The Scottish government has revealed its plan for future rent controls, after the COVID-inspired Cost of Living Act (Tenant Protection) (Scotland) ends in March.
Patrick Harvie, MSP, Minister for Zero Carbon Buildings, Active Travel, and Tenants’ Rights, shared the proposed transitional measures with Propertymark earlier this month.
The plan is to change the rent adjudication process to smooth out sharp rent increases once the hard cap ends on 31 March. Relevant when tenants challenge proposed rent increases, it would require rent officers at Rent Services Scotland to base the increase they allow on the lowest of three factors:
- The rent increase proposed by the landlord
- The open market rent that the property could achieve
- A maximum “reasonable” increase, which would be determined by a new tapering formula designed to slow down rent increases for current tenants
The full details of the tapering system haven’t yet been decided – the government has just wrapped up a consultation with sector stakeholders earlier in January, to which PayProp responded in support of letting agents. But the aim is to smooth out the transition for tenants currently paying below-market rents based on the rent controls that have been in place since 2022, instead of allowing landlords to immediately up their rents to the open market level.
The transitional system will last for a year at most, and politicians have said that they will review it regularly. But there is no guarantee that it would not be replaced by longer-term rent controls. Since the Cost of Living (Tenant Protection) (Scotland) Act came into force in 2022, the government has chosen to extend rent controls each time they have come up for renewal. The Scottish government has previously consulted on longer-term measures.
For lettings professionals, the hope now is that the government will agree with them that rent controls have failed. Sector experts have pointed out that rents have increased faster than before rent controls were brought in.
Meanwhile, 100% of Propertymark members in Scotland have seen landlords considering selling up due to rent controls. If supply falls, it would become more difficult for tenants to find a home to rent due to increased competition and higher open market rents.
On the other hand, the fact that the Scottish government has been consulting on a transitional system instead of a permanent rent cap may be a good sign.
Representations made by industry bodies, landlords and agents have explained that rent caps have hit landlord confidence, leading to a lack of properties.The proposed transitional tapering system, which will allow rents to rise at a higher rate for current tenants than the existing cap, may perhaps persuade some landlords to continue providing properties to the sector rather than selling up. As before, landlords will also be able to set the rent freely for new tenants. In the meantime, industry experts will keep up the pressure on politicians to abandon rent controls in the interest of finding a new way forward that works for landlords, tenants and agents.
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