SNP rent controls exemplar was ‘unmitigated disaster’

It comes as a new high-level umbrella group of industry leaders set up in response to the SNP’s new housing law warned aspects of the proposals could face "potential legal challenge".

Speaking exclusively to The Herald, the group, called More Homes More Quickly (MHMQ), which "collectively represents the entire spectrum of private rented housing providers across Scotland" said aspects of the rent control regimes are "particularly worrying".

It has provided a 2,000-word briefing document for consideration for the proposed Housing (Scotland) Bill consultation, which is currently under way.

Mr McLennan said in response to concerns around unintended consequences of rent controls: "Rent control systems have sought to mitigate potential unintended consequences in a variety of ways which are intended to achieve an appropriate trade-off between the competing goals of stabilising rents and minimising any unintended consequences, and we have taken this into consideration when designing an appropriate system of rent control for Scotland.

"A key lesson from the literature is that, because the impacts of a rent control system on different groups depends on how the rent control system as a whole operates in its particular regulatory, financial and economic context, it is generally not possible to say that a given rent control system will work in all international contexts.

"Similarly, it is not possible to say that any particular element of a rent control system is beneficial in all contexts. Generally, each element will have costs and benefits for tenants and landlords, and choosing the optimal trade-off needs to consider how these costs and benefits vary in the light of other elements of the framework and the wider context.

"The impact of a rent control system needs to be considered in the round. However, international experience from countries such as Germany, Ireland, France, Norway and Sweden shows that strong regulatory regimes are not incompatible with a sizeable private rented sector."

SPECIAL SERIES:

Part One: SNP housing law 'open to potential legal challenge'

New Scottish housing rent controls put forward by industry

Comment: Scottish rent controls measures 'rejected by councils'

MHMQ said: "The commentary we have presented highlights that the rent control regimes in these countries can lead to social exclusion, diminishing standards and constrained supply. The unintended consequences are significant.”

The Scottish Government’s Rented Sector Reforms: Fairer Scotland Duty Assessment states that "we have also looked at other countries’ experiences such as Sweden, as well as more localised rent control measures in cities such as Berlin, and had discussions with officials from the Republic of Ireland".

Berlin was cited, and criticised (Image: Getty Images)

The housing leaders' group said: "It is particularly worrying to note that Sweden’s rental market is characterised by waiting lists approaching 20 years, with a black market in subletting linked to organised crime, and a widely accepted ‘housing crisis’.

"Berlin’s rent freeze was an unmitigated disaster which led to a near 60% drop in available properties before being ruled unconstitutional and dropped; and the Irish example has been catastrophic for both the supply of rental homes and the rise in rental levels despite the caps."

John Boyle, of Rettie, also said: "The Government using Sweden and Ireland as some kind of exemplars for rent controls is particularly worrying - these countries have strict rent control regimes that have had devastating impacts on supply."

Ruth Gilbert, national campaigns chair of tenants’ union Living Rent, said there are international access stories and added that in Scotland rent controls should be "tied to the property not the tenancy".

Ms Gilbert said: "Rent controls have been adopted by governments across the world in response to the same issues we have in Scotland: high rents and a lack of secure, affordable housing. 

"France has controlled rents in areas of ‘housing stress’ since 2014. 1,149 areas currently have controls that apply in the tenancy and between the tenancy that prevent landlords from hiking up rents when a tenant leaves. Rent is increased once a year at a rate set by the local authority, and homes with poor energy ratings have additional controls. 

"In Ontario, Canada, rent controls are tied to inflation and pegged to the Ontario Consumer Price Index, and the state can cap rent increases below inflation. Since 2021, the limit has been 0%, 1.2% and 2.5%.

"Tenants in Scotland need rent controls tied to the property not the tenancy to prevent landlords evicting tenants to hike up rents. We need rents tied to quality to drive up standards in Scotland’s housing stock. And in areas of high rent pressure we need local authorities given the power to cap rent increases at 0% in order to bring exorbitant rents down."

Mr McLennan said in a broad response including to concerns around European rent controls said that "we continue to engage with stakeholders on rent controls as the legislation goes through the parliamentary process and that "fairer, well-managed private rented sector is in the interest of both tenants and responsible landlords".

Tomorrow: The new rented housing developments in Scotland and those that were abandoned