Fair Rents (Scotland) Bill or Artificial state manipulation of free market rent?

by Readers Question

10:34 AM, 6th November 2020
About 3 weeks ago

Fair Rents (Scotland) Bill or Artificial state manipulation of free market rent?

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Fair Rents (Scotland) Bill or Artificial state manipulation of free market rent?

Recently I received an email from East Ayrshire Council in Scotland regarding a proposed ‘Fair Rents (Scotland) Bill’ which is proposing to allow a ‘rent officer’ to fix rent for private lets and allows him/her to link it to the Consumer Price Index. It also suggests that rent can not be raised over 1% above the Consumer price index. Nice if they would say they would also fix bankers potential to raise interest rate to no more than 1% above the CPI. Needless to say there is no mention of fixing other sectors income like the bankers.

The below link takes us to the proposed bill and allows landlords to submit views with a deadline of 07th Dec 2020:

https://yourviews.parliament.scot/lgc/fair-rents-bill/

I have submitted my views as follows and would urge all landlord even if you are based out with Scotland to submit similar views if possible asap to hopefully prevent such a manipulative bill. If they do this in Scotland, they may eventually implement such a dictatorship practice to England and others.

1 The Member in Charge thinks there is a need to make private rents fairer for tenants and to create a better balance of power between private landlords and tenants. Do you agree with this overall policy aim? If so, do you think the Bill will help achieve this outcome?
Please provide your response in the box provided.:
We have 17 years of experience renting out houses and flats to individuals and families mainly in receipt of housing benefit or UC. We disagree with the member in charge here. To start with every one of us believes in fairness in everything, not just rent. But to interfere or micro-control an already open and free market which is run by natural supply and demands is going to backfire.

Properties are offered and tenants have 100% free choice to accept or decline a tenancy knowing the rental price discussed in advance as the free market is already. There is no need to artificially manipulate a market by fixing a price.

When we offer housing to a higher risk group of tenants, rent should be charged to reflect that and fixing a price eg capping rent is like one size fits all.

To use a pretext of like need to make something fairer is oversimplifying it and missing out on the larger true picture of things. For example, we have to carry out our risk assessment for different people with very different circumstances & backgrounds and the factual higher levels of property damages, vandalism, lack of co-operation from certain groups of tenants, non-payment periods of housing benefit/Universal Credit housing cost especially during the setup and last payments stages at the end of tenancies, the high level of benefit office errors and the typical end of tenancy non-payments of housing benefit and/or UC housing costs due to the flaws in the Hb & UC administration system & the poor practice of the UC administration for individuals and families on benefits. All those factors are considered when setting rent.

This is in contrast to professionals and students with for example full guarantors, a good reference and good credit history etc which factually is a much lower risk group of tenants. To reflect on the higher risk group of tenants which ultimately costs more to sustain long term housing due to factually higher repairs, maintenance, loss of rent, time and operational costs, rent should be able to be set accordingly higher and for lower-risk tenants rent accordingly can be set lower.

Another word, for the same property, a housing provider must have the freedom and flexibility to set the appropriate rent to reflect risks & costs for providing the housing.

It is no different from a same car or a same house but for a different owner or person will cost very different to cover for insurance. It is the same for the same amount of loan, but for a different person with difference, creditworthiness will have a very different interest rate and terms. Are we going to say next we want to fix eg cap all types of insurance pricing for everyone regardless of whether the person just left prison for 3 murders or bankrupts twice in comparison to a Phd graduate qualified surgeon who saves countless lives to make it fairer and to create a better balance of power between those two groups of people with very different circumstances and situations? Are we going to say next we will pay everyone in society the same from one who is emptying the bins to our prime minister of our country to make it fairer and to create a better balance of power between those people? It simply does not work and ironically will make it unfairer.

To demonstrate the above for housing purposes, we can provide years of pictures of the typical end of tenancies malicious and careless damages, vandalism and the high level of non-payments of rent from families on benefits archived to show the committee we can not simply say it is fair to artificially fix one price for very different outcomes and scenarios. Might be the same property, but prices must be able to be flexible.

If we, as a society, is moving towards artificially capping things as a norm eg fixing a price and controlling a free market, we are heading towards communism. Everyone gets the same pay, the same amount of food, everything capped regardless of your contribution and ability. No free market, no free movement. The ill-thought-out flawed proposed cap will not achieve the flawed outcome. I asked the committee to decline this proposal for artificial manipulation. It is simply wrong.

2 Section 1 of the Bill it prevents a landlord of a private residential tenancy from increasing rent in any year by more than the Consumer Price Index plus 1%? Do you agree with this? Section 1 also gives the Scottish Government a power to vary the cap by order. Do you agree with this?
Please provide your response in the text box provided. :
Again we can not link the full operational costs of housing to different people and families with very different circumstances and situations to the Consumer Price Index. It has nothing to do with nor has any correlation to Price Index linking. To link the two is simply wrong again. How can anyone correlate with the high level of repairs & maintenance costs, increasing gas, electric and Epc compliance costs, ongoing operational cost and the already artificially manipulated finance cost (Finance (No. 2) Act 2015) to Consumer Price Indexing? And where is the logic of 1% above the indexing comes from which affects what rental should be charged to sustain long term housing?

I disagree with giving the Scottish Government a power to vary the cap by order as it is artificial manipulation and interference of supply and demand rent by the government which will have an adverse effect and impact on a private housing providers cashflow and income which will ultimately have an adverse effect and impact on the sustainability of private housing services, ability to finance the increasing compliances requirement and ability to offer stable long term housing for our tenants.

3 Section 2 allows a tenant in a private residential tenancy to apply to have a “fair open market rent” determined by a Rent Officer. Do you agree with section 2?
Please enter your response in the text box provided. :
We do not agree with Section 2 to allow a tenant in a private residential tenancy to apply to have a “fair open market rent” determined by a so-called Rent Officer as that would allow the so-called ‘Rent Officer’ to artificially set rent for something s/he should not be able to do in an open, free-flowing market dictated by open and free supply and demand. All tenants are free to accept or decline any private let on offer.
3a. We do agree with The right set out in section 2 to appeal a Rent Officer’s determination to the First-tier Tribunal as an open, free-flowing market rent should not be set by a 3rd party so-called rent officer in the first place by manipulating the rent by such 3rd party. This would not work in any sector.
3b. The matters set out in section 2 that must be taken into account in determining what is a “fair open market rent” is it should be left to the open and free-flowing natural market determined by supply and demand. Matters to take into account is that it would be impossible for a 3rd party to determine a ‘fair open market rent’ due to each individual person or family circumstances are different therefore the risk element/factors would also be individually different for the housing provider to take on and consider reflected by the rent offered linked to the different costs. It is basically like appointing a car insurance officer to set a ‘fair open market one size premiums fits all car insurance’ which is total nonsense as such thing does not exist considering each driver to be covered by an insurer has different circumstances and different level of risk which is reflected on the different level of insurance premium for the exact same vehicle. It would not be possible for a so-called rent officer as a 3rd party to be able to assess clearly the long term operational cost of the private housing provider to qualify him/her to set rent on behalf of the service provider. The so-called rent officer should contribute by providing private housing him/herself if s/he wishes to set a fixed rent price as then s/he can be responsible for his/her own finance set out by him/herself. Such so-called rent officer should not determine the finance of someone else. Ironically, this is clearly driving towards unfairness.

4 Section 3 requires the following to be entered into the Scottish Landlord Register: the monthly rent charged for a property, the number of occupiers, and the number of bedrooms and living apartments. The MSP who introduced the Bill thinks this change will help ensure we have more public data about private rent levels. Do you agree with Section 3 of the Bill?
Please enter your response in the text box provided.:
We do not agree with this as for the same property may have different rent over a period of time for different individuals and families under different backgrounds, circumstances and situations. The bill is flawed and the mentality behind it is also flawed. To micro-dictate, a free-flowing market will adversely affect the supply of private housing as Msp’s or local authority labelled as ‘rent officers’ are not the ones who are offering private housing and should not be the one controlling or interfering with the ones who are actually offering private housing. Msps and so-called rent officers are not qualified to know the ins and outs, low or high risks and actual operational costs, labour, energy and time it takes to offer private housing to different types of individual and families, therefore, data that are collected in that fashion will not be accurately reflecting matters and can only feed their original flawed incoherent points and flawed aims which will bring flawed outcomes. On the contrary, we need a public data records the likes of a Tenant Registration to records data on the level of rent arrears, non-paying tenants typically abandoning private housing without paying several months of rent etc like the landlord registration which gives the private housing providers access to data to allow us to carry out more accurate risk assessments and in the long run avoid a high level of non-paying tenants and therefore would, in turn, reduce rent in the long run.

5 What financial impact do you think the Bill will have – on private tenants, on landlords in the private rented sector, on local authorities, on Rent Services Scotland, on the First-tier Tribunal, or on anyone else?
Please enter your response in the text box provided.:
We think it will ultimately cause chaos in the private rental sector as a group of people who have no direct experience or true idea of costs we endure in offering private housing is attempting to dictate the rent through a flawed set of aims. It will definitely adversely affect private housing providers and will artificially interfere & manipulate private rental. This will adversely affect the private housing providers only source of income and directly affects the housing provider’s ability to service the private rental operational costs and the ability to service the funding requirement for ongoing repairs & maintenance as well as increasing gas, electric & Epc compliance requirements etc. In turn, this will drive down private housing standards which will lead to unavoidable non-compliance and in return reduce the amount of private rental properties for private tenants. It is a lose-lose scenario of course unless we want to drive towards a communist state where all housing is state-owned. We can all attempt to manipulate our existing free open market by appointing a group of so-called ‘Rent officers’ to start this process of changing our capitalist society and head towards communism. This is exactly what this mentality will lead to. We can then propose to appoint loan interest officers to cap all loans with a fix interest rate and applies to all loans, insurance premium officers, cost of all commodity officers to artificially fix prices for the open capitalist society we live in if that is what we really want. We wonder will we recognise our hard-fought capitalist society in 20 years if this kind of mentality continues.

6 We welcome any other comments you may have on the Bill that you think are relevant and important, including its likely impact (positive or negative) on equalities, human rights and quality of life issues.
Please enter your comments in the box provided: At the moment, we have an open, free-flowing healthy private rental market where housing providers have the environment to offer private housing rent set by their own risk assessment/complex & variable operational costs to the private tenants. This is essential and must be left to be flexible. As is the same with any products or services in an open free-flowing capitalist market. As soon as the state attempts to artificially manipulate and dictate any free-flowing element of supply and demand of any sector including the private rental sector, it will create artificially manipulated negative results. The Msp who thought of this ridiculous bill clearly has issues and flaws in his/her mindset taking us backwards as a society heading towards increasing state control & dictating free open market. As mentioned several times already if the bill proceeds it is a step towards state dictatorship. It is double standards. If we start dictate private housing rent by a 3rd party who has no real experience of the true costs of each property which is different, what is stopping us dictate the price of any service or product in our hard-fought open free capitalist society moving forward? Are we setting the precedence for this communist practice to initiate and spread? It directly infringes on private housing providers basic human right to set price for the service of private housing him or herself and allow the open market to accept or decline his or her private housing services. If the rent is too high then the natural law of supply and demand will determine the viability of the offer of such service, not by a local authority. If this flawed bill was to proceed it will directly infringe on equalities as all other sectors are allowed to flourish in the free open market without being the local authority artificially setting the price of their product or services which the authorities are attempting to dictate in the private housing sector.

If this bill was to proceed, it is a sure a sad direction for our country’s future. local authority rent officers should set the price of rent for their own local authority housing, not on behalf of private housing.

Alan


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Comments

Dr Rosalind Beck

11:30 AM, 6th November 2020
About 3 weeks ago

Excellent effort.

Freda Blogs

11:58 AM, 6th November 2020
About 3 weeks ago

Absolutely right. This is yet further encroachment upon landlords’ rights as property owners. The market works well enough in finding a rental level and tenants have a choice.
By all means implement these policies for publicly owned property (although I am not persuaded it is necessary or desirable, for all the reasons you state). It is looking increasingly like a return to the terrible days pre introduction of the Assured Shorthold Tenancy, when there was no PRS to speak of when rents were controlled and landlords could not get possession (sounding familiar)?
If I were in Scotland, my answers to all the questions would be: I do not agree with this unnecessary interference and if implemented I will sell my properties and leave the Private Rented Sector.
That will make their job easier – fewer properties to regulate and monitor.

They need a history lesson.

Rennie

12:09 PM, 6th November 2020
About 3 weeks ago

Thank you so much for sharing your answers with us. It helps to organise the thoughts instead of just blowing up because yet another thing is sent to try us.........

Rennie

14:11 PM, 6th November 2020
About 3 weeks ago

Here goes:-

Your Views
1 The Member in Charge thinks there is a need to make private rents fairer for tenants and to create a better balance of power between
private landlords and tenants. Do you agree with this overall policy aim? If so, do you think the Bill will help achieve this outcome?
Please provide your response in the box provided.:
No.
There is actually a need to make private rents actually payable by tenants and a need for a system that helps and encourages landlords to recoup any losses
occasioned by tenants either knowlingly or negligently.
Yes, there is a need to create a better balance of power between private landlords and tenants and it needs to give landlords more power. Why do you think that
the government deregulated rent control in 1988? Because they needed more housing possibly?
Why do you think they removed security of tenure for tenants? Because landlords weren't up for continuing to provide housing when they couldn't get their
property back possibly?
It worked really well didn't it?
What did the government do wrong prior to this? What happened to make them run out of houses and money? In 1980 Margaret Thatcher introduced "right to
buy" so not only did she deplete the supply of social (cheaper) housing, but she also gave generous discounts thereby severely decreasing councils ability to
house people.
What didn't any council do - ever? Why build or buy homes that could be rented out at about 75% of the market rent so they could house their people. I see now
that I live in Scotland that private companies are building homes like billy-o but unfortunately affordable rent isn't affordable - ask the people who have been
asked to pay that affordable rent and also look at the statistics because they both say the same thing - NOT AFFORDABLE.
So tenants cannot have security of tenure more than a certain degree that landlords are happy to deal with. If you are asking why then it has something to do with
the house belonging to the landlord and the natural desire to be in control of it.
If you have been paying attention over the last 5 years landlords have been paying out more and more and more and more.............................oh yes, and even
more. What for?
no tax relief on mortgage interest which is a legitimate borrowing to run one's business. Oh yes, sorry, I should have been a plumber! Mandatory EPCs,
mandatory EICRs, mandatory gas safety checks ( I have to admit this is one I would never miss even if it wasn't mandatory), inadmissibility of taking a larger
deposit for a tenant who represents a higher risk or keeps 5 dogs or both, tenant fees ban so I can't find out if a potential tenant is a risk to my income unless I
pay for it ( so that means the tenant can just keep moving around with no regard to how much it costs the landlord - oh for a tenant who would just stay put for 12
years), inability to save the potential tenant and the letting agent time by telling them that people on benefits will not be considered, mandatory deposit protection,
inability to accept 6 months rent up front where this can mitigate the risk of rent default, void periods where the tenant thinks they can just move out and ignore
their contract with you, voic periods waiting to find the right tenant with a lesser risk profile, council tax on voids, unpaid gas and electricity bills, tenants who
decorate without your permission and think they are grand decorators but when they move out you have to pay £1,000 to put the decoration right. I could go
on..................................
so where were we? Oh yes, the balance of power. Well I can categorically state that the balance of power is ALL on the tenant's side.
2 Section 1 of the Bill it prevents a landlord of a private residential tenancy from increasing rent in any year by more than the Consumer
Price Index plus 1%? Do you agree with this? Section 1 also gives the Scottish Government a power to vary the cap by order. Do you agree
with this?
Please provide your response in the text box provided. :
No and No
3 Section 2 allows a tenant in a private residential tenancy to apply to have a “fair open market rent” determined by a Rent Officer. Do you
agree with section 2?
Please enter your response in the text box provided. :
No.
Because of the way the system would operate it wouldn't be fair to the landlord and it certainly wouldn't be an open market rent would it as it would be regulated.
a. Won't be necessary as there won't be rent officers.
b. As above fair open market rent doesn't exist. It is either fair (but to whom?) or it is an open market rent.
4 Section 3 requires the following to be entered into the Scottish Landlord Register: the monthly rent charged for a property, the number
of occupiers, and the number of bedrooms and living apartments. The MSP who introduced the Bill thinks this change will help ensure we
have more public data about private rent levels. Do you agree with Section 3 of the Bill?
Please enter your response in the text box provided.:
No.
According to what you say your only reason for wanting this data is so that you can control rents and have rent pressure zones. If that were not the case and you
wanted to do something constructive with the data I would be only too happy to supply it.
5 What financial impact do you think the Bill will have – on private tenants, on landlords in the private rented sector, on local authorities,
on Rent Services Scotland, on the First-tier Tribunal, or on anyone else?
Please enter your response in the text box provided.:
I beleive that landlords will scuttle off and live in Portugal (if they can afford it - not many can) or just stop being landlords because the amount of time, money and
effort to run this business is just not worth it. Should have rented from the council and then they would pay my care home bill when the time comes. Instead of
which, stupid me, I studied really hard at school, worked day and night and 7 day weeks to buy my own home, then worked day and night to buy a home to let out
so I could provide for my retirement and now I am in my retirement and all I get is money bleeding out me and sleepless nights.
financial impact on tenants....there will be fewer and fewer private rental homes so according to the laws of supply and demand the price will go up. Landlords will
be ver more reluctant to take on tenants on any kind of support so those people with the least visible means of support will be on the streets because the councils
can't provide for them and the government wont let/fund the councils to build/buy homes for these people.
Local authorities...they will all be having nervous breakdowns because they can't cope with the demand put on them
Rent services Scotland.....don't know who they are
First-tier tribunal.........no-one will ever get through the doors as there will be such a queue and that will only be the people who can afford to go to court. Far
easier for landlords to just shut up shop and call it a day.
6 We welcome any other comments you may have on the Bill that you think are relevant and important, including its likely impact (positive
or negative) on equalities, human rights and quality of life issues.
Please enter your comments in the box provided::
For all of these, equalitites, human rights and quality of life issues......... if there were a database of tenants so landlords could know who not to rent to and
thereby avoid all the thousands of pounds worth of losses, landlords would stop visiting their mental health provider, tenant's rents would go down, private sector
housing would increase, working and non-working tenants would have an equal crack at the whip BUT ONLY PROVIDING THE COUNCIL PAY THE LANDLORD
DIRECT WITHOUT ANY WAIT AT THE BEGINNING OF THE TENANCY OR ANY CLAWBACK AT THE END OF THE TENANCY.
I know I am shouting but ARE YOU LISTENING?
The problem is not what you think it is. Landlords aren't turning to short lets because it is more lucrative (well it was up until now). Landlords aren't turning benefit
applicants away because of stigma or because they don't like them. Landlords don't want anyone to be homeless but all the while you put the load on them
instead of sorting the problem at it's root, all these problems you are trying to avoid will continue

terry sullivan

15:13 PM, 6th November 2020
About 3 weeks ago

same rules for social housing? in england social landlords evict thousands for non-payment, asb etc

michael@mjproperty.co.uk

15:54 PM, 6th November 2020
About 3 weeks ago

Alan
Excellent post and well thought out. I commented a few days ago on another post-

'I am fed up of seeing landlords bleating that the risk hasn't paid off, sometimes it doesn't pay off- property investment is a risk. If you don't want to take the risk then sell up , take your gain or loss and get out of the market.'
Once governments start to mess around with free markets things usually go wrong, we only have to look back at the 70's to see how much government interference bankrupted our country ( History lesson to our present government)
We invest in property as we accept the risk / reward and sometimes we win and sometimes we lose and as long as we win more often than we lose we remain in the market.
Whilst 'Fair rent' sounds appealing it doesn't necessarily mean that current tenants will get a reduction which is what they will initially think. As I have had experience of fair rent tribunals they don't always go the way you may think.
The response that will come of this policy( as I suspect it will become law) is once again to push a few landlords out of the market but they may not be replaced because rewards are being stifled and once rewards become stifled then investors tend to shy away . This will eventually lead to less properties on offer and also effectively giving the ones that remain an automatic increase every year, after all if the government tell me to put my prices up every year then I will, even though we generally don't as we want to keep and rewarding good and timely tenants. This will eventually lead to a rental sector that will not be fit for purpose, investors will leave, choice will be limited and more people will end up on the streets.
In the cities that have carried out rent controls over the years they eventually abandon the policy because it just doesn't work. The people who introduce them are usually long gone by then and its left to others to pick up the pieces.
Personally as a property investment company we would exit a market that was being interfered with and we would not give a second thought to it because the risk to our capital would be far to great.
And therein lies the demise of the private rented sector, initially in Scotland if this proposal becomes law. We only have to look at the private rental sector pre 1988 and watch history repeat itself.

michelle green

18:39 PM, 6th November 2020
About 2 weeks ago

Unfortunately I don't think the threat of landlords exiting the market will worry the government. I have believed for quite some time that this is their absolute intention. Anyone with an insight into the new build estate/shared ownership/Help to Buy etc monetised model can see that large corporations aim to own and control the whole housing industry.

Alan Wong

23:40 PM, 6th November 2020
About 2 weeks ago

Reply to the comment left by Rennie at 06/11/2020 - 14:11
Hi Rennie, did you submit those views directly to the consultation site as that is where it will reach the committee? Its obviously nice for us all to share our views here too but make sure it is submitted in here: https://yourviews.parliament.scot/lgc/fair-rents-bill/

Alan Wong

23:49 PM, 6th November 2020
About 2 weeks ago

Reply to the comment left by at 06/11/2020 - 15:54
Hi Michael, thanks for your feedback. Can you go to the committee page and submit an objection to their twisted proposal which is one way of voicing our views:

https://yourviews.parliament.scot/lgc/fair-rents-bill/

Art Dobson

7:30 AM, 7th November 2020
About 2 weeks ago

This is the future, the golden goose of btl is dying and the smart money is getting out and playing the stock market.
The government wants votes and more money in the economy, the easiest way is to get tenants spending that rent on economic activities that generate greater employment.

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