Scottish Government Proposes Linking Rent Increase Limits to Inflation

New proposals from the Scottish government suggest that rent increases in Scotland could be linked to inflation. An amendment to the government’s Housing Bill would restrict increases to 1% above the Consumer Price Index (CPI), which is a measure of inflation, with a maximum cap of 6%. These regulations would apply exclusively to properties located in rent control areas, and a consultation on the matter is scheduled to commence in spring next year. Housing Minister Paul McLennan stated that this announcement offers certainty for tenants and encourages investment. However, the Scottish Greens, who were part of the government when the bill was initially presented and played a significant role in its creation, have criticized the proposed caps’ size. The Scottish Conservatives urged the Housing Secretary to “must see sense and finally ditch the SNP’s botched rent controls scheme.” The Housing Bill was introduced earlier this year. The legislation empowers ministers to establish rent control zones based on recommendations from local councils. McLennan commented: “Setting out the cap in this way, with CPI as its basis, allows for a reflection of the costs of landlords to offering a property for rent, while offering protections to tenants in terms of limiting more significant rent increases.” Within the selected zones, caps will be in effect both during and between tenancies. Nevertheless, McLennan indicated that exemptions would be made for certain properties to avoid these restrictions. A consultation will explore how these exemptions should be applied, with the minister suggesting in Holyrood that mid-market rent properties were one such option. Green MSP Maggie Chapman asserted that her party did not believe these proposals would “tackle the significant unaffordability of rents in many areas across the country.” She further stated: “It does not give tenants in the private rented sector the stability they have been promised.” Chapman then questioned the minister on how caps linked to the inflation rate would enhance rent affordability. McLennan responded: “It’s important that any design of rent controls considers the longer-term picture, since rent growth can be above as well as below inflation.” He continued, “We consider that allowing some margin over inflation, such as 1% as has been mentioned, would give investors some assurance that over the long run, any periods when growth is below inflation may be balanced out with periods where rents may grow above inflation.” Megan Gallacher, the Scottish Tory housing spokesperson, commented: “The SNP government remains wedded to meddling in the housing market despite all the damage that rent controls have caused.” Holyrood’s local government committee is currently reviewing the bill. The first stage of the three-step parliamentary process required to enact it into legislation is anticipated to conclude by the end of November. Living Rent, a Scottish tenants’ union, expressed approval that the caps would extend to periods between tenancies but simultaneously criticized their proposed magnitude. Ruth Gilbert, the union’s campaign chairwoman, stated: “Setting a cap at above inflation – even by just 1% – will bake in above-inflation rent increases for tenants, and severely weakens the rent controls we so desperately need.” She added that they “will continue to fight for rent controls that bring out-of-control rents down, not just limit future increases.” Conversely, Propertymark, a trade association for property professionals, argued that restricting rent increases between tenancies “removes any incentive for landlords to invest or upgrade properties.” The organization also suggested that “further changes” to the bill are necessary to “give more confidence to letting agents and their landlords.”