Professor Douglas Robertson

THE RentBetter Research reveals that much remains to be done to ensure affordability under the PRS. The debate around rent control makes much of the data presented in this blog controversial for some. Is the sector in decline or is the data exaggerating this trend? Landlord registration data suggests a smaller decline, but doesn’t this data have its weaknesses?

Have the temporary “emergency” rent restrictions helped or hindered tenants in terms of maintaining affordable rent? Are rent rises in Scotland really that big compared to the rest of the UK?

Having access to good data is essential when considering both the effectiveness of any policy intervention under the PRS and the impact that future proposed policies could have on market functions. But unfortunately, official data regarding the SRP is currently quite poor. As the unfortunate experience of the Rent Pressure Zone illustrates, if you are looking to show localized ‘hot spots’ at high rents, you need rent data closer to that found in Ireland or the most countries in Europe.

Information on rents paid must be collected, as well as basic measurements of size, quality and all of this must be geographically specific. Currently, as none of this exists, the prospect of being able to implement some means of rent regulation seems destined to repeat the failure of rent pressure zones. The basic tools are still not in place.

We know that the various legislative texts adopted so far, the pressure zone on rents, the rent freeze and the rent increase ceiling, have had very little impact on the financial accessibility of the PRS in its together. Some data even suggests that rent controls in Scotland have so far exacerbated the rise in rents, but in reality this is likely to be the result of a combination of factors, some of which are common to the rest of the UK. Uni – the imbalance between supply and demand. and a period of high inflation and rising interest and mortgage rates. Other factors are specific to Scotland.

The regulatory and tax environment (these taxes with differences specific to Scotland) and the freeze/capping of rents from the end of 2022, with landlords and letting agents stating that the combined effect of all these factors is leading them to be more likely to increase rents are higher between tenancies due to their perception of increased risk in the sector.

One of the initial policy objectives of the 2016 law was to “provide more predictable rents and protection for tenants against excessive rent increases“. Rent regulation via rent pressure zones has proven to be completely ineffective. No local authority submitted a case to the government because the rent data requirements demanded by the Scottish Government were deemed simply too onerous. Rent settlement cases, where the tenant considers the increase to be unfair and requests the intervention of the rental officer, represent only 0.1% of all private residential rentals, or only 227 cases, and are therefore insignificant .

Finally, the “Covid 19 pandemic” and then the “cost of living crisis” both led to emergency rent regulation measures, the first being a rent freeze, the second a ceiling on rent increases internal at 3%. These two short-term interventions on rent increases during tenancy have stabilized rent increases for certain existing tenants. However, when that lease changed, it appeared that landlords were maximizing rent increases, keen to recoup what they saw as previous rental income losses. This is in the context of RentBetter research showing since wave 1 of 2019 and repeated in wave 3 in 2024, that the standard for rent increases in the PRS is at change of tenancy – not annually. It is therefore not surprising that the rental rent cap has had little impact on controlling rent levels across the sector.

This perhaps explains why rent rises in Scotland over the past two years, as detailed in official ONS data, have outpaced all other areas of the UK, including London. That said, rental data from the Scottish Government’s PRS is derived only from advertised rents, not rents actually paid by existing tenants, as is the case in England and Wales. The ONS therefore recognizes that the Scottish data creates a distortion.

This is important because there is a serious affordability problem across the PRS. THE RentBetter This study clearly shows that private tenants have learned to accept ever higher rents. They may pay more than 40% of their net income in rent, as almost a quarter of tenants do, and therefore more when they add council tax, electricity and heating, but as it has become the norm in their locality, the experience of friends, neighbors and associates, it does not seem unaffordable. It’s simply the amount of rent if they want to live in a certain place. Tenants who spend such a high proportion of their income on rent are struggling financially, but still view their rent as affordable, because that is the reality of today’s rental market.

But why are rents increasing? Well, according to the 2022 Scottish Household Survey, PRS stock fell by around 13% between March 2017 and March 2022. The Scottish Landlord Register shows a smaller 5% fall in stocks over the same period. As the owner registration lasts for three years, there is an obvious time lag in this data. It also appears that rent increases are now more common in the sector, particularly for long-term tenants, since annual increases became a legal right of landlords incorporated into the new PRT and particularly where rental legislation emergency on the capping of “cost of living” rents was adopted. promulgated.

Looking at both datasets over the long term, the sector grew from 6% of households in the 1990s before peaking between 2016 and 2017 at 15%, with the stock then stabilizing at 13%, before continue to decline in recent years. The most recent period (2022-2024) shows an 11% reduction in the number of landlords on the Scottish Landlord Register, but an increase in the number of properties. Qualitative research findings indicate that most of this growth comes from new niche markets for student housing construction.

Over the same period, the number of Scottish households increased by 4%. If the PRS had been expanded to accommodate another 15% of all households, there would be around 27,000 additional properties within the PRS. Thus, supply decreases at a time when demand increases, creating upward pressure on rents, which has affordable consequences for tenants.

THE RentBetter The study has consistently shown that a growing number of owners are talking about leaving the market. walk. But this study also showed that owners have always talked about leaving their home, but that fewer of them do it than say it. However, recent factors, such as recent tax changes and the effects of the “cost of living crisis” on mortgage rates, have significantly changed the financial model that many homeowners had long followed, as mortgages at low interest rates have simply disappeared. These over-indebted owners found themselves in serious financial difficulties.

Others, without such a debt burden, because they used their personal pension money to buy a rented property, might be tempted to cash out sooner than initially planned. Furthermore, as the study also detailed, the introduction of emergency restrictions on rents during the Covid 19 pandemic and the ‘cost of living crisis’ had an impact on people’s income perceptions. owners and how this might happen in the future.

Over the past five years, the confidence of landlords and real estate agents in the future viability of the SRP has declined significantly. THE RentBetter The survey showed that those who were very or somewhat confident in the PRS decreased from 41% in 2019 to 17% of respondents in 2024. In comparison, those who were not confident increased significantly, rising from 42% in 2019 to 70% in 2024. the Scottish Government is actively considering introducing another rent control measure into its current Housing Bill, in order to guarantee the stability and affordability of rents. A potentially additional concern about financial returns plays on owners. the spirits. Could this encourage more people to leave the sector?

Any measure aimed at limiting rents requires very careful consideration. There is ample international and historical evidence on rent control that demonstrates its unintended consequences. What is clear from all the evidence gathered over the last five years through the RentBetter study is that legislating is easy, but ensuring that those good intentions come to fruition in the market is much harder.

• Professor Douglas Robertson was Chair of the Scottish Government Advisory Group between 2009 and 2015, which made recommendations for reform and now sits on the RentBetter Advisory Group.

To access the full set of research reports on the impacts of recent legislative reform on the private rented section in Scotland visit here.