Landlords to challenge Scottish rent control extension

A coalition of landlords and letting agencies are to seek a legal challenge to the Scottish Government’s rent control and eviction ban legislation and its proposed extension from April. The Scottish Association of Landlords, Scottish Land and Estates, and Propertymark have together submitted a petition to the Scottish Court of Session requesting a judicial review.

Emergency legislation coming out of Covid was meant to last until the end of March this year, but the Green Party MSP and tenants’ rights minister Patrick Harvie has confirmed that he is planning to extend this for another six months. Landlords will have rent increases restricted to a three per cent maximum.

The Nicola Sturgeon’s Scottish Government has recently revealed these plans to extend the six-month eviction ban with rent controls. Landlords are furious about what was intended as a temporary measure, may, as some predicted, be a backdoor means of imposing permanent rent controls on Scottish landlords.

A six-month ban on rent increases and evictions came into force under the Sturgeon Government last October but landlords are determined to use the legal system to challenge any such continuation of this, in court.

Severe shortage of rental homes

Landlords and their representative have issued the Government with a severe warning that these sorts of interventions in the rental market are exacerbating an already severe shortage of homes for tenants in the country.

Propertymark, the professional body representing letting agents throughout the UK, the Scottish Association of Landlords and Scottish Lands and Estates, have now submitted a petition to the Scottish courts requesting a judicial review of the “temporary” legislation.

The landlord and agent representatives have dubbed the legislation “disproportionate and unfair” and warn that it is leading to an acceleration of a trend where landlords are selling up, exiting the industry, leaving tenants not only paying higher rents, but also unable to find suitable accommodation.

They argue, with some basic economic justification, it would seem, that if supply is reduced and demand is rising, rents can only go one way. And that’s leading to the squeezing out and pricing out of many desperate potential tenants.

The Scottish Government’s plans to extend the eviction ban and continue rent controls until September will relax slightly the currently imposed total rent freeze, placing a cap on the system of a maximum of a 3 per cent increases in rents.

Greens MSP Patrick Harvie, also the minister for zero carbon buildings, as well as promoting tenants’ rights, argues that these protections will benefit tenants although he admits that costs are increasing rapidly for landlords.

A safety net is to be provided such that in certain circumstances, for example when mortgage payments and/or service charges have risen dramatically, landlords will be in a position to apply to the Government for higher rent rises, up to a maximum of 6 per cent.

No restriction for social landlords

No restrictions are to be placed on the social rented sector in Scotland, apart from a voluntary agreement from councils and housing association landlords to restrict increases to below the level of inflation, currently running above 10 per cent. The Convention of Scottish Local Authorities is to commit to average rent rises of no more than £5 a week.

Propertymark has warned that a 3 per cent rent rise cap in the private rented sector would materially discourage landlord investors from staying in the industry given the level of inflation and with mortgage interest rates rising at the fastest rates in decades.

Propertymark director Nathan Emerson has said of these new extending measures:

“The legislation is being made without any clear evidence as to its need.

“Private landlords provide homes on a huge scale for people, and they must be able to cover the costs of outgoings on the property. Repairs and maintenance costs are not solely applicable for social landlords and it’s essential for landlords to be able to keep properties to a high standard in the interest of their tenants.”

The petition presented to the courts in Scotland warns that the legislation will mean that those well-off individuals, tenants renting in the private rented sector, will be given a degree of protection that is not available to social tenants who may be in strained financial circumstances.

Landlords leaving in droves

A recent survey put forward by Propertymark of its Scottish agent members shows that around 90 per cent of their landlord clients who are looking to leave the buy-to-let sector have decided on this mainly due to the current rent freeze and eviction ban. Propertymark also found a big increase in the number of landlords serving notice on their tenants to enable them to sell their properties with vacant possession.

According to property agents Hamptons International, rents in Scotland have risen at the fastest rate of any UK region. Let property rents in Scotland rose by 11 per cent in the year to December whereas nationally this figure averaged 7.7 per cent over the same period, the agent says.

John Blackwood, chief executive of the Scottish Association of Landlords, has commented on this issue:

“Landlords selling up loss making property is further reducing housing supply, despite ever increasing demand. The result is the cost of finding a new home is actually increasing for renters.

“Landlords have had enough. We must stand united to protect our property rights by challenging this unfair legislation in court,” he added.

A spokesman for the Scottish Government told The Daily Telegraph:

“We recognise the role of the private rented sector in providing homes for let and acknowledge that some costs have been rising for landlords as well as tenants. The emergency legislation passed by Parliament requires us to keep measures under regular review.

“We are not aware of a legal action being served on the Scottish ministers challenging the Cost of Living (Tenant Protection) (Scotland) Act 2022.”

Rent control controversies

Rising rents across the UK have reignited the a political discussion as whether it is effective policy to enact rent control provisions. Some politicians, such as Sadiq Khan the Mayor of London, have argued strongly that these controls are the answer to tenants’ problems, particularly in the big cities.

When introduced the rules and regulations surrounding of rent control measures vary considerably from place to place, most consisting of caps on price increases within the duration of a tenancy, and sometimes beyond the duration of a tenancy, coupled with restrictions on eviction.

Research

Much research has been conducted over many years into how rent control affects tenants and housing markets. The results invariably conclude that while rent controls of varying degrees may help tenants in the immediate term, in the short run, in the long run these measures distort market pricing and equilibrium, leading to adverse effects.

These effects include long run decreases in renting affordability, landlords leaving the sector, a fuelling of the decline of whole neighbourhoods, and a decline in the quality of housing – landlords no longer able or unwilling to afford proper up-keep and repairs.

Rent controls can also lead to a serious “miss-match” over time between tenants and rental properties. That’s because once a tenant has secured a rent-controlled home it may choose to stay put, never moving on in the future for fear of losing the low rent. This leads to a drag on an economy due to low labour mobility and leads to longer commutes for productive labour.

A study by the London School of Economics (LSE) and a report by the House of Commons Library set out a convincing case against rent controls, see here