Rent controls fly in the face of housing sector facts - David Alexander

18th Jul 2024
David J Alexander
Rent controls fly in the face of housing sector facts - David Alexander - D. J. Alexander

David Alexander says the removal of rent caps would unlock investment to build the homes that Scotland needs so desperately. 

With the dust settling on the General Election, it is now time to return to day-to-day politics. The Scotland (Housing) Bill continues to rumble on

with its proposal to freeze rents for five years. In recent months a growing number of key people in the property sector have made the point that billions of pounds of investment are on hold in Scotland because of proposed rent controls in the bill. This will remain the case until these proposals are reviewed and changed.

The fact is that rent controls don’t work, have never worked anywhere in the world, and will only make the current housing emergency worse.

The Scottish Government ignored the facts about the private rented sector and simply imposed a rule based on belief rather than their own data. According to official data two-bedroom flats comprise almost half of the total private rented sector (PRS) market in Scotland and between 2010 and 2022 (when the rent cap was introduced) average rents rose by 32.8 per cent at a time when inflation increased by 36.1 per cent. In the following year after the cap was brought in rents rose 14.3 per cent against an inflation rate of 8.6 per cent.

Rents were able to increase despite the cap because it didn’t apply to new lets, only to existing ones. So based on this evidence nobody would think capping rents will help tenants.

There was also an argument that many tenants in the PRS found their homes unaffordable. The annual Scottish Household survey in 2022 (the most recent available) found that just 4 per cent of tenants in the PRS stated they had reported difficulties in paying rent in the previous 12 months. In the social housing sector this figure was 7 per cent over the same period.

Tenant satisfaction in the PRS was 88 per cent while in the social sector it was 79 per cent while 95 per cent of PRS tenants said their neighbourhood was a very or fairly good place to live with this figure falling to 88 per cent in the social sector.

So, we have a picture of PRS tenants experiencing on or around annual inflation rises, who find their homes affordable, and like the neighbourhoods they live in.

Therefore, the introduction of rent caps was not needed, has resulted in higher rents, and contributed greatly to a housing emergency across Scotland.

But there is a solution. Property investors, housebuilders, and all involved in the housing sector in Scotland know that the only way to resolve this issue is to build more homes at a faster pace to ensure the existing demand is met and we are prepared for any future increase in need.

While this is the obvious solution it is consistently ignored by successive governments who are in denial about how to fix this issue. It is easier to blame the private rented sector, holiday letting businesses, second homeowners, and empty flats, rather than create a market that welcomes investment in the housing sector.

There is so much investment simply waiting for clarification on whether rent caps will be removed from the forthcoming bill that all that is required is a simple commitment to review the bill and remove income restrictions on rents. If that happens the floodgates will open and billions of pounds of investment in build to rent and housebuilding will flow once more, resulting in a speedy resolution of the housing emergency.

David Alexander is CEO of DJ Alexander Scotland Ltd

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