For greater than 20 years, Ian Walker has rented out eight flats he inherited on his father’s demise in 2001, in central Edinburgh’s fascinating, 18th and nineteenth century New City.
The businessman — who’s retired and asks to not be recognized by his actual title — says life as a landlord to college students, enterprise folks and others has been a “fairly passable expertise”, though the rents have been “not terribly excessive”.
However Walker, who himself lives in Edinburgh, has began to unwind his portfolio, blaming what he describes because the “very worrying” angle of the Scottish authorities in the direction of landlords.
In September 2022, confronted with a surge in dwelling prices, the devolved administration imposed a freeze on rents for sitting tenants. When the freeze ended on March 31 this yr, it was changed by a cap on increases for these tenants of three per cent a yr — or as much as 6 per cent in some distinctive circumstances. The cap, nicely beneath the UK’s prevailing inflation charge, will stay in place till March subsequent yr.
The federal government can also be planning a brand new housing invoice. That can enable ministers to use the identical rental caps throughout modifications of tenancy as presently apply for sitting tenants.
Walker responded by placing two of his properties in the marketplace — the place they’re prone to be purchased by owner-occupiers, not a brand new landlord.
Research by Hamptons, the property agent, suggests Walker’s determination displays a wider development. Scotland was the one a part of Nice Britain the place property gross sales by landlords have been larger in October than in the identical month final yr, it discovered. The hire cap, whereas in style with many tenants, has been broadly blamed for encouraging such gross sales, decreasing the availability of personal leases and placing upward strain on new rents.
The Scottish authorities’s stance is “a catastrophe for everybody”, in response to Walker.
“It is going to end in a massively diminished provide of rental housing as folks take their properties off the market,” he says. “You’ve got an asset and also you select: do you deploy the price of that asset in a price-controlled space or a non price-controlled space just like the inventory market? It’s blindingly apparent what’s going to occur.”
Gross sales by landlords on the rise
Patrick Harvie, the Scottish Inexperienced minister answerable for tenants’ rights, insists, nonetheless, that the hire cap has struck “an necessary stability between safety for tenants and the rights of landlords”. He factors out that the native housing allowance — the aspect of the common credit score profit meant to assist tenants with housing prices — has been unchanged since 2020. The failure to lift the allowance means an necessary aspect of many poorer tenants’ earnings has been frozen. The allowance can be raised in April subsequent yr.
As proof of the market’s continued well being, Harvie says the Scottish Landlord Register confirmed a slight enhance — of 1.2 per cent — within the variety of properties accessible for hire between August 2022 and September this yr.
“Rental market challenges are being felt throughout the UK, with rates of interest, tax and the freeze on native housing allowance growing strain on tenants and landlords,” Harvie says.
But landlord teams stay satisfied that authorities insurance policies are squeezing landlords disproportionately out of the Scottish market. Based on property agent Hamptons, landlords have been the sellers in 12 per cent of Scotland’s property transactions within the yr to the top of September, 3 proportion factors up on the identical interval in 2022. All over the place in England and Wales, the speed was both flat or down on a yr earlier than. Solely 6 per cent of consumers in Scotland within the interval have been landlords.
John Blackwood, chief govt of the Scottish Affiliation of Landlords, says that, as a result of landlords should replace their registration solely each three years, Harvie’s figures from the Landlord Register might not replicate actuality.
Blackwood insists an extended time horizon offers a extra correct image. Between January 2017 and March 2023, the variety of registered Scottish rental properties declined by 6 per cent, to 340,154. The primary new, Scotland-only restriction on landlords’ rights — a near-ban on no-fault evictions — got here into pressure in December 2017.
“Proof from native authorities in Scotland and different market statistics clearly factors to landlords promoting up and a discount of properties accessible to hire throughout the nation,” Blackwood says.
Tony West, an vitality marketing consultant from Oxfordshire, responded to the altering ambiance round Scotland’s housing market in January final yr by promoting his solely Scottish property, a rented flat in Granton, a northern district of Edinburgh.
West, who nonetheless owns some properties in England, says he was anxious in regards to the impact of rising variations in tax and different insurance policies between Scotland and the remainder of the UK on his means to understand the worth of the property, owned collectively along with his spouse.
“We have been very nervous on the time about Scotland going impartial and what that may imply from a tax perspective,” he says.
As a result of there had already been a debate about the opportunity of hire controls in Scotland, West additionally feared he might face rising mortgage costs if rates of interest rose on the similar time his means to lift rents was capped. He nonetheless made a degree of taking a reduction on the sale to make sure he bought to a different landlord who would let a longstanding tenant keep within the flat.
Each the hire cap and a basic souring of attitudes in the direction of landlords have vindicated his determination, West provides. “The rules in opposition to landlords are simply hideous.”
John Boyle, director of analysis and technique for Rettie & Co, an Edinburgh-based property agent, says the cap has been a “very blunt instrument” and has not contained hire will increase between tenancies.
Figures from Zoopla, an internet property portal, present rents in Scotland in November have been 12.8 per cent larger than a yr earlier than. Zoopla attributes the rise — the quickest in any UK nation or area and above the ten.1 per cent nationwide common — to landlords’ need to place up rents for brand new tenancies to compensate for the Scottish hire cap for sitting tenants.
“Though it might have restricted rents inside tenancies, it has accelerated hire will increase between tenancies,” Boyle says of the hire cap. “It has additionally led to a discount within the non-public rented provide simply when demand for that sector is booming. There have been plenty of unintended penalties.”
Some Scottish native authorities are dealing with significantly acute issues as they search to fulfill their obligations to accommodate homeless folks in a declining variety of accessible properties. The native authority for West Lothian, west of Edinburgh, says the variety of non-public properties accessible for hire in its space declined by 4.9 per cent within the yr to March 2023, to six,148.
“An identical image will be seen throughout the nation because of systematic weaknesses within the housing system and failure to deal with this at a nationwide stage,” the council says. “The non-public landlord sector has seen melancholy because of Covid hire controls on evictions and hire will increase, and because of rising mortgage and upkeep prices.”
But the brand new housing invoice, with its widened restrictions on landlords’ freedoms, will take the present coverage additional, quite than scaling it again.
Hire cap ‘reduction’
Aditi Jehangir, secretary of Dwelling Hire, a Scottish tenants’ marketing campaign group, says that, whereas the hire cap has been a “enormous reduction” for hundreds of tenants, the brand new measures are essential.
“Because the will increase in new market rents reveal, we now want hire controls to cap rents between tenancies and convey rents down,” she says.
Harvie factors out, in the meantime, that Scotland has “led the UK” in a single exercise that ought to cut back upward strain on rents — the constructing of latest houses. Workplace for Nationwide Statistics figures present Scotland, with round 8 per cent of the UK’s inhabitants, had 11 per cent of housing completions within the yr to March 2023.
Nonetheless, Boyle says housebuilding in Scotland might be going nonetheless quicker if builders — significantly builders of properties for long-term hire — confronted fewer dangers. Personal sector builders accounted for 64.2 per cent of housing completions in Scotland within the first quarter this yr, in contrast with 73.9 per cent in England.
“Construct-to-rent has actually not taken off in Scotland in the best way it has in Manchester and London,” Boyle says.
He fears that the brand new housing invoice won’t tackle the underlying challenges of assembly demand for lodging in Scotland.
“The demand on the non-public rented sector has outstripped the availability of the property accessible and the hire rises have been a consequence of that,” Boyle says.
Walker, in the meantime, will resolve what to do along with his remaining six flats after the brand new invoice is revealed. He insists he feels sorry for his tenants and it will likely be “unhappy” if he feels compelled to promote.
“There was no actual want to do this,” Walker says of the potential sale. “It’s simply been instigated by the politicians.”
