SNP is out of touch with reality on new rent caps

The announcement this week by the SNP government that they will be introducing rent caps in “control areas” at 1% above inflation up to a maximum of 6% is perhaps not surprising but is indicative of their continued disconnection from reality. Their own data and multiple international studies have always shown that rent controls never work and are a disincentive to investment which only exacerbates rental problems.

A study last year by the Institute for Economic Affairs (IEA) stated that the introduction of rent controls across the world always leads to reduced investment in the sector resulting in greater demand, higher rents, and a poorer situation for tenants.

Practically there is also uncertainty over who will collate the data to determine which are “control areas” and how this this will be funded. The Scottish Government expects local authorities to implement this, but their response has been that without additional funding this will be impossible to do.

There is also more than a touch of cynicism in all of this since John Swinney’s government officials have already met with the Scottish Association of Landlords (SAL) and provided them with an outline of the timescale of the introduction of the Scotland Housing Bill which puts its implementation years beyond the next Scottish election and not before 2027-28. This latest announcement seems more like a holding pattern for next years’ election rather than a serious statement of policy. It is some raw meat to throw to supporters prior to next years’ Scottish elections.

However, there is considerable irony in the suggestion that a maximum annual rent increase should be capped at 6%. Had the Scottish Government offered this three years ago most landlords would have been delighted.

Long term private rented sector price rises have generally been well below 6% and often below inflation in most areas in Scotland. If this limit is implemented most areas in Scotland - with the exception of Lothian and Glasgow - will see higher annual rises in rents than existed prior to the Scottish Governments’ intervention in September 2022 with the Cost of Living (Tenant Protection) Scotland Act 2022.

That act has resulted in much higher rent rises, much lower investment in the private rented sector (PRS) and generated unprecedented demand which remains unmet which will undoubtedly result in higher rents in the future.

The problem with this announcement and many of the proposals on the private rented sector in recent years is that they are simply political press releases issued to maintain support rather than actually resolve the current housing problems.

The fact that the Social Justice Secretary, Shirley-Anne Somerville, said that the Scottish Government had been “working closely with tenants’ organisations” in the legislation, “including a system of long-term rent controls that is fair for tenants and encourages investment in the sector” says it all.

They should be working closely with everyone involved in the sector to resolve the current housing emergency. They should be negotiating with landlords’ organisations, letting agents, housebuilders, landlords, property investors and tenants if they are to create a workable, and sensible solution to resolve the current major housing needs which Scotland faces. Only by adopting this practical approach will we come anywhere close to ending the current housing emergency.