SCOTTISH Government plans to introduce rent controls in “pressure areas” could hinder investment in the locations that need it most, the country’s private rented sector “champion” has warned.
The proposals form part of the Private Tenancies Bill, announced alongside a package of other measures last week by First Minister Nicola Sturgeon, who said the legislation would offer tenants “protection against excessive rent rises, while also giving clear rights and safeguards to landlords”.
Introduction of rent controls is not the way to do it
However, Gerry More – who was appointed in October by construction trade body Homes for Scotland to help drive investment into the private rented sector (PRS) – said the move to introduce local rent controls in overheated areas was “counter-productive” to the government’s hopes of attracting institutional investment to deliver large-scale, purpose-built development.
More, a former board member at housebuilder Cala whose post has received government funding, 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.”
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 about 330,000 properties in Scotland’s PRS, of which an estimated 80,000 are occupied by families, according to campaign group PRS 4 Scotland. A further 14,000 are “houses in multiple occupation”, providing accommodation for about 60,000 people, while 130,000 are rented by couples and individuals.
An estimated 465,000 new homes are needed 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.”
However, a Scottish Government spokesman insisted that investors have “nothing to fear” from the proposals.
He added: “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 £1.7 billion in affordable housing and will now exceed our target of delivering 30,000 homes by 2016, including 18,600 homes for social rent.”