UPDATE: Since time of publication, the Scottish government has announced that private rents will be allowed to rise by up to 3% from April. Landlords will also be able to apply to Rent Service Scotland to increase rent by up to 6% in order to partially cover increased costs like mortgage interest or service charges.
The rethink came after industry organisations, including PayProp, wrote to the Scottish government to advise them of the rent freeze’s impact on the private rented sector. The move was welcomed by housing professionals, but there is still concern that it may not have gone far enough: the permitted rent increase is still well below December’s Consumer Price Index inflation of 10.5%.
The limits on landlords’ ability to evict tenants will also remain in place for at least another six months. However, the rent increase cap will no longer apply to student accommodation. Because students tend to choose fixed terms in line with the academic year, the rent cap was already having very little impact on the sector.
The cap on rent increases in Scotland is set to be extended for at least another six months, and industry groups warn that it could do severe damage to the private rented sector.
Scotland’s Minister for Zero Carbon Buildings, Active Travel and Tenants' Rights, Patrick Harvie, has recommended for the Cost of Living (Tenant Protection) (Scotland) Act 2022 to be extended to 31 October 2023. Under the Act, private sector rent increases are capped at an amount set by the government, and evictions are also banned in most cases. Landlords can only evict a tenant for engaging in antisocial or criminal behaviour, abandoning the property, owing six months or more of rent arrears, or when they need to sell or move into the property due to their own financial hardship.
Rents in the social housing sector will be allowed to rise from April. Council and housing association bosses had argued that they would no longer be able to build or refurbish homes without extra rental income. They have now agreed with the government to keep rent rises below inflation. The average council tenant will see their rent rise by under £5 per week. Housing associations are negotiating an average rent rise of 6.1% across their portfolio, but some tenants could face rent increases of up to 11.1%.
Private rented sector bodies have argued that the same logic applies to private landlords, who also face higher costs. Lettings industry body Propertymark briefed Scottish politicians on the impact that the rent freeze was having on the sector, and has now confirmed that it is working on a Judicial Review.
What next?
The Scottish government has not yet said what cap it will set on private sector rent increases. Setting a cap above zero could give landlords more flexibility to cover their increased costs. And evidence from PayProp suggests that landlords in Scotland weren’t imposing large rent increases on tenants before the cap came into force. The average increase handed to existing tenants in the 12 months to November 2022 was 7.2%, below the UK average of 7.5% and roughly in line with the 6.1% agreed by housing associations.
The legislation allows for one further six month extension, meaning that rents could be frozen and evictions banned until 31 March 2024. But in a statement, Propertymark said it believes that the Scottish government is working on plans for permanent rent controls – and warns that this would undermine much-needed housebuilding and energy efficiency improvements.
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