Scotland’s BTL market collapses as rent controls bite

There’s a lesson for private sector landlords in England with data showing that Scotland’s buy to let market is collapsing after rent controls were implemented.

According to the Daily Telegraph, the number of Scotland’s landlords investing in property has plummeted to a 15-year low.

It says data shows that just 5.7% of all homes purchased in 2024 were for investment purposes.

This represents a near-halving of investment when compared to 2021, the year before a 3% cap on annual rent rises was introduced by the Scottish National Party (SNP) government.

While this cap was lifted in April 2024, the SNP has proposed further rent controls with a potential 6% cap.

The Scottish government is also considering prohibiting rent rises between tenancies, a measure not implemented during the initial round of controls.

Landlord properties are becoming ‘unviable’

John Blackwood of the Scottish Landlord Association (SLA) told the newspaper: “Landlords are concerned that without this option to reset rents to market value between tenancies, their properties will become increasingly unviable as costs increase at a faster rate than they can raise rents.”

More than half of SLA’s members say they have plans to downsize their property portfolios within the next five years.

Nearly eight in 10 of them say this decision is down to perceived government hostility towards landlords.

Timothy Douglas of Propertymark emphasises the need for lower tax burdens on landlords to help boost the cost of renting for tenants.

He said: “While the minister [Mr McLennan] is beginning to recognise that landlords and investors are vital to solving the housing crisis in Scotland, and inflation-linked rent increases will support investor appetite, further changes are still needed to give more confidence to letting agents and their landlords.”

Additional dwelling supplement on rental property purchases

The SNP recently increased the additional dwelling supplement on rental property purchases from 6% to 8%, marking the second such tax hike in two years.

Rent controls were initially introduced in Scotland in 2022 through an emergency bill, leading to a six-month rent freeze followed by a 3% cap.

Despite this cap, the cost of a one-bedroom flat surged by more than 20%, according to DJ Alexander, Scotland’s largest estate agent, as landlords could still increase rents between tenancies.

The surge in rent prices has contributed to a significant rise in homelessness in Scotland, with government figures showing 40,685 homelessness applications in 2023-24 – a 4% increase compared to the previous year.

It’s also the highest level since 2011-12.

The homeless figures led Anas Sarwar, the Scottish Labour leader, to call for the country’s housing minister, Mr McLennan, to be sacked.

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