Landlord regulations will make shortage of homes to rent worse

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SEVERAL articles appeared in the news last week about the Scottish Government’s proposals for regulation of private landlords. The situation as 
described by the press is that demand exceeds supply, causing rents to increase faster than earnings. Some 35,000 new properties are required per annum but only 15,000 are being built. This is causing difficulties and distress to tenants and those seeking rented ­accommodation.

The Scottish Government’s idea to address these issues 
is to regulate to decrease the return on investment and 
increase the administrative overhead on landlords. Markets typically respond to drops in returns and more difficult trading environments by lowering investment.

So the Scottish Government appears to be addressing 
the imbalance in the housing market by creating an environment to encourage greater imbalance.

Perhaps increasing the attractiveness of investment might lead to an increase in supply and in turn ease the pressure on rents and increase the volume and value of 
accommodation available to renters.

Alternatively a programme of public sponsored building could address the supply shortfall. Either way, reducing supply seems the least likely way of solving the problems. Are the proposals more aimed at achieving a political result than a practical solution?

Dr Duncan McKenzie, via email

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