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Scotland and the new private rented sector: Part 1

In collaboration with Policy Scotland and hosted by the Wheatley Group, we held our first Annual Scottish Housing Policy Conference on June 6. The topic of the first event was the private rented sector and making sense of the myriad changes underway from within and outside of Scotland. It was a well-attended event reflecting the breadth of the housing sector in Scotland and the fact that the Housing Minister gave the opening address. And there was something for everyone: placing the recent tenancy and associated reforms in international context; thinking anew about rent controls; the controversy of short-term letting; the growing importance of mid-market rent; the challenge of securing sufficient quality data to monitor the sector; the role of build to rent; and the scope for social enterprise to promote a different kind of rental market.

There’s a lot to cover, so this blog post is divided into two parts: in this, part one, we summarise and reflect on contributions to the plenary sessions, the common theme being one of regulation; and, in part two, we do the same for the parallel sessions.

In his opening address, the Minister set out the three main strands of rental market reform in Scotland:

  • the new indefinite tenancy with its annual rent increase provisions and the 18 prescribed routes to end a tenancy;
  • the local rent pressure zone (RPZ) approved limitations on rent increases; and,
  • the linked set of dispute resolutions through the new first-tier tribunal system.

This is of course not all that is going on, but the three elements do represent the fundamental pillars of what is being attempted in Scotland, and what is now of so much interest elsewhere in the UK. The Minister also stressed the importance of robust evidence for monitoring and evaluating the impact of these reforms and noted that the Scottish Government is prepared to act where new legislation is not delivering as intended.

Ken Gibb chaired the conference and set proceedings off by providing a little context. First, that the sector has trebled in size since 1999 and that much of that growth was unplanned and ‘accidental’ from a policy perspective (and indeed policy has only come to accommodate that growth in recent times). Second, that the subject of rental market reform in Scotland ticks the three evidence boxes that CaCHE is interested in: identifying and closing evidence gaps; providing rigorous evidence to support planning and strategy; and, undertaking evaluations of the effectiveness of interventions. Third, that the rental market is not homogenous but fundamentally segmented into discrete submarkets on both sides of the market. Policy has to understand the complexities of the sector and the very different groups it caters for. And finally, the tax question – the three big tax assaults on private landlords via cutting tax relief, through higher transactions taxes and higher rates of capital gains tax. To be charitable, this strand of policy sits oddly when looking at rental market policy as a whole.

Christine Whitehead followed and focused mainly on the security of tenure and rent pressure zones, placing Scotland in a comparative context. Other European countries, she noted, each have their own sets of rules which give a different mix of rights and constraints, and most have reduced regulation over the past 40 years. Britain has been at the extreme end of short-term tenancies and insecurity for tenants. Even where European countries have relatively lower degrees of security the direction of travel in recent times has been to increase security. Christine also pointed to growing pressure to increase rent controls in several countries and regions where there is rent stabilisation and housing market pressure, notably in Canada, France, Germany and Ireland. And she noted that, so far, there is little evidence on the impact of increasing rent controls on investors’ preparedness to invest; instead there appears to be growing interest among institutional investors (see Andrew Bruce’s contribution on Build to Rent in Part 2) and landlords who appear to be happy with long-term security and index linked in-tenancy rent increases.

Douglas Robertson responded by drawing partly on recent work with Gillian Young on behalf of Shelter Scotland, which also places analysis of Scotland’s approach to rent regulation within a broader review of European rent regulation measures. This work is usefully summarised in a recent Shelter blog; but one of the key messages, of particular relevance to CaCHE (and the subject of Mark Livingston’s contribution), is that we need much better data on private rents in Scotland. As Douglas and Gillian note in the report: “The single biggest barrier to the effective operation of… ‘rent regulation’ provisions [in Scotland] is the lack of robust data on the stock of private rented dwellings and the rents being charged” (p. 5). This makes it difficult to apply for a RPZ or for tenants to challenge rent increases.

Following the parallel sessions, which are summarised in part two, we finished with a panel looking at the controversial area of short-term lets. Interestingly, several speakers and members of the audience called for a balanced perspective: yes, there are real costs associated with the spatial proliferation of such lets in specific neighbourhoods and in some higher demand touristic rural settlements; and there are genuine benefits for the service they can provide (for which there is considerable demand). John Boyle noted the absence of evidence about displacement from hotels in Edinburgh and Glasgow, suggesting that short-term lets were not impacting on occupancy rates. There was a lively debate about the form of regulation and the troubling interface with the digital world which may be moving much quicker than regulation can cope with. A big issue going forward following the recent tax changes is the scope for exits from the Buy to Let sector shifting into short-term lets.

The conference programme and speaker presentations are available to view on the event page.

View Part 2 of this blog. 

Prof Ken Gibb is Director of the UK Collaborative Centre for Housing Evidence. 

Dr Gareth James is Knowledge Exchange Associate for the UK Collaborative Centre for Housing Evidence.

 
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Date: June 27, 2018 11:58 am

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