Rent Controls Lifted: for the time being.....
The Scottish Government will lift rent controls on 1st April 2025, allowing landlords to set rents at open market value. This is particularly significant as the government still intends to introduce permanent rent controls in the future and the Housing (Scotland) Bill is going through Parliament at the moment to bring these into force. However, it is unlikely that any rent controls introduced through this new legislation would come into force before 2027 but here is everything you need to know about the proposals:
Understanding Scotland’s New Rent Control Proposals: What you need to know.
The Housing Minister, Paul McLennan, has announced changes to the rent control proposals in the Housing (Scotland) Bill. These changes aim to clarify how rent caps will work in Rent Control Areas (RCAs). Let’s break it down step by step.
What’s Changing?
Under the proposed amendment:
- Rents in Rent Control Areas (RCAs) will be capped at the Consumer Prices Index (CPI) + 1%, with a maximum cap of 6%.
- This cap applies to rent increases during tenancies and between tenancies, but only in areas designated as RCAs.
How Does the Rent Cap Work?
The cap ensures that rent increases remain predictable. Here’s how it would look:
- If CPI is below 5%: The cap will be CPI + 1%.
- Example: If CPI is 3%, the rent increase allowed would be 4% (3% + 1%).
- If CPI is above 5%: The increase is capped at 6%, regardless of CPI.
- Example: If CPI is 8%, the maximum rent increase allowed would be 6%.
What are Rent Control Areas (RCAs)?
Rent Control Areas (RCAs) are not a nationwide measure but targeted interventions in specific geographic areas experiencing high rental demand and housing shortages. Cities like Edinburgh and Glasgow, where significant rental inflation and affordability challenges are prevalent, are prime examples of where RCAs might be implemented.
To establish an RCA, local authorities must apply to the Scottish Government. These applications must provide evidence that rents in the area are rising disproportionately compared to income levels, resulting in affordability issues for residents.
This evidence-based approach ensures that rent controls are applied only where they are most needed, helping to address housing affordability challenges while maintaining fairness across the rental market.
What About Landlords?
The government plans to consult landlords and tenants in Spring 2025 to gather feedback on:
- Exemptions: Deciding which types of properties might not be subject to rent control.
- Higher Rent Increases: Allowing some landlords to increase rents above the cap in specific circumstances.
While these caps will help tenants, it's also important to understand the potential impact on landlords, particularly in terms of property improvements and higher rent adjustments
1Let thoughts:
While linking rent caps to inflation is a positive step forward, we believe that an amendment is needed to tie rent controls to individual tenancies rather than properties. This adjustment would allow landlords to continue investing in property improvement.
Upgrades such as redecorating, installing new flooring, or replacing furniture typically occur during tenant turnovers. However, if rent controls are tied to properties rather than tenancies, the financial incentive for these improvements diminishes. This could pose challenges for landlords and, ultimately, negatively affect the quality of housing.
We also believe that major property upgrades or the installation of costly energy-efficient measures understandably warrant higher rent adjustments, whether completed during or between tenancies.
The full wording of the Bill can be read here.
We would love to hear your thoughts on these proposals, please feel free to reach out to me at beata@1Let.com
Stay tuned for further updates!