Investor News

The Outlook For Rent Controls And The Greens Influence

The recent alliance between the SNP and Greens has certainly focused attention to the potential effects this may have on housing policy.  However, prior to this, Scottish Government (ScotGov) had already begun working on a long term strategy,  titled  'Housing to 2040'.  The whole document can be found by clicking here.


It is worth a read, and particularly on the parts around the private rented sector.  On the whole, the strategy clearly feels a need to focus on providing more 'affordable, social housing' and there are numerous steps and provisions outlined to help ScotGov meet the country’s increasing demand for more homes within this important sector of the market.


However, the plan seems to adopt a premise that there is a need to protect all tenants throughout the land and assumes that they are somehow often being unfairly treated.  For the vast majority of tenants in Scotland, this simply isn’t the case and those of us at the sharp end often feel that the increased regulations add time and costs for both tenant and landlord/agent alike without providing real life benefits for either.


There is much in the strategy which states that regulations should be reviewed and checked to confirm that they are adequate for purpose and offer tenant protections as required.  We are always supportive of ensuring tenants are treated well, are safe and receive a good service, so policing existing regulations is good practise. However, the criticism levelled at ScotGov from many quarters is the steady flow of new regulation without ensuring that existing laws are being complied with by some practitioners. In ‘Housing to 2040’ there is little on the detail, and despite its length it doesn't offer much information as to what exactly is being done, or due to be brought in.


A recent ‘Association of Residential Letting Agents’ (ARLA) seminar in Edinburgh explained that the underlying issue for ScotGov in creating policy, which is alluded to in the paper, and which the attending civil servants (Amanda Callaghan - Head of Private Housing Services Unit, and Charlotte McHaffie - Leader of the Tenants' and Landlords' Rights and Responsibilities Team, which is in the Private Housing Services Unit) confirmed, is that they do not have the accurate data on which to base the policies.  The gathering of such data is one of the key challenges for them, underlined by the comment in the paper that they may also draw upon 'lived experience' when assessing what, if any, regulations may need to change. In other words, there is a risk that policy may be created on perceptions, views, and opinions, as opposed to real market data.


It remains to be seen what effect the Green Party will have in ScotGov creating housing policy.  It’s likely that the SNP will be resistant to some of the Greens preferred policies, and no doubt both will be very mindful of how any significant changes will be viewed by the electorate.


According to Rory Cowan (Scottish letting Industry's main legal expert and adviser) The Housing Bill, which will come out of it all is likely to contain the following (Rory/our observations in brackets);


  • Pre-eviction action protocols (these are in place already under temporary measures for COVID, but may well become permanent.  They list actions which must be attempted to keep a person in a home if they are in severe rent arrears and at threat of eviction.  At Cullen, we haven't had one of these for over 15 years though.)


  • Longer notice periods (these may be changed to ensure Tenants receive longer than 28 days' notice for certain 'Notice to Leave' reasons.  We don't envisage these being onerous though.)


  • All grounds for re-possession remaining discretionary (pre-COVID, circa half of the 19 grounds for a Landlord to issue a Notice to Leave were mandatory (First Tier Tribunal must issue eviction notice if the tenant didn't leave) and half were discretionary).  However, as Rory stated, they seem to have forgotten to ask the banks and lenders who have first charge over these and may want their assets back!)


  • Review of the grounds for possession(likely that they will check whether these still meet the various needs as the Private Residential Tenancy model is now 5 years' old.)


  • Minimum EPC levels (this process is already in place but will confirm the plans for all properties (including private homes, rental homes, social homes etc  - i.e. all homes) to be minimum D by 2025, albeit with a list of exemptions for Victorian/Georgian/older properties which are limited to what they can do in practise, or for Listed buildings etc.)


  • Rent controls (this is where there is very little detail.  The Rent Pressure Zones (RPZ's) which are in the PRT provisions, have never been used by any local authority.  Mainly because, the rules state they must collect and exhibit data to Holyrood to have one brought in.  Such data can't be collected easily, and is often instantly out of date.  So we don't yet know what, if any, control provisions will be put in place.  Our guess is that there will be something which sounds/looks good to the Greens, who will claim a win for its inclusion, but with sufficient gaps or hurdles in the necessary process to cause them not to adversely affect the functioning of the private rental sector market.  The civil servants will also advise strongly if they feel that any proposed measures won't work, or simply aren't legal).


We will monitor all of these very closely and the various bodies representing landlords will look to have their voices heard throughout.


One final observation regarding ‘IndyRef2’.  We heard recently from a well-known political analyst that there are whisperings the SNP may look to hold IndyRef2 by the end of 2023.  It’s generally expected that Scotland will have another referendum at some point, it’s more a case of ‘when’ rather than ‘if’, and COVID has probably meant that any timetable has slipped anyway.  However, most recent polls suggest that if it were held tomorrow the result would be broadly the same as in 2014, possibly suggesting that most voters haven’t changed their minds since the first IndyRef.


Brexit also now means that if Scotland were to vote for independence it would be outside both the UK and EU.  The Westminster Covid response benefits (vaccinations, furlough support) have also been reported as supporting the view that Scotland is better off in the UK.


So, no definitive answers but private property investment in Edinburgh has worked well for investors for the last hundred years or more and we expect that this will still be the case once the dust has settled.


Steve Coyle

Managing Director
Cullen Property Ltd