Harvie plans to extend rent controls until next spring
Green minister Patrick Harvie wants to extend the rent controls for a further six months, risking a further backlash from the property sector.
Emergency measures to protect tenants during the cost of living crisis, including the private rent cap and additional eviction protections, will be put to Parliament.
The move prompted the UK Apartment Association (UKAA), the body which represents the build to rent (BTR) sector, to warn that a rent cap “in any form… lowers confidence and inhibits the BTR industry’s ability to deliver customer, community and investor value.”
The Tenants’ Rights Minister has confirmed proposals to keep the Cost of Living (Tenant Protection) Act measures in place until 31 March 2024 at the latest.
The legislation was introduced in October last year but following a furious reaction from landlords and investors Mr Harvie was forced to raise the 0% cap to 3%.
In March, the Scottish Parliament voted to extend the measures to 30 September, with the option to extend again for a final six-month period to the end of March next year.
At a property conference in Glasgow in April, Mr Harvie 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, held by the Scottish Property Federation, heard that Legal & General, which has previously invested significant sums in Scotland’s housing sector, was 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.”
The latest plans would mean:
- Most in-tenancy private rent increases would continue to be capped at 3%
- Alternatively, private landlords could apply for increases of up to 6% to help cover certain increases in costs in a specified time period where these costs can be evidenced
- Enforcement of evictions would continue to be paused for six months for most tenants, except in a number of specified circumstances
- Increased damages for unlawful evictions of up to 36 months’ worth of rent would continue to be applicable
Social rented sector tenants are protected by the voluntary agreement reached with social landlords on below-inflation rent increases for this financial year.
Mr Harvie said: “As the cost of living crisis continues, these measures are giving important support to tenants, providing them with much-needed stability in their housing costs and additional eviction protections.
“As the social housing sector have agreed their rents in consultation with their tenants, the focus of this temporary legislation is on providing private renters with similar protection. We know some landlords are impacted by rising costs too.
“The option of increasing rents by 6% in specified circumstances ensures landlords who may be impacted by the cost of living crisis can recover some increased costs associated with their let property.
“The final date of 31 March 2024 would be as long as the rent cap and eviction protections could run if approved by Parliament. The necessity of these measures is being kept under review and we will continue to assess whether they remain justified, balanced and proportionate based on the financial pressures rented households and landlords are facing.
“We are also looking at how to transition out of the emergency measures, and we continue to listen to and work hard with stakeholders to develop and deliver rental sector reform.”
The UKAA argues that the BTR industry should be treated in a similar manner to the social housing sector. Gillian McLees, chair of the UKAA Scotland Hub, will be working with investors and the Scottish housing minister over the next six months to inform the next review in September.