Scotland’s Rent Controls Could Hinder Buy-to-Let Investment
The Scottish Government is planning to introduce rent controls in ‘pressure areas’ as part of a package of measures announced by First Minister Nicola Sturgeon last week.
The Private Tenancies Bill will offer tenants " protection against excessive rent rises, while also giving clear rights and safeguards to landlords, " Sturgeon said, amid concerns the measures are counter-productive to the government’s hopes of attracting institutional investment to deliver large-scale, purpose-build development.
Gerry More, who was appointed last October by construction trade body Homes for Scotland, to help drive investment into the private rented sector (PRS) said: " Whilst a simpler, streamlined and fairer tenancy system is welcome, this should not be to the detriment of building the high quality and professionally-managed homes in the private rented sector that are required to help meet demand. "
" I am therefore concerned that this move could prove counter-productive since these pressurised areas are exactly where investment to increase the supply and quality of PRS properties is needed most. "
Gerry More’s comments were echoed by Pete Chambers, property partner at law firm Burness Paull, who said over-regulation of the sector could have a negative effect by scaring away the long-term investors that the government hopes to attract.
Chambers said: " We are seeing a lot of UK funds and property companies looking at PRS in Scotland . Anything that makes investment less attractive in Scotland versus the rest of the UK could negatively impact upon the likelihood of these parties investing. This could result in reduced provision of rental property, which in turn could exasperate the housing shortage and push up rents – the very thing the legislation is designed to protect against. "
There are around 330,000 properties in Scotland’s private rented sector, of which an estimated 80,000 are occupied by families, according to campaign group PRS 4 Scotland. Another 14,000 are ‘houses in multiple occupation’ providing accommodation for around 60,000 people, while 130,000 are rented by couples or individuals.
An estimated 465,000 new homes are required by 2035 to meet demand but the Scottish Property Federation warned that rent controls could ‘sound the death knell’ for investment in the build-to-rent market.
David Melhuish, the trade association’s director said: " If the Scottish Government wants to increase housing supply, then the introduction of rent controls is not the way to do it. We should be doing everything we can to encourage investment rather than regulate this sector before it has had a chance to take root. "
According to a government spokesman, investors have nothing to fear from the proposed legislation. A spokesman commented: " Our aim is to provide good quality homes and protection for hundreds of thousands of families, modernising the private rented sector to make it more professionally managed and better regulated for those who want to live, work and invest in it. "
" We want to see supply grow to meet demand – this is the sustainable, long-term solution to addressing housing affordability. That’s why we are investing £1.7bn in affordable housing and will now exceed our target of delivering 30,000 homes by 2016, including 18,600 homes for social rent. "
The proportion of people living in the PRS in Scotland has doubled over the past 10 years, according to official statistics. Figures from the Scottish Household Survey , published in August show that 14% of Scotland’s 2.2 million households were renting privately in 2014, compared with 7% in 2004.
The percentage of people living in social housing declined from 32% in 1999 to 23% in 2007. The social sector has remained at around 23% of all Scotland’s households since then, and was 24% in 2014, according to the statistics. The percentage of people who own their own homes also declined from 66% in 2005 to 60% in 2014, although the proportion of households owning outright increased from 22% in 1999 to 30% in 2007, and has remained the same since.
Article by +Roxanne James on behalf of Propertyshowrooms.com
