There’s no doubt that rents in many areas of Scotland are rising and this is showing little sign of slowing. The reality of this for many thousands of private renters is that their housing is becoming less and less affordable.
The Scottish Government has responded to this, in part, through the recent reform of the tenancy. The tenancy is the biggest change to private renting for a generation, which alongside improving security of tenure, included within it two forms of rent regulation:
- Tenants can appeal rent increases within tenancies to a Rent Officer where they believe a rent increase is excessive.
- Local authorities have the power to apply to Scottish Ministers to designate Rent Pressure Zones in specific areas. If successful rent increases within tenancies would be limited to a formula linked to the Consumer Prices Index.
Focus on the issue of unaffordable rents in the private rented sector is very welcome – but how effective are these reforms likely to be?
To answer that question we commissioned Professor Douglas Robertson and housing consultant Gillian Young to carry out research into Rent Pressure Zones and rent regulation in other countries to look at examples of this kind of intervention in action.
What can Rent Pressure Zones achieve?
Firstly, it’s important to consider how Rent Pressure Zones are understood and what they can actually achieve in practice. The renters we spoke with as part of this research clearly were of the view that rent controls or rent regulation – including Rent Pressure Zones – should be used to improve affordability.
However, this cannot be said of Rent Pressure Zones in themselves: a useful stop-gap which could protect tenants from large spikes in their rent – yes. But with above inflation rent increases still possible during tenancies, and with no controls on initial rents, upward pressure on housing costs could continue under this model.
So, in the grand scale of rent controls, this is light-touch stuff.
What makes rent controls work?
The research also looked at international examples of rent controls to see what works and two lessons emerged – where rent controls work well:
- there is good data on rents, and
- they are complemented by a balanced housing market where there is an adequate supply of housing that is affordable.
Importantly, the evidence shows that without a sustained effort from government which gets affordable housing built in the right places, it is challenging to design rent controls which are effective. Where rent controls were introduced without this wider action to boost the supply of affordable housing they were all too often rendered ineffective by loopholes and shadow markets on rentals.
We need much better evidence on private rents
At the moment we simply do not know enough about rent levels in Scotland to either make Rent Pressure Zone applications, or design rent controls which work well.
Rent Service Scotland – the body responsible for collecting information on rents – relies almost entirely on advertised, not achieved rents. Nor does it collect nearly enough data on rent increases within tenancies.
This last point is crucial: it is specifically this kind of data – rent increases which occur during a tenancy – that the Scottish Government insist that local authorities provide to support a Rent Pressure Zone application.
Next steps
In Scotland what this means is:
- We need to get much better data on rents to back up Rent Pressure Zone applications. The appeals from tenants to Rent Officers should help with part of this. Getting rental data from all three Tenancy Deposit Schemes will help this go even further.
- To meaningfully tackle unaffordable rents, we need put sustained effort into increasing the supply of affordable housing in high pressure housing markets like Edinburgh, parts of inner Glasgow, Aberdeen and many rural areas. This will also provide the surrounding context needed for rent controls to work.
- To fix this long-term a concerted effort needs to be made to take the sting out of rising property prices and rising rents. Build more houses, yes, but also design policy which treats houses as homes, rather than stores of wealth.
There will continue to be a debate in Scotland about the regulation of private rents – and that is welcome. What this review of international experience of rent controls shows is that this debate needs to be underpinned by data and evidence.
The ultimate conclusion from this may well be as it has been for well over a century – that the market alone cannot deliver affordable homes.