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Bill aims to protect tenants

Housing sector fears new rent rules will deter investment

Rented propertyA clampdown on rogue landlords has been welcomed by housing support agencies but prompted criticism that the new rules controlling rents could deter investment in the sector.

A new bill will ensure tenants have more security, stability and predictability when privately renting a home in Scotland.

The Private Housing (Tenancies) (Scotland) Bill is designed to protect 700,000 people from the prospect of unforeseen and unfair eviction and unpredictability over rent increases.

It will prevent landlords hiking rents more than once a year and ensure tenants cannot be evicted simply because their agreement has come to an end.

Housing Minister Margaret Burgess said the new law would address affordability, security of tenure and give landlords assurances that tenants will respect their properties.

“The private rented sector is changing. It is now home to a growing number of people in Scotland, and we recognise there are some areas where rents are increasing significantly. It is right and responsible to give local authorities the ability to introduce rent controls in order to ease areas under pressure,” she said.

“The range of measures brought forward under this bill will ensure the private rented sector is better managed, simplified and successful, and creates a system that works for everyone.”

Jon Sparkes, chief executive of Crisis, said:  “Today’s announcements on tenancy reform are a major step forwards, with Scotland once again taking the lead in protecting people from the devastation of homelessness.”

But there have been repeated warnings from those representing landlords that the measures would deter investors and that no longer having the power to reclaim properties would affect the supply available for events such as the Edinburgh Festival when properties let to students are normally made available in the summer months.

John Boyle, spokesman for PRS 4 Scotland which represents a number letting agents, said: “The Scottish Government’s desire to improve Scotland’s Private Rented Sector is to be commended, and there are a number of features in the Bill that we can support to create more secure tenancies.

“However, the Bill will raise a number of alarm signals. In particular, the focus on rent caps and a one-size fits all tenancy is likely to deter the investors the sector needs and the devil will be in the detail of the final legislation. What we need going forward is clarity on key questions.

“Already investors and landlords will be concerned that the Bill leaves discretion for individual local authorities to set the level of rent caps, and this could lead to precisely the type of long term uncertainty that we know deters investment in housing stock.

To let“Regrettably, the popular cry for rent controls has clouded the truth about the rental market. Rents are not universally going up; in former hot spots, such as Aberdeen, they are now decreasing. Where rents are rising, such as in Edinburgh, supply is tight and demand exceptionally high. The debate has been hampered by the lack of definitive data on Scotland’s PRS and this needs to be corrected before the Bill progresses.

“Landlords and tenants in the student market will be particularly worried by the apparent removal of any ability for students to take a 10-month lease, and there will be a knock on negative effect on short term holiday lets too.

“It is clear that the intention of the Bill was not to hammer students and Edinburgh’s festivals as well as investors in student accommodation, but that is what is likely to happen.”

Homes for Scotland’s Private Rented Sector (PRS) Champion Gerry More emphasised the importance of balancing the needs of tenants, landlords and investors if the Scottish Government is to achieve its objective of significantly expanding capacity in this fast growing sector.

Having been tasked with attracting long-term institutional investment to enable the development of professionally managed purpose-built private rented housing at scale, Mr More said: “There is much to be welcomed in today’s announcement on updating the tenancy regime with initial rents continuing to be market-led.

“However, we now need to work through the detail, particularly in relation to the use of rental caps and how student tenancies are ended, in order to ensure Scotland remains competitive relative to other countries.”

The Scottish Property Federation said the reforms “will be tested in time on their ability to support the much-needed new investment and homes required for this fast-growing sector.”.

The SPF welcomed modernisation of the overly-complex tenancy regime, but expressed concern at the failure to effectively support investment in new student accommodation blocks, which are developed with specific planning permission and therefore do not have the flexibility of other landlords in relation to their choice of tenant.

John Hamilton, chairman of the SPF, said:”Large-scale Build to Rent investment offers the opportunity to deliver new homes to the market relatively quickly, but we need to secure a critical mass of investment to make this potential market a reality. If we fail to attract significant levels of new build then we will have missed an opportunity to offer home-seekers choice and to ease the pressure on rents and house prices in the Scottish residential property market.

“We fully support measures already under way to raise management standards in the existing sector, and are also pleased to see some commitments from investors coming forward for the new Build to Rent sector to add vitally needed new homes and choice of tenure to Scottish home-seekers.

“The test of the legislation will therefore be whether or not it sustains and builds on the exciting new PRS projects that are beginning to emerge in Scotland. Without a significant new supply of homes we foresee only added upwards pressure on rents and on social housing waiting lists, which would be the opposite outcome to the Government’s intentions.”

David AlexanderDavid Alexander, managing director of DJ Alexander, (left) said: “The proposals in the Housing Bill are something the private rental sector can “live with”.

However he questioned the intention to give local authorities the power to regulate rents in special hotspots or ‘pressure zones’ as the government describes them. “Yes, there are hotspots, such as Stockbridge in Edinburgh or Hyndland in Glasgow but how does one identify where these districts begin and end and how much public money will be spent in going through the process?

Mr Alexander is disappointed by the Housing Bill’s insistence that landlords will not, in future, have the power to evict a tenant for anti-social behaviour without going to a tribunal.

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