading their properties in readiness for a new incoming tenant.

Before implementing rent controls, Mr Douglas called for a pilot programme prior to introducing a ‘one size fits all’ policy that fails to take into account the different levels of regional affordability.

He also highlighted that there was a lack of understanding from the Scottish Government about the impact taxes and regulations are having on landlords, calling for a review into all costs and taxes impacting private landlords thereby promoting an evidence-based understanding that these costs have on buy to let landlords and investors.

Finally, Mr Douglas called for an annual parliamentary update on the private rented sector and said that within the Bill there is currently no statutory timetable for the Minister to report back once they have received the periodic rent assessments and recommendations from local authorities which brings further uncertainty and inconsistency in the proposals.

Douglas said:

“Rent increases capped at CPI+1% up to a maximum of 6% within a rent control area does provide clarity because it means that the legislation will be amended so rent control area caps will be provided in a more consistent way across the country. Whether it provides full certainty for all landlords is difficult to say but, on the whole, it would allow agents and landlords to plan for the future under this legislation with a greater degree of certainty. This being said, further amendments are needed and Propertymark continues to urge the Scottish Government to remove the application of rent controls between tenancies, commit in the legislation to a review of all taxes and costs impacting private landlords, and ensure that the periodic assessment of rent conditions by local authorities are more consistent and Scottish Ministers are held to account via statutory reporting timescales.”