Rent Controls to hit Scottish Landlords

Nicola Sturgeon reveals plans for rent controls with new Private Tenancies Bill.

Scotland's first minister Nicola Sturgeon has set-out her plans through a new Private Tenancies Bill which will 'improve security for private tenants, introduce rent controls and abolish the 'bedroom tax' as early as possible,' as reported by Scottish Housing News.

But the plans to introduce local rent controls in 'high-pressure' rental areas in Scotland could deter investment in Scotland's private rented sector (PRS) and curtail much-needed housing supply, according to the Scottish Property Federation (SPF).

The SPF issued the warning to Nicola Sturgeon as she outlined the plans which will not only introduce local rent controls, but will remove of the 'no-fault' ground for repossession. This no-fault possession principle was introduced in 1988 by Margaret Thatcher's government at a time when UK private residential tenancy laws were deregulated, after many years of rent control and life-time security of tenure for tenants.

The SPF is concerned that just the threat of rent controls could 'sound the death knell for future investment in the build-to-rent market. SPF says that build-to-rent 'has the potential to rapidly boost Scotland's housing supply, which needs to be increased dramatically across all tenures if the current housing shortage is to be resolved.

Over the last few months, says SPF, Scotland has seen significant, high-quality investment into the build-to-rent sector, with La Salle Investment Management making a £1 billion investment in Aberdeen and Grosvenor?s plans for 400 purpose-built rental units in Edinburgh. In addition, The EDI Group has announced plans for PRS development at India Quay, Edinburgh, as has Whiteburn Projects in Dundee, all of which could now be at risk.

Ms Sturgeon argued, in setting out her legislative programme before the last full session of the Scottish Parliament before the 2016 elections, that the new Private Tenancies Bill will improve security for tenants in the private rented sector (PRS), provide more predictable rents and protection for tenants against excessive rent increases, and give clear rights and safeguards for landlords.

More specifically the planned changes will:

  • Introduce a Scottish Private Rented Tenancy to replace the current Assured system.
  • Remove the 'no-fault' ground for repossession, meaning a landlord can no longer ask a tenant to leave simply because the fixed-term has ended.
  • Provide 'comprehensive and robust' grounds for repossession that will allow landlords to regain possession (only) in specified circumstances.
  • Provide more predictable rents and protection for tenants against excessive rent increases.
  • Create a 'more streamlined, clearer to understand tenancy system that is fit for the modern private rented sector?.

Jon Sparkes, chief executive of Crisis, told Scottish Housing News the announcements on tenancy reform show Scotland is 'once again taking a lead in putting ground-breaking measures in place to protect people from the devastation of homelessness.

With the private rented sector continuing to grow and the ending of an assured shorthold tenancy now the leading cause of homelessness across the UK  it is particularly encouraging that greater protection for tenants is at the heart of the Scottish Government?s housing plans through the removal of the 'no fault' ground for eviction.

If re-elected, the SNP has said it would introduce a Scottish Social Security Bill in the first year of a new parliament to 'pave the way for measures to address weaknesses in Universal Credit, mitigate as far as possible the impact of UK government welfare cuts and abolish the bedroom tax.

The Chartered Institute of Housing (CIH) Scotland said the legislative programme 'acknowledges the positive role that housing has to play in promoting social justice, good health and improving our environment.

Ashley Campbell, policy and practice officer, has said: 'We note that the government aims to surpass its target of developing 30,000 affordable homes over the lifetime of the Parliament ' each one of these homes represents a step towards meeting housing need across Scotland.

Announcing the Scottish Government?s target to provide 30,000 affordable homes by the end of the current parliament, Ms Sturgeon pledged £195 million over next three years to extend the Help-to-Buy (Scotland) scheme, which she said will help at least 6,500 households. As Help-to-Buy is funded through the UK's Barnett mechanism, detail will not be available until after the publication of the UK Spending Review in November.

Graeme Brown, director of Shelter Scotland, described the PRS bill as 'a very positive step'.

The private rented sector is now home to 330,000 households across Scotland, including around 85,000 families with children. The changes included in the bill will begin the process of reforming the private rented sector and making it more modern, stable, flexible, predictable and fairer for everyone that calls it home,' said Brown.

Harriet Protheroe-Davis from the Living Rent Campaign, said:

This is a big victory for tenants and for the Living Rent Campaign. It is absolutely right that the upcoming bill will strengthen the rights and protections for tenants, as well as including provisions for the introduction of rent controls in high-pressure areas.

It is important that the model of rent controls fully addresses the problems in rented housing, and we will continue to campaign to ensure that it does, but today's announcement shows that the Scottish Government has listened to the thousands of people who have backed the Living Rent Campaign?s calls for rent controls and better protections.

Rents are becoming increasingly unaffordable, and if we are serious about tackling poverty in the private rented sector, rent controls are a must.?

Sarah Speirs, director of RICS Scotland, told Scottish Housing News:

"RICS is concerned that yet more government intervention in the PRS market has the potential to unsettle institutional investment, at a time when its contribution to provide much needed supply, is vital. Indeed, legislation 'creep' has a significant, and negative, impact on consistency which, in turn, damages the investor confidence required for a well-functioning market.

Whilst the proposal for rent controls currently lacks detail, we urge the Scottish Government to err on the side of caution in taking the proposal forward. If rent control is implemented incorrectly, for example the setting of rents below market rent without any balancing concessions for landlords, this could result in a catastrophic impact on PRS supply.

Furthermore, whilst longer tenancies will provide more security for individuals renting privately, the mandatory extension of tenancies may have a detrimental effect on the number of properties coming onto the rental market. RICS welcomes steps allowing landlords to terminate lease agreements on specific grounds, including breach of tenancy and to sell the property.?

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Article courtesy of LandlordZONE

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