The Catastrophe of Rent Controls: Lessons from Scotland

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The Catastrophe of Rent Controls: Lessons from Scotland

By Sim Sekhon

Rent controls have been a hotly debated topic in the English housing market for years. Those in favour argue that such measures could help curb skyrocketing rents and make housing more affordable for tenants. However, landlords and others who oppose rent controls warn that they would have a catastrophic ripple effect.

To understand the potential consequences, let’s take a closer look at the situation in Scotland, examine the pros and cons of rent controls, and consider London’s stance on the issue.

The Scottish Experience

Scotland has been at the forefront of the rent control experiment in the UK. In September 2022, the Scottish Parliament introduced a temporary rent freeze followed by a cap on annual rent increases of 3%.

Rent controls may seem like a solution to rising rents, but they have raised a number of concerns.

Firstly, rent controls have led to a decrease in the supply of properties available to rent. According to a survey by the Scottish Association of Landlords, since the introduction of rent controls, 17% of landlords have sold or are considering selling their rental properties.

Secondly, rent controls have discouraged landlords from investing in the upkeep of their rental properties. According to the same survey, 44% of landlords have reduced or stopped spending money on maintenance and improvements since rent controls were introduced.

Thirdly, rent controls have made it more difficult for new renters to find housing. According to the Scottish government, since the introduction, the average time it takes for a new tenant to find a property has increased from 12 weeks to 16 weeks.

The Pros and Cons of Rent Controls

Those findings point to significant issues with the concept of rent controls within a private rental market, but let’s pause for a moment and look at the broader pros and cons of controlling rents.

Pros:

  • Affordability: Rent controls can, in the short term, make housing more affordable for tenants, preventing landlords from imposing rent hikes.
  • Stability: Tenants may enjoy more stable living arrangements, knowing their rents won’t suddenly skyrocket.

Cons:

  • Reduced Supply: Rent controls can deter landlords from entering or staying in the rental market.
  • Disincentive for Investment: When landlords can’t adjust rents to account for maintenance costs or property improvements, it reduces their incentive to invest in rental properties.
  • Longer Tenancies: While stability can be good, rent controls might discourage tenants from moving when they need to, potentially locking out younger renters who are just starting their careers.
  • Unintended Consequences: Rent controls can lead landlords to switch their business model. For example, they may begin to focus on short-term holiday lets rather than long-term tenancies.

London and the Rent Control Debate

London’s Mayor, Sadiq Khan, has been a vocal advocate for rent controls. Indeed, rents in the city have been soaring, and affordability is an issue for many. But, as the Scottish experience shows, the consequences of rent controls and the implications for the English housing market need careful consideration.

A Stark Warning

A leading trade body has consistently warned that controlling or freezing rents could exacerbate the housing problem. The organisation argues that rent controls typically lead to a reduction in the supply of rental properties, discourage landlords from improving their properties, and potentially result in fewer opportunities for younger renters to secure housing. That’s exactly what’s been happening north of the border.

No Easy Answers

The Scottish case shows us that while rent controls may provide short-term relief for some tenants, they could unleash consequences that harm the overall housing market. Ultimately, the decision of whether or not to implement rent controls, in London or across England, is a complex one with no easy answers. I believe that it’s essential to strike a balance between protecting tenants’ interests and ensuring a sustainable and thriving rental market.