Another attempt to introduce rent controls is expected to backfire and ultimately worsen the situation for tenants. This is the view of a leading lettings agency head, who warns that such policies could lead to unintended consequences.
David Alexander, the head of DJ Alexander Ltd, Scotland’s largest lettings agency and a member of the Lomond Group, cites official private sector rent statistics to illustrate the potential harm of the proposed policies in the Housing Scotland Bill.
According to Alexander, the measures outlined in the Bill are unlikely to ease the housing crisis. Instead, he argues that they will only serve to intensify the existing problems, ultimately making the situation more difficult for tenants in the long run.
Recent statistics have shed light on the trajectory of rent prices in Scotland over the past decade, revealing significant increases in rental costs, particularly in the two years following the introduction of rent controls. From 2010 to 2022, the average rent for a one-bedroom flat in Scotland rose by £138, which equates to a 31.2% increase over the 12-year period. This steady rise in rent prices had been in line with inflation during that time, as the annual rate of rent increase matched the overall inflation rate of 2.6% per year.
However, the situation has changed dramatically in the two years since rent controls were implemented. For the same one-bedroom flat, rents have surged by £130, representing a 22.4% increase in just two years. This rapid escalation in rent prices suggests that rent controls may have inadvertently exacerbated the very problem they were meant to address, as landlords adjust prices in response to new policies. This increase in rents during the two-year period stands in stark contrast to the relatively steady and moderate rate of increase observed in the previous decade.
The story for larger properties follows a similar pattern. Over the 12-year period from 2010 to 2022, two-bedroom properties saw a 32.8% increase in rent, while three-bedroom properties rose by 34.4%. In the last two years, however, rents for these properties have increased by 27.1% and 25.4%, respectively. This is particularly concerning given that during the same period, inflation was significantly higher at 10.9%. The data clearly shows that rents for larger properties have been rising at a faster rate than inflation, further highlighting the growing rent pressure that tenants are facing.
These figures suggest that, despite the intentions behind rent control policies, the current measures may be contributing to further rent inflation, making housing even less affordable for tenants in Scotland. Rather than alleviating the issue, the introduction of rent controls may have unintentionally driven up costs for renters, leaving them with fewer affordable housing options. The data calls for a closer examination of the effectiveness of rent controls in achieving their intended goals and whether alternative solutions are needed to address the underlying issues in the housing market.
The latest figures reveal an interesting pattern in the Scottish rental market over the past 14 years, particularly regarding two-bedroom flats, which make up the largest proportion of the private rental sector. Out of the 18 areas across Scotland, 11 of them saw rent increases for two-bedroom flats that were below the cumulative rate of inflation, which stood at 50% over the period. This suggests that, in many areas, rents were increasing at a pace that was in line with or even below inflation, indicating a relatively stable rental market.
In four additional areas, rent increases for two-bedroom flats were slightly above inflation, ranging between 0.4% and 13.5% over the 14-year period. However, it is only in the Lothian and Greater Glasgow regions where rent increases have significantly outpaced inflation. In these areas, rents for two-bedroom flats have risen by 54.4% and 31.8%, respectively, well above the overall inflation rate for the period.
David Alexander, the head of DJ Alexander Ltd, has pointed out the discrepancy between the Housing Scotland Bill’s proposals and the actual trends shown in the latest statistics. He argues that, contrary to what the bill suggests, the introduction of rent controls in September 2022 has not reduced rent growth but has instead contributed to a substantial increase in rents. Before the introduction of these controls, most areas of Scotland experienced either a slowdown in rent increases or increases that were in line with inflation, making the housing market more stable for tenants. However, Alexander suggests that rent controls may have had the unintended effect of exacerbating the rent inflation problem, making housing even less affordable for renters.
Even after rent controls were introduced, the latest figures show that most parts of Scotland saw average rent prices rising in line with inflation. It is only the hotspots of Edinburgh and Glasgow where the largest increases have been observed. It’s also important to note that these statistics refer specifically to properties that are newly listed on the market, meaning they do not take into account the rent increases applied to existing tenants. For those tenants, rent rises are likely to be lower than what is being seen in the new market listings.
What the data also highlights is that, over the 12 years leading up to 2022, average rent increases were generally in line with or below inflation. This suggests that, far from helping tenants by limiting rent increases, the rent control legislation actually led to faster and steeper rent hikes compared to the previous period. According to David Alexander, the introduction of rent controls in September 2022 effectively put the brakes on investment in the private rented sector (PRS), leading many landlords to exit the market. This, in turn, has driven up demand to unprecedented levels, a situation that continues to persist today.
The underlying message from these statistics is clear: the policy of rent controls and caps has not had the intended effect of reducing rent prices or helping tenants. Instead, it has exacerbated the problem by reducing property investment and increasing demand in a sector already facing shortages. Alexander argues that the solution lies not in further interventions but in working with the PRS to help grow the sector and allow the market to find its own balance. Only by doing so can Scotland address the current levels of demand and reduce pressure on the rental market. Failure to adjust this approach could result in even higher rent increases in the future.
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