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

by Readers Question

10:34 AM, 6th November 2020
About 4 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

Dylan Morris

7:40 AM, 7th November 2020
About 4 weeks ago

Nice of them to link the annual increase to CPI which is lower than RPI and unlike RPI doesn’t include an element of housing costs.
Given the Johnson administration Scamdenic fiasco I think it’s a dead cert we’ll get Starmer as PM in four years time. And you can bet this socialist nonsense will be applied to England. Probably a resurrection of RTB in the PRS as well unless Boris can’t resist the urge to implement it beforehand.
In the meantime we’ve got the Pets Bill enforcing us to take giraffes and rhinos to look forward to next year. Wouldn’t surprise me if there’s a DSS Priority bill as well.

LPrince

9:02 AM, 7th November 2020
About 4 weeks ago

This is an excellent post. Really informative comments too. Thank you.

michael@mjproperty.co.uk

9:50 AM, 7th November 2020
About 4 weeks ago

Reply to the comment left by Alan Wong at 06/11/2020 - 23:49
All completed

Jessie Jones

11:27 AM, 7th November 2020
About 4 weeks ago

It will be interesting to see whether a large number of rents are now increased within the affected area, as landlords seek to mitigate the possibility of future rises in Bank Of England base rates.

Landlord Phil

11:55 AM, 7th November 2020
About 4 weeks ago

It's a truly brilliant idea as long as they also fix mortgage interest rates forever, underwrite the cost of court action, underwrite non payments, cap the amount we have to spend on maintenance, fix taxation with no more taxes to be imposed & agree to top up the increases in our contractors fees. Oh and they of course will give us a free platform to find new tenants, credit check them for free & abolish the additional stamp duty we pay.

Can anyone else hear the distant bell of communism ringing? The next thing will be them choosing our tenants. Maybe they will force us to sell to some people, at their agreed price. Where does this end?

If this is going to happen, I'm all in favour of independence for Scotland. If this is a way to stop English landlords investing in Scotland, job done. My cash is staying south of the border.

Rennie

12:29 PM, 7th November 2020
About 4 weeks ago

Reply to the comment left by Alan Wong at 06/11/2020 - 23:40
Yes I did submit it

Dylan Morris

13:02 PM, 7th November 2020
About 4 weeks ago

It’s a great money making exercise for the Local Authorities. A “Rent Assessment” inspection £300 plus VAT. Perhaps a concession to £200 plus VAT if it’s a “Revised Rent Assessment” where for instance a Rent Assessment has originally been carried out and landlord has now done significant upgrading to the property, such a new kitchen/bathroom (or other substantial improvements) and wishes to increase rent above the annual rent increase limit.
The Councils will be loving it, all that power. And an army of jobs worth Rent Assessors all members of the gold plated final salary pension scheme.

Mick Roberts

11:39 AM, 8th November 2020
About 4 weeks ago

Reply to the comment left by Rennie at 06/11/2020 - 14:11
Rennie says it all here & this is where the Govt & Councils aren't learning from history:

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?

I can remember this & the tenants in B&B's cause no one would house them. Govt made it so that Landlords would take tenants. Councils then stopped paying these massive costs for B&B's. This ain't that long ago.

Rennie more or less says the rest of it too. All causing the problems with the increasing homeless we have today.

Landlord Phil

11:51 AM, 8th November 2020
About 4 weeks ago

Reply to the comment left by Mick Roberts at 08/11/2020 - 11:39
Regrettably governments these days don't seem to want to learn from the lessons that history gives us. It's all about the next round of votes. Doing the sensible & right thing seems to be somewhere in the background. It doesn't matter what colour your politics are, they will all do what's right for them to get votes. And right now, it's those that feel victimised that are holding the pencil that politicians want to attract. If only there were politicians around that really could command respect through long term policies. Ah well. I can wish. Until then, it's about finding ways to make a buck by creative routing between regulation. James Caan said it best. Whatever the market is doing, go the other way. I'm holding on, but can understand why others will leave the PRS. Its bloomin hard if property is a side business, and it really is for most landlords.

Mick Roberts

11:53 AM, 8th November 2020
About 4 weeks ago

Reply to the comment left by Landlord Phil at 08/11/2020 - 11:51
Yes & to explain to tenants that the Govt do this is cause they get more votes, even though they make it worse off for tenant, tenants don't understand why Govt would make them worse off by a Landlord.

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