On 29th March 2023 a panel discussion was held by UK Apartment Association (UKAA), focusing on the impact the temporary rent control measures have had on the Scottish rental sector, and possible future solutions that would address the chronic undersupply of homes in Scotland.
With the recent election of Humza Yousaf as First Minister, and the continuation of the SNP – Greens pact, the premise is that permanent rent controls are coming in the future. Therefore, the debate must now turn to good policy design and minimising unwanted outcomes, and in order for investor confidence to grow, certainty and stability are required.
There have been accounts of the immediate decline in investment in Scotland once the temporary rent control measures were announced, with deals to deliver homes collapsing within hours of the announcement. The way in which the measures were brought in, and without warning, was of particular concern.
Arguments for and against rent controls
On the one hand, rent controls can improve affordability, stabilise neighbourhoods, improve well-being, and allow more money to be spent on other parts of the economy. At the same time, however, they reduce housing availability, investment, labour mobility, and they require enforcement which is costly.
Rent controls’ impact on BTR
Whilst the Build to Rent (BTR) pipeline has shown consistent growth in Scotland over the last 10 years, only 11% of the pipeline has been completed and is operating, 21% is under construction, and the remaining 68% is either in the planning system or on hold. The necessary socio-economic drivers needed to encourage BTR investment in Scotland are already present, and the biggest issue for investors at the moment is political risk.
The importance of BTR at scale in delivering housing numbers is being underestimated, and the temporary rent controls had a significant impact on these developments being delivered. There is clear preference among institutional investors to invest in projects in England, rather than in Scotland, due to the current climate of rent controls and lack of trust in the Scottish Government.
Remedies for the current situation
There could be ways in which rent controls might work in future, however, caution needs to be exercised when considering case studies from Europe as examples of rent controls working, with there being plenty of those where rent controls have had a significant negative impact on the availability problem.
A cross-party housing group needs to come up with genuine solutions. In terms of a rent cap, there is no magic number that would solve the current issues Scotland is facing, and the situation is more complex than that.
Further discussions on the topic must be had and all parties are encouraged to participate in future events so that their views can be heard and discussed.
For more information or advice, please contact us.
