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The current climate is not an easy one for UK landlords. After a decade of increasingly hostile legislation, landlords must now face up to the likelihood of declining house prices, tougher borrowing requirements and deteriorating economic conditions. Unfortunately the situation for Scottish Landlords is even more bleak. On the 6th of September, First Minister Nicola Sturgeon announced the intention to introduce a rent freeze for all Scottish tenants.
The First Minister said: “The Scottish Government does not have the power to stop your energy bills soaring, but we can and will take action to ensure that your rent does not rise. By definition these are temporary measures. But they will provide much needed security for many during what will be a difficult winter.”
What is the Scottish Government Proposing on Rent Freezes?
As the term ‘rent freeze’ suggests, rents in Scotland will be frozen at their current levels. However, the Scottish government have offered little in the way of details around the plan, other than the initial announcement. In her address, Nicola Sturgeon confirmed that rents would be fixed until at least the 31st of March 2023 and that the decision would affect private and social landlords alike.
Although the emergency legislation has been announced, it has not yet passed in to law. The SNP hope to attain parliamentary assent as soon as possible, with the hope that it will be enacted within the next three months. Despite the delay in passing the legislation into law, Nicola Sturgeon announced that rents would be fixed as of their levels on the 6th of December.
To further add to the angst of Scottish landlords, Nicola Sturgeon also proposed a moratorium of evictions over the winter. This would mean that, irrespective of cause or tenant behaviour, landlords would be unable to evict Scottish tenants until the 31st of March 2023 at the earliest.
What Do the Scottish Rent Freezes Mean For Landlords?
It is hard to truly grasp just how bad this announcement may be for Scottish landlords. Mainly, due to the lack of granular details provided by the Scottish government. On the face of it, the announcement sounds like another blow for Scottish landlords and the Scottish private rental sector. In a time of economic hardship and spiralling inflation, landlords will be expected to fix rents and shoulder the entirety of the burden, whilst being unable to evict problem tenants.
Whilst the initial announcement describes the measures as a ‘temporary emergency’ response. The worry is that the temporary nature of the measures may become permanent, as has been the case with emergency measures introduced on the back of the pandemic. The Scottish government have alluded to this themselves, with Nicola Sturgeon stating that the measures will last until “the end of next March – at least”.
The problem that this poses is that the policy only provides a short term hiatus, rather than fixing the underlying problem. Fixing rents and preventing evictions won’t prevent the cost of living crisis. Whist in the short term it may provide some respite for tenants, the likely long-term result will be an even more dysfunctional housing market. As has been discussed before on Landlord Insider, rent controls often only exacerbate supply and demand imbalances, at the eventual expense of tenants. The Scottish Property Federation has already reported that a multi-million pound investment into the sector has been put on hold on the back of the announcement.
Responses to the Scottish Rent Freezes From The Private Rental Sector
Generally, the response from the private rental sector has been scathing. Many have called into question the rationale behind the Scottish governments announcement and criticized their lack of appropriate planning. At a meeting with John Blackwood, of the Scottish Association of Landlords, Patrick Harvie – the Green Party Minister in charge of the policy – was unable to provide any details at all of how the policy would be implemented. Equally, he was unable to explain how the policy would impact on evictions and rent increases which are already underway. Mr Harvie suggested that the details were still being worked out by civil servants.
David Alexander – DJ Alexander
David Alexander, who runs the Scottish estate agent DJ Alexander, has been vociferous in his opposition to the policy. Mr Alexander said: “That the minister in charge of this policy seems to have little or no understanding of how it is to be implemented is both damning and shocking. This all smacks of a thrown together policy to gain some publicity and deflect attention from the appointment of the new Prime Minister.”
He also argues: “Furthermore, the Scottish Government does not even seem to know or understand its own legislation. Another minister explained the lack of consultation with landlords prior to the announcement was to prevent rents being increased before the policy was implemented. As all landlords know rents can only be increased in Scotland with three months’ notice and tenants can appeal against any increase. The notion that this needed to be announced with no consultation with landlords highlights just how unaware the Scottish Government is of how their existing legislation operates and also their desperate need not to consult, not to be open, and to make decisions without any understanding of the consequences.”
Mr Alexander concludes: “So this is an announcement clearly designed to gain headlines without any real impact on the tenants it purports to be helping. This whole process has been one of short sighted, ill-considered opportunism with little concern for the lives of the tenants and landlords that it affects. Everyone involved in the sector has been inundated with calls as tenants and landlords are worried about how this will impact on their lives. And yet we have A Scottish Government minister stating vaguely that there will be an update at some point in the future.
Timothy Douglas – Head of Policy and Campaigns at Propertymark
Timothy Douglas of Propertymark highlights that tenants are not alone in feeling cost-of-living pressures: “It is not only tenants who are exposed to the effect of the cost-of-living pressures and as a key housing provider, private landlords will be asking what help they can expect to manage any additional costs they may have to bear as a result of today’s announcement. Furthermore, it’s unfair to suggest letting agents and their landlords will be routinely increasing rents at a time when many tenants are facing a further strain on their finances. All parties will need to continue to work together.”
The worry is that temporary measures in Scotland have a habit of becoming permanent. Mr Douglas highlights: “We know the Scottish Government is committed to a system of rent controls and is already considering a ban on winter evictions. What’s most alarming is that this feels like déjà vu with the potential for these new temporary protections to become permanent as has been the case with others introduced during the pandemic.”
Sally Thomas – CEO of the Scottish Federation of Housing Associations
It is not just private landlords who are up in arms about the new policy. Social landlords have also expressed their concerns following the announcement, fearing that it could lead to a broader degeneration of housing standards and a reduced incentive to maxmise energy efficienct.
Ms Thomas, of the Scottish Federation of Housing Associations, said: “Housing associations and co-operatives are doing everything they can to support their tenants as the cost of living crisis takes hold, and we understand the motivation to restrict increases in rents. Housing associations exist to provide affordable rented housing; that’s why, despite no government restrictions, rent for social homes is consistently around half the level charged in the private sector. If a rent freeze continues without increased government support, we risk housing associations being unable to build the new social homes that Scotland desperately needs, and it is more than likely we won’t achieve the target of 110,000 new affordable homes by 2032.”
She continues: “It also threatens our ability to maintain and upgrade existing homes: leading to poorer quality, less energy efficient housing. We will be working with the Scottish Government in the coming days and weeks to demonstrate the consequences of today’s announcement and ensure this policy does not jeopardise Scotland’s ambitious targets on maintaining and delivering affordable homes and decarbonising housing.”
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