Private rental prices rise as freeze could continue

In his latest column for The Scotsman, David Alexander voices his opinion on the continued increase in private rental prices amid the possibility of the Private Rental Sector's freeze being extended.

No-one can argue with policy decisions which are created using evidence, consultation, and experience of key participants in a sector.

To create a workable solution to a problem it is essential that the history of that issue is examined, and lessons learned to find the best possible response to the circumstance. By using a fair, comprehensive, and transparent process you create consensus and positive policy which can transform lives.

I was, therefore, quite surprised to see the First Minister say in his programme for government announcement that he wished to continue with and extend the legislation to freeze rents in the private rented sector (PRS) in Scotland.

The ‘temporary’ legislation announced in September 2022 is to be continued and expanded in proposals due to be put before Holyrood in the current legislative year. When the rent freeze was announced last September, the Government was warned that this would lead to higher rents and fewer properties.

From social housing landlords, housing associations, housebuilders, personal and corporate investors, trade bodies, universities, and anyone with any experience of the housing sector in Scotland the key concern was that this would worsen the situation for tenants.

There is also extensive evidence from around the world that rent controls simply don’t work. In Berlin, the government had to abandon its rent control plans and even compensate landlords after it resulted in chaos within the market.

In Ireland, the government has recently reversed its rent restriction policies after the total number of available properties to rent shrank to a few hundred. The Taoiseach has now promised to work with property investors and landlords to rapidly improve the housing sector.

In Stockholm there is an 11-year waiting list to get a property in the PRS and a major problem with illegal subletting.

Meanwhile rental prices in Scotland increased by 5.7% year on year to July 2023. This was the highest monthly figure since the data began to be collected in January 2012 and is up from 3.9% in September 2022 when the Cost of Living (Tenant Protection) Scotland Bill was introduced.

Furthermore, while rental prices had historically increased by a lower amount in Scotland than in England and Wales since 2015 the rate of increase has been growing rapidly over the last year. For example, from January 2015 to September 2022 rents in Scotland increased by 8.7%. The accumulated rate to July 2023 is now 14.1% so has clearly risen substantially in the last ten months compared to the previous eight years.

What this tells us is that a bill that was introduced to help tenants cope with the cost of living has actually exacerbated the situation for many of them and made their circumstances worse. By imposing financial controls on the PRS many construction projects to create more new homes have either been put on hold or cancelled which will ensure the current situation persists and may even deteriorate.

Some landlords have already left the market in response to the legislation with the result that the sector is facing unprecedented demand at a time of great shortages.

In July alone my own firm received nearly 40,000 enquiries for viewings for our rental properties with nearly 30,000 of these in Edinburgh alone. This is a clear indication that supply is not remotely meeting demand and is a sign that action needs to be implemented immediately.

I think that everyone involved in the property sector from developers and landlords, investors, tenants, and social housing providers should be consulted widely and listened to about what it is required and how it can expect to realistically be achieved.

The imposition of policy without consultation, without appropriate analysis of prior implementation of similar policies which have already been shown to have failed, will simply result in fewer homes and higher rents for tenants.

What is required is more social housing, more properties in the private rented sector and an approach which welcomes investment, which is open to discussion and developing appropriate policies about how to resolve our housing issues.