Scottish landlords exploit SNP rent control loophole to increase rents

Scottish landlords exploit SNP rent control loophole to increase rents

0:02 AM, 11th April 2024, About 2 months ago 11

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Scottish landlords are capitalising on a loophole in the SNP’s rent control laws, leading to a 12% increase in rents, the Daily Telegraph reports.

The rent cap legislation which restricted rent rises ended on March 31.

However, new plans to bring in permanent rent controls are not expected to come into force until 2025, following a consultation.

This gap has seen landlords raising rents as they scramble to cover spiralling costs.

The move follows Scottish tenants seeing the highest rent rises of 11.6% – the highest in the UK.

Despite the rise, tenants’ rights minister Patrick Harvie has defended the rent cap saying ‘thousands’ of tenants have been helped.

Nicola Sturgeon first capped rent rises at 3%

Scotland’s former first minister, Nicola Sturgeon, first capped rent rises at 3% and placed a pause on evictions in 2022.

The law didn’t cover new tenancies which is when landlords put rents up.

Last month, Humza Yousaf’s SNP-Green government published radical new plans to bring in new longer-term market controls.

This would see local authorities getting powers to create rent caps as low as 0% for up to five years.

Other proposals include allowing courts to delay evictions during the winter months or where they cause high levels of stress.

The new rules would also prevent landlords from ‘unreasonably refusing’ pets or requests to redecorate.

Enact the new rent control legislation by the end of 2025

The Scottish Government says it wants to enact the new rent control legislation by the end of 2025, but industry experts say the plans will reduce investment in Scotland’s PRS.

It will also force more landlords to sell up, they claim.

Michael Lawson, who owns 75 properties in Fife, told the Telegraph that he had issued 26 rent increase notices of ‘between 8% and 12%’ for existing tenancies on April 1.

He said: “All landlords are doing this. Landlords like me just can’t make a return.

“We try to make £300 a month per property but now we’re struggling. Some will be making £100 a month now, and it’s not worth the faff.”

Considering selling 20 properties

Mr Lawson said he was considering selling 20 properties in his portfolio, a move he believes will be bad for tenants.

He explained: “This will mean people not having a home.

“It’s a zero-sum game as that property will stay in the housing stock, but will it stay as a rental?

“Why would anyone invest in it? You can’t be heartless, but you have to work pragmatically.”

He added: “The government is constantly shoving new legislation down our throats. It’s exhausting.

“They have a vendetta against landlords but also a total misunderstanding of how the sector operates.”

Landlords were taking the opportunity to increase rents

The chief executive of the Scottish Association of Landlords (SAL), John Blackwood, said landlords were taking the opportunity to increase rents after their costs ‘sky-rocketed’ over the past few years.

He points to rising interest rates, inflation and increased regulation.

Mr Blackwood told the Telegraph: “From a recent survey of our members, respondents reported that one in ten let properties are no longer financially viable as the costs to run these properties are far in excess of the rents being charged.”


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Comments

Beaver

10:14 AM, 11th April 2024, About 2 months ago

"Last month, Humza Yousaf’s SNP-Green government published radical new plans to bring in new longer-term market controls.....This would see local authorities getting powers to create rent caps as low as 0% for up to five years."

So the SNP have now created a situation where landlords have an incentive to push rents up as high as they possibly can, if they don't intend to exit the market. And if they exit the market and the properties remain rental properties the new landlords also have an incentive to get rents up as high as they possibly can now...because they may not be able to do it later.

Martin Roberts

10:40 AM, 11th April 2024, About 2 months ago

Don’t think it's 'exploiting a loophole' as much as forced into raising rents by the system.

Cider Drinker

10:43 AM, 11th April 2024, About 2 months ago

Rather than setting a fixed percentage for rent increases, I’d suggest a simple algorithm should be used to calculate a fair rent for a property.

This algorithm would use house value, interest rates, inflation, maintenance/repair costs, letting agent fees the tax treatment of landlords to calculate a reasonable range of prices for the rent.

For a house valued at £200k and with interest rates running at 6%, this would suggest £1,000 per month just to cover the interest. Add 25% because of Section 24, 15% for maintenance/repairs and 10% for agent fees and then somewhere in the region of £1,800 would seem reasonable.

Now, add a sim for risk. Don’t forget insurance and legal fees.

Beaver

10:48 AM, 11th April 2024, About 2 months ago

Reply to the comment left by Martin Roberts at 11/04/2024 - 10:40
Absolutely: The SNP government is dramatically increasing the risk of investing...the only option is to raise rents to the maximum, including for long term tenants. Many landlords used to hold rents down slightly to encourage long-term tenancies. The SNP has just made that a very high risk investment strategy.

Beaver

11:17 AM, 11th April 2024, About 2 months ago

It would be nice to think that the SNP had learned something of Nicola Sturgeon's rent control measures. There is a common cliche that we talk about having "a good man in a crisis". But something that is recognised in both business and psychology is that there are some people who thrive on crises:

https://www.psychologytoday.com/gb/blog/fulfillment-any-age/201410/how-deal-someone-whos-always-looking-crisis

And because these people thrive on crises they are continually looking for them.

Reluctant Landlord

12:03 PM, 11th April 2024, About 2 months ago

NOT exploiting anything. Getting the rent they need to be able to continue to house people the Scottish government cannot!

Peter

12:11 PM, 11th April 2024, About 2 months ago

It would seem to me likely that labour is going to do quite well in Scotland in the next general election. That being so, it’s worth remembering that the Welsh Labour government declined to Institute rent controls.

It’s quite possible therefore that with either a hung parliament in Scotland or a labour majority that these controls may never happen. What do you think?

Neil Robb

13:27 PM, 11th April 2024, About 2 months ago

What many people are missing is my rents are £300 one bed flat two bed £350 to £450. Three bed houses £550 to £625 . Four bed £700 so when people see 10 % rise it is not a lot

I never raised rents during tenancys in Scotland not I am and probably yearly now

These headings are very misleading.

Mine are all be low market rents some by over £300.

GlanACC

14:06 PM, 11th April 2024, About 2 months ago

Reply to the comment left by Cider Drinker at 11/04/2024 - 10:43
Cider Drinker, take from me (a professional computer programmer) - there is no such thing as a simple algorithm

Beaver

14:08 PM, 11th April 2024, About 2 months ago

Reply to the comment left by Peter at 11/04/2024 - 12:11
I wouldn't agree with everything that Mark Drakeford did in Wales but his government did at least have the wit to understand that implementing rent controls was only going to make the situation for renters worse. What's going on in Scotland is different to what's going on in Wales. The SNP only cares about independence...Mark Drakeford did at least appear to care about governance.

The fact that the SNP government underperformed on healthcare and education is irrelevant to them; they always find a way to blame Westminster for their woes anyway...it's always somebody else's fault other than theirs. Every totalitarian government needs it's scapegoats...just as Vladimir Putin needs 'The West' to blame for all his failures so the SNP needs Westminster (the place that actually provides most of its funding).

So if the Scottish electorate is given the facts....this is how your government actually did on education...this is how your government actually did on healthcare...this is what the effect of rent controls was...then it has a choice over which way it votes. It's not for me to decide what shape of government the Scottish electorate gets but it would be nice to think that somebody would explain the facts to them so that when they reach the ballot box they can make an informed decision.

The rent increases that Scotland has seen will be a crisis for some tenants in Scotland. That crisis was created by Nicola Sturgeon. If they now do as Humza-Yousaf's government proposes they will just be creating a bigger crisis. But that's a crisis manufactured for the Scottish electorate by the SNP...it's not a crisis caused by landlords "exploiting loopholes" in what was in any case terrible legislation and economically illiterate.

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