Scotland’s rent freeze will see landlords ‘remove their properties’

Scotland’s rent freeze will see landlords ‘remove their properties’

15:39 PM, 6th September 2022, About 4 weeks ago 73

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In a bid to help tenants struggling with rising bills, Scotland’s First Minister Nicola Sturgeon has announced a rent freeze for private and public rented properties.

The rent freeze starts immediately and will be in place until the end of March next year – and the government will also introduce a moratorium on evictions during winter.

However, Scottish landlords say the move will see landlords removing their rental homes from the market.

And one leading industry expert says Scotland’s move could see rent controls mark ‘the end of the private rental sector as we know it’.

Rent freeze in Scotland is necessary

Ms Sturgeon told MSPs at Holyrood that the rent freeze in Scotland is necessary because the cost-of-living crisis is a ‘humanitarian emergency’ that could cost lives.

The Scottish government will now table emergency legislation that will ban evictions during winter – and freeze rent until next spring.

Ms Sturgeon also says that the devolved governments need to meet with the UK government about the steps that should be taken to help people – raising the prospect of a UK-wide rent freeze.

The Scottish government is also looking to increase Scottish child payments which will pay extra money to families who are receiving some benefits.

Also, rail fares will be frozen by ScotRail until March 2023.

‘Landlords will be removing their vacant properties from the rental market’

John Blackwood, the chief executive of the Scottish Association of Landlords (SAL), said: “Since rumours of this announcement broke, I have been inundated by landlords saying they will be removing their vacant properties from the rental market, and I don’t blame them.

“Who on earth is going to let a property in the knowledge that they will be unable to meet their own financial and maintenance obligations if their tenants don’t pay the rent or their outgoings increase?”

He added: “Instead of helping tenants pay their bills, the Scottish Government has chosen to penalise people who have provided the homes politicians have failed to provide for decades.

“Once again the Scottish Government fails to grasp the reality of Scotland’s housing crisis and has chosen the easy option of attacking landlords for political reasons which will only further reduce the supply of housing, putting more people at risk.

“This is not a solution; it will only cause more hardship.”

‘Students and others who can’t find suitable accommodation’

He went on: “In just a few weeks, we will see more stories of students and others who can’t find suitable accommodation.

“We warned of this last year, and nothing was done but no one should be in any doubt where the blame for that new crisis will lie. It will be at the door of Bute House.

“Despite reassurances from Scottish Ministers that they value the role private landlords play in provided much needed housing, we are astounded that once again they have chosen to attack landlords at a time when they should be encouraging landlords and tenants to work together to overcome financial hardship.”

‘Rent freeze represents a potentially seismic new frontier’

Tom Mundy, the chief operating officer at Goodlord, the lettings platform, said: “This rent freeze represents a potentially seismic new frontier in UK lettings policy.

“While we understand the need to support tenants, introducing rent control could mark the end of the private rental sector as we know it by stripping away the central incentive which encourages people to invest in buy-to-let properties.”

He added: “There’s a major risk that this freeze will push landlords out of the PRS market at a time when pressure on rental stocks is particularly acute.

“This will squeeze the whole lettings market and create bigger headaches for the Scottish Government later down the line.

“Long-term, it could serve to stymie all future investment in the space and fatally undermine the system.”

‘A fundamental re-write of the UK lettings market’

Scotland's rent freeze will see landlords ‘remove their properties’ property118.com 2The chief executive of tenant referencing firm Vouch, Simon Tillyer, said: “This is a huge step from the Scottish Government. It could be the first towards a fundamental re-write of what the UK lettings market looks like.

“At a time when too many landlords are already leaving the market and there are more tenants than there are homes available to rent, we should not be taking steps that will drive even more landlords away from the PRS.”

He added: “I wouldn’t be at all surprised if this is the final straw for landlords and sparks an exodus. This policy risks creating more problems than it solves.”

Mark Alexander, the founder of Property118, said: “The Scottish government need to consider how many rental properties currently being marketed to let will revert to being marketed for sale as a result of this announcement.

“There is already an acute under-supply of available rental property in many areas of Scotland, and this will only serve to exacerbate that position.”



Comments

Annie Landlord

19:14 PM, 6th September 2022, About 4 weeks ago

S21 doesn’t exist in Scotland. Currently (until the end of September) all grounds for S8 are discretionary, meaning the Tribunal decides whether the landlord’s request for possession is ‘reasonable’. It doesn’t matter if the tenant has trashed the property, is a year in arrears or has a cannabis farm in the attic, there is no mandatory eviction. All the signs are that ScotGov intends to continue with this (what was emergency Coronavirus) legislation) so they really do have landlords over a barrel. The logical conclusion is that ScotGov intends to ensure that landlords cannot sell, or indeed move back into, their property

Porky

19:59 PM, 6th September 2022, About 4 weeks ago

Reply to the comment left by Chris Bradley at 06/09/2022 - 15:52
I mainly agree with your arguments but reduced margin due to mortgage interest rate rises should not be lumped in with the other increases such as maintenance and insurance etc. A tenant doesn't get to know or able to choose landlords that have a large mortgage on the property they rent so they shouldn't be penalised if mortgage interest rise. You chose to borrow to buy to let so you should take the hit on this in my view. Interest rates have been very low for years and I fear many have taken this for granted and now with interest rates rising they don't like the consequences.

DSR

20:19 PM, 6th September 2022, About 4 weeks ago

Reply to the comment left by Porky at 06/09/2022 - 19:59
disagree. A LL choses to invest on the ability to make a decent return and that is based on what knowledge is available at the time and factoring in various 'what if's' in the calculation. No one is a mind reader so you cant predict everything!

ANY changes that reduce this income stream, then a LL has a right to make the decision to put the rental costs up if justified. Extreme increases will not be tolerated by the market that is itself based on supply and demand so essentially there is a natural 'cap' (whether you like the level of the cap or not!), If he asks too much rent, no one will want to live there.

Tesco are not obliged to sell you an apple for less than it took them to pay to get it onto the shelf, so why should a tenant expect a Landlord to receive less than it takes to run the property, fulfil his legal obligations and make a return on his investment?

david porter View Profile

20:22 PM, 6th September 2022, About 4 weeks ago

The SNP want Scotland to leave the UK. They had a referendum but only Scotland could vote. Why could Englad and Wales not vote.
If Southern England had been allowed to vote on Scots indepedence they would have been gone before lunch!!!!!!!

Dylan Morris

21:30 PM, 6th September 2022, About 4 weeks ago

Reply to the comment left by John McKay at 06/09/2022 - 18:57With pice freezing on energy bills the suppliers get compensated. Hence the new PM’s energy freeze max £2,500 per average household is costing £100 billion over next 18 months. Would have no problem with rent freeze so long as Government likewise compensate landlords.
And you can bet Sturgeon will, come the end of March extend the rent freeze and the eviction moratorium. Will be extended until end of September and further because nothing will have improved by end of March.

AllnWlkr

22:36 PM, 6th September 2022, About 4 weeks ago

Hmn, forcing the issue perhaps? Time to wait and see if there'll be a social rent announcement 😏

Jessie Jones View Profile

22:55 PM, 6th September 2022, About 4 weeks ago

Reply to the comment left by Blodwyn at 06/09/2022 - 15:58
Precisely. If the government told Tesco that they could not increase the price of bread, despite the cost of wheat soaring, do we think that people would be able to buy bread at the current price, or do we think that Tesco would stop selling bread?

Leila S

23:05 PM, 6th September 2022, About 4 weeks ago

I have a house in Aberdeen that has been rented out for about 10 years. The rent was already terrible as the market is a mess, but I’ve been sucking up the deficit and not increasing the rent as I have good tenants and they struggled during the pandemic as the main earner is a driving instructor.
However after recent mortgage rate rises, I am now significantly out of pocket each month - several hundred pounds - and have no option but to sell….but now Nicola is telling me I can’t for at least another 6 months. This could break my family, especially if nothing is done about the fuel crisis.

Porky

23:19 PM, 6th September 2022, About 4 weeks ago

Reply to the comment left by DSR at 06/09/2022 - 20:19You say you are investing in a BTL. If you need a loan to pay for it the bank or building society are investing in it as well as your contributing deposit. If bank interest rates soar and you have to increase rent to compensate you are making your tenant pay for your financing choices.
So glad I fully own all my lettings, I won't be burdening my excellent tenants with any more than I absolutely have to.

Porky

0:14 AM, 7th September 2022, About 4 weeks ago

Reply to the comment left by DSR at 06/09/2022 - 17:08
If yiu are going to make an analogy then it has to be an accurate one. Take the Tesco apple analogy you chose. You are right in saying Tesco would not (normally) sell its apples cheaper than the cost to buy them from their supplier and prepare them to get to to shelf. However if the costs of retailing those apples along with other products includes a large cost associated with a bank loan on their stores then suddenly Tesco apples would be more expensive than say Asda down the road who fully own all their stores let's say. Guess who is going to be selling all the apples?
In your incomplete analogy you are assuming everyone is going to be facing the same increases but you are wrong, they are not. Those with big mortgages on their properties will be facing reduced margins if interest rates go up unless they pass it all on to the tenant. The tenant can easily choose to shop at Asda but can't easily switch houses with a LL who doesn't burden them with financing cost increases. We are talking about someone's home here not buying fruit and veg.

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