The Scottish parliament introduced rent control measures to address housing affordability in September 2022. This has led to rents rising faster in the last two years than the previous 12.
Rent controls in Scotland were implemented as part of broader housing legislation aimed at stabilizing rents and ensuring long-term security for tenants. These measures include capping rent increases during tenancies and requiring landlords to justify hikes based on specific criteria such as significant property upgrades. While these controls were designed to shield tenants from sudden financial strain, they have inadvertently created market distortion.
One of the main challenges is the reduction in rental property supply. Landlords, facing restrictions on rental income growth, may choose to exit the rental market or convert properties into short-term lets, such as Airbnb, which are exempt from these controls. This exodus reduces the available housing stock, intensifying competition among tenants and pushing rents higher for the remaining properties.
Furthermore, rent controls can discourage new investment in the rental market. Developers and landlords may perceive the sector as less profitable, leading to fewer housing projects and exacerbating the supply-demand imbalance. This dynamic can be particularly pronounced in urban areas like Edinburgh and Glasgow, where demand for rental housing is consistently high.
Critics also argue that rent controls do not address the root causes of housing affordability issues, such as insufficient housing supply and inefficient planning regulations. Instead, they may create a two-tier system where existing tenants benefit from lower rents, while new renters face inflated prices in an increasingly competitive market.
Much like the beleaguered rental market in England new supply and investment is badly required, therefore it comes as no surprise that these sorts of punitive policies are backfiring.
