Law of unintended consequences emanating from Holyrood

Law of unintended consequences emanating from Holyrood

11:29 AM, 28th March 2022, About 2 months ago 3

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Some of the more onerous restrictions which were imposed on landlords in Scotland in the first dark days of the pandemic are about to be rescinded at the end of the month, and it might be assumed that this would be a good thing for the private rental sector.

But will it? Or will the law of unintended consequences which so often attends regulatory action emanating from Holyrood have a further dampening effect on an already zealously policed component of the Scottish rental accommodation market?

The restrictions, such as extending notice periods for evictions, limiting the grounds for evictions and so on were put in place in a hurry with the best of intentions. Back in the early Covid period, when nobody really knew what was going on, there were fears of mass unemployment, and of people losing their homes as a result.

Massive financial aid through UK furlough schemes meant that worst-case non-payment of rent scenarios were not realised, but the Scottish Government still decided in September last year to further extend the Emergency Acts until now.

A policy note says that “given the significant relaxation of restrictions in the vast majority of other areas, the Scottish Government believes the public health justification for extended notice periods no longer exists…and should be expired.”

It has to be said that right away that the great majority of our tenants, and those of other major letting agencies, are responsible and meet their commitments under their agreements. It has been notable that those who have fallen into substantial rent arrears are known repeat offenders.

However, a landlord who might want to recover built-up arrears or cut his or her losses by eviction is now faced with a situation in which grounds that previously meant that an eviction would be mandatory have been made discretionary.

This means that more and more cases will inevitably head to the First Tier Tribunal where more notices to leave will be decided under the “reasonableness test”. The very likely effect of this will be that landlords will decide the game is not worth the hassle and exit the sector.

The reason rental prices are inexorably rising is that there is an ongoing lack of private rental stock in the market. It is simple supply and demand. In order to increase the availability of suitable stock, the regulatory framework has to make the market more appealing to property owners.

This is very far from being the case in Scotland at the moment. The private letting sector is one of the most heavily-regulated areas of commercial enterprise in the country, to the point that many landlords now feel that they are being actively discriminated against.

Take the new legislation which is about to come in which means landlords can no longer issue a blanket ban on tenants keeping pets and will have to object in writing on receipt of a pet request.

Even in an unfurnished flat, cats can rip up carpets and scratch walls and dogs can make an intolerable mess. But deposits, which function to guard against this sort of eventuality, are now restricted to only twice the monthly rent.

It is just another disincentive for people who might want to enter the market, coming on top of the difficulties of becoming registered, lodging of deposits, safety checks and certification and detrimental changes in tax laws.

Proposed new legislation in the Scottish Government’s New Deal for Tenants, now out for consultation, will further affect restrictions on evictions, establish a regulator for the sector, implement rent controls and impose further zero-emissions burdens.

The fact is that the private rented sector plays a crucial role in the housing system, providing homes to people who cannot, or simply do not want to, own their own home and for whom the social rented sector is not an option.

Such people want reasonable accommodation at a fair rental price. Responsible landlords aspire to provide it and still make a reasonable return on their investment. That is how markets work – willing buyers and willing sellers.

There is no gain to be had from regulating a functional market into extinction.

Riccardo Giovanacci, Managing Director of Newton Letting



Comments

by Mick Roberts

6:49 AM, 29th March 2022, About 2 months ago

Good intentions yes.
But what Govt & Councils forgot, is Landlords/Landlady's are human beings too. Oh sorry u single person, u don't have to pay the rent. u single person u horrible Landlord, we know nothing about u, u too could be skint & in debt & mind not great, but yes u are going to let this person not pay rent for 2 years & u can't evict. AND u WILL still pay the mortgage in the meantime & repairs for this person to live here.

As soon as Corbyn shouted We need Rent holiday for tenants, tenants jumped for joy. I knew at that moment they gonna be worse off next year as more landlords think I've had enough, they pack up, now limited supply, tenants are paying more.
Govt said they can catch this rent up. Yet again time shows us the Govt don't know anything about renting. If u let us evict quick, next Landlord would say What I can get rid of her in a month? Yeah I'll take a chance on her, I'll take em all and I'll buy some more houses for the others. And that people is how u bring rents down. Make it easier for Landlord, u make it easier for tenant. Hurt the Landlord = Hurt the tenant. We have no competition

And that is why My Govt & Council's, u/we are in the position we are in now. Landlords have packed up, rents have rocketed & Landlords are super cautious no longer taking a chance. I used to take ANYONE, the people u wun't want to meet on a dark night. Gave 'em a chance. Some ended up brilliant & still with me 14 20 years later. Not any more. Well done Govt & Councils. Keep bringing them rules & regs & costs in. Cause it's the tenant u really hurting. They can't afford New build standards & 2022 regs on a 2015 Benefit rent. U making 'em homeless.

Love some Scottish Landlords to tell us on here what's it like up there with tighter controls & Scottish tenants to let us know how hard it is to get a house & rent prices.

And as I read on, Riccardo echoes what we all know:

Govt & Councils & should be coming to us & saying:

Mick, what can we do for u that is going to make u not sell all your houses and what can we do to entice more landlords in as we in the crap here, our hostels are full too and not emptying.
We're sorry we wanted all your 50 year old houses to have New build standards, we din't realise that would result in impossible rents for benefit tenants.

by Morag

10:02 AM, 2nd April 2022, About 2 months ago

As a Scottish landlord since 2006, with up to 11 properties at one point, I have gradually been worn down by the continual onslaught of demonisation in the media and ever increasing regulation, and have been selling as tenants leave. However I feel this has been largely across the whole UK, and not worse in Scotland. The Scottish Landlord registration system has many flaws making it less than useful to tenants or landlords, but it is not too burdensome or expensive to register. I have been horrified reading on this platform about the various selective licensing schemes perpetrated on landlords by various councils in England. I may be wrong but I feel the Scottish Government secretly recognises the vital contribution of the PRS to housing provision, but they feel they have to be seen to go along with the mainstream myth that there was much wrong with the status quo that required improvement by new legislation. As we all know, and have warned until blue in the face, it has only led to a reduction in supply, a trend towards faceless large scale corporate landlords who only want reliable professional tenants, and rent increases in high demand areas. Having said that, until a couple of years ago, I had not noticed any significant increase in rents during my time, and like many of you, had never felt the need to increase rent during a tenancy. Even between tenancies, it rarely seemed prudent to attempt an increase as it might deter potential applicants, given the level of competition in the market. I have been shocked however by how market rents do seem to have increased in recent years, even in formerly less popular areas as tenants are being forced to look outside their preferred areas.
My remaining three tenants have been with me since 2012 and 2015, and don't seem to be going anywhere in a hurry. Their properties are barely valued at what I paid for them in 2006, following 2008's crash, so I'm not necessarily desperate to sell them right now anyway. I'll just play it by ear meantime and see what the future brings.

by Jireh Homes

12:51 PM, 3rd April 2022, About 2 months ago

Agree the Scottish PRS is heavily regulated and for most landlords the current system is not fair but perhaps reasonable given the previous political pressure towards increased tenant rights, with national Landlord Registration not a significant burden compared with some English licensing schemes! However the proposed New Deal for Tenants legislation swings the pendulum even further so incumbent on all landlords and agents with properties in Scotland to respond to the consultation.
In addition to proposals allowing pets and decoration, there is the potential for heavy fines for inadvertent mistakes on eviction process (for those who have gone down this route know how strict the requirements are being interpreted by FTT), and failing to report rental property returns, as a further example if unintended consequences.


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