UK: Scotland’s rent controls will expire on March 31 2025, meaning landlords will be able to set rents with no restriction until the Housing (Scotland) Bill comes into effect in 2027.
Rents were frozen in 2022, before being subject to a cap between April 2023 and April 2025.
Paul MacLennan, Scottish housing minister, said: “The temporary changes to rent adjudication were in place to support the transition away from the short-term rent cap that was in place under the Cost-of-Living Act. They were in place for year to manage the risk of very steep increases in rents for tenants if there was a return to market rent in a single step and will come to an end on March 31, 2025.”
The Housing (Scotland) Bill would see rents capped at inflation plus one per cent in rent control zones, up to a cap of six per cent.
The rent controls have seen a virtual cessation of BTR investment in Scotland, with some developers converting BTR projects to PBSA. In April 2023, a series of interviews with institutional investors, conducted by Rettie & Co for the The Scottish Property Federation., discussed the impact of Scotland’s three per cent rent cap on the Scottish BTR market. Of the 14 investors interviewed, with a combined £15 billion of BTR assets, nine judged Scotland to be unattractive, including four who view the country as “un-investable under current conditions”.
Will Scarlett, of Scarlett Land and Development, said the end of rent controls could mean a window of new investment would be created. He said: “We understand, informally, that current transitional rent control measures will not be rolled over or extended by Scottish Government after March 31, 2025, when they were always due to expire. If so, then from April 1, 2025 open market rent setting can return with no rent cap restriction. This should remain the case until the Housing Bill legislation comes into effect in 2027 – with key rent control attributes expected to be made clear by late 2025, possibly to include some form of qualified exemption for built-to-rent/mid-market rental subject to a consultation exercise due to commence in April 2025.”
“This looks like positive news for residents in Scotland and suggests that the Scottish Government are on track for long-term rent control legislation that is far more acceptable to institutional investors,” he added.
Tenants’ union Living Rent criticised the end of the rent cap measures. Ruth Gilbert, national campaigns spokesperson for Living Rent, said: “As soon as these measures end on March 31, tenants are going to be hit by a tidal wave of rent increases as landlords cash in after two years of emergency protections. The rent controls and protections in the housing bill will only come into effect in 2027. From now until then, tenants are faced with two years of completely uncapped rents. Landlords increasing rents, which will decimate our cities, force people out of their homes and further exacerbate both homelessness and poverty.”
According to analysis from DJ Alexander Ltd, Scotland’s largest letting agency, between 2010 and 2022, average rents for one-bedroom apartments rose by £138 (31.2 per cent). In the two years following rent control implementation, similar properties saw a £130 (22.4 per cent) rise. The company says translates to a 2.6 per cent annual increase before controls, matching inflation, compared to a substantially higher rate afterward.
David Alexander, chief executive of DJ Alexander Scotland, said: “What the rent cap legislation did was put the brakes on property investment in the private rented sector, led to some landlords leaving the market, and has consequently increased demand to unprecedented levels which remain to this day. By interfering in the market and by imposing controls the law of unintended consequences has resulted in tenants being charged more, with increases rising at a faster rate, and with a market that is overheating with little sign of this being resolved.”
He added: “The logic of the findings of the latest data is that we need to scrap plans for rent controls and rent caps, the Scottish government must work with the PRS to grow the sector as a sustainable and valued element of the housing offering in Scotland to ease demand, and let the market find its own level again. The market has worked successfully for decades yet the last two year’s interference has led to unprecedented demand resulting in large increases in rents.”
