The Telegraph has run an article outlining the problems experienced in Scotland, and why England is close behind.

The article can be seen here (subscription may be necessary) and outlines that the Scottish rental market faces significant challenges due to tightening regulations and economic pressures, leading to decreased landlord investment and rising homelessness. Here’s a summary of the key issues:

Landlord Investment Decline

  • Record Low Purchases:
    • Only 5.7% of homes bought in Scotland in 2024 were for investment—the lowest in 15 years.
    • This marks nearly a 50% decline since 2021.
  • Reasons for Decline:
    • Tightened rent controls (annual cap at 3%, lifted in April 2024).
    • Proposed new measures include inflation-linked caps (up to 6%) and banning rent increases between tenancies.
    • Increased taxation: Additional dwelling supplement rose from 6% to 8%.

Impact of Rent Controls

  • Policy History:
    • Scotland banned no-fault evictions and fixed-term tenancies in 2017.
    • Rent freezes and caps introduced in 2022.
  • Unintended Consequences:
    • Market Effects: Rent caps failed to prevent significant rent hikes (e.g., 20% for one-bedroom flats).
    • Landlord Concerns: Without the ability to reset rents to market value between tenancies, properties may become unviable.
    • Investment Deterrence: Rent control measures reduce incentives to invest in or improve properties.
  • Homelessness Crisis:
    • Homelessness applications reached 40,685 in 2023–24, the highest since 2011–12.

Reactions from Stakeholders

  • Scottish Landlord Association (SLA):
    • Over half of members plan to reduce their portfolios within five years.
    • 79% cite government hostility as a key factor.
  • Policy Suggestions:
    • Reduce tax burdens to encourage investment.
    • Avoid rent control measures that disincentivise property upgrades.
  • Housing Minister’s Perspective:
    • Acknowledges landlords’ right to returns but supports inflation-linked rent increases.

Broader Implications

  • Tenant Costs: Continued rent increases despite controls reflect market imbalances.
  • Homelessness and Supply: Rising homelessness underscores the need for balanced policies that address both tenant protections and housing supply.
  • Potential Lessons for England: With Labour introducing similar policies in England, these outcomes provide critical insights into balancing regulation with market viability.

Policy Outlook:
To address these challenges, the Scottish government may need to:

  • Reassess rent control measures for unintended market impacts.
  • Provide incentives to retain and attract landlords.
  • Develop broader housing policies to increase rental stock and reduce homelessness.