Rent freeze may harm property investment - David Alexander

Politicians just love pulling rabbits out of the hat, especially if it’s passing legislation which is popular with the public but costs the government nothing in financial terms.

Nevertheless, someone still has to pay and in terms of the freeze on residential rents announced by Nicola Sturgeon at Holyrood last week the fall guys on this occasion are Scotland’s private landlords.

But make no mistake. This decision has implications which go beyond the property sector and should have the wider business community rather worried.

Referring to the proposed increases in energy bills, our First Minister said she was powerless to act on what is an issue reserved to Westminster but was determined to help people cope with the rising cost of living where appropriate. That included a freeze on rail fares and on rents in both the social and private housing sectors.

David Alexander is the chief executive officer of DJ Alexander Scotland

Now given that Scotland’s railway has been renationalised the Scottish Government’s decision on fares does seem to come within its remit. Whether one agrees with the policy or not is a matter for debate (given the 5 per cent recently awarded to well-paid train drivers and a pay demand pending from guards and ticket-collectors, how is the railway to be funded, one might ask).

But putting government controls on what a private businesses (i.e. one providing long-term residential accommodation) can charge its clients is starting to look like rigid state socialism – the type of system which the people of Eastern Europe jettisoned with such glee three decades ago and have no desire to return to.

The Scottish Government stance seems to be that the current cost of living situation is an emergency and rents have been frozen because people need a roof over their heads.

But even more important to existence, surely, than a warm home is food; if you cannot afford to eat it matters not one jot whether you live in a shack or a palace.

Logically, therefore, Nicola Sturgeon’s next move might be to force Tesco and Sainsburys to limit prices on staple foods like meat, poultry, fish and potatoes in their Scottish stores (let’s not forget she’s already done so with alcoholic beverages). And given that cooking these foods is also a necessity, perhaps the next step will be to place restrictions on what B&Q can charge for the oven and hob it supplies with each designer kitchen.

She won’t, of course, at least not now nor any time in the near future. But a line has been crossed in Scotland and who knows where it might eventually end.

So why has Sturgeon picked on private landlords and will probably get away with it?

The simple answer is because she can and so she has.

Sadly, the move is likely to have substantial public support, especially among tenants of course (when the government orders your landlord not to raise your rent, what’s not to like?).

“Landlords? They’re all fat cats and can afford to take a hit,” is a widely—held but erroneous perception – an attitude which hasn’t been helped by the Scottish Government’s mixture of indifference and hostility towards the private rented sector.

Politicians are known to have a liking for free lunches but in the real world there is no such thing. At the end of the day, someone picks up the tab. And those tenants who just now will be so grateful to Nicola for freezing their rents might change their tune within a year because their landlord has decided lettings no longer provide an acceptable return on investment and has given them notice to quit because he or she is selling up. And then they might find it difficult to secure alternative accommodation – because so many other landlords have decided to act similarly.

But the most worrying aspect of all this is the Scottish Government’s interference in the market and the negative signals it sends out. Who’d want to invest in property in Scotland at the present time – whether it’s a one-bedroom flat in Leith or a 20-storey, state of the art office block on the Glasgow waterfront?

David Alexander is chief executive officer of DJ Alexander

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