Minister on spot
Harvie hears of investor exodus after rent controls
Patrick Harvie: controlling rents (pic: Terry Murden)
Property leaders delivered a stern message to Tenants’ Rights minister Patrick Harvie today that the rent control legislation he introduced last year has led investors to pull out of Scotland.
Mr Harvie told delegates attending the Scottish Property Federation annual conference that he took action last autumn to impose a ceiling on rents to protect those most vulnerable to the soaring cost of living.
Since then he said the 0% ceiling on rent increases has been amended to 3% and will be reviewed again.
But he was reminded that hundreds of millions of pounds of investment had been lost in recent months as institutions became nervous about pumping money into Scotland.
The conference heard that Legal & General, which has previously invested significant sums in Scotland’s housing sector, is among those that have pulled the plug.
The result was fewer homes being made available and rents for new tenants rising.
Sharing a panel of speakers, Stuart Oag, finance director at Drum Property Group, said: “Since the emergency legislation, the approach from institutional investors fell off the edge of a cliff. There have been no deals in Scotland since the turn of the calendar year.
Stuart Oag: no deals in Scotland this year (pic: Terry Murden)
“There have been deals in England and there are the same economic headwinds south of the border. So what has made private rental investment so difficult in Scotland? You could draw your own conclusions, but I am sure the emergency legislation has been a part of it. It is the key differentiating factor.”
To loud cheers around the conference hall at the SEC in Glasgow, he told the minister: “To get the housing you need you need to get the investors.”
Another panel member, Gillian McLees, director at Rettie & Co, said her firm had been forced to counsel staff who were being inundated with calls from those unable to find accommodation.
“We are offering staff counselling as they are receiving thousands of calls from people who cannot find a home. We are listening to a lot of horror stories,” she said.
Gillian McLees: counselling staff (pic: Terry Murden)
Earlier, Susan Aitken, leader of Glasgow City Council, said the city centre currently suffered from the lowest daytime footfall in the UK, while the night-time economy had benefited from a 130% surge in evening visitors and 110% at weekends.
She said the centre of Glasgow had been “deliberately de-populated” in the past and work was now under way to re-populate it.
However, she said it was important not to replicate the experience of other places which had seen citizens priced out of city centre homes, so the plan would include affordable housing.
Among other projects under way to revive the city centre is the creation of an “Avenue of the Arts” around Sauchiehall Street. The area is already home to the Glasgow Film Theatre, Conservatoire and the Piping Centre.
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What’s better than rent control? A market in which landlords have to compete against each other for tenants, instead of the other way around. How do you get that sort of market? Not by making it less attractive to supply accommodation (as rent control does), but by making it less attractive NOT to—by imposing a tax on vacant lots and unoccupied buildings. The “vacancy tax”, as it is sometimes called, is not limited to what real-estate agents call vacancies, i.e. properties advertised to let; it also applies to unoccupied properties that are not on the rental market (preferably including vacant land, so as not to encourage demolition or deter construction), and prompts the owners to find occupants in order to avoid the tax.
Notice that a tax on vacant residential property is not only better for tenants, but also better for business, because it keeps nearby residential areas populated with prospective employees and customers!
And notice that a vacant-property tax is meant to be AVOIDED, not paid. Moreover, avoidance of it would generate economic activity, expanding the bases of other taxes and allowing their rates to be reduced, so that everyone else—including tenants, home owners, and landlords with tenants—would pay LESS tax!