Scotland’s tenants’ union calls for “proper rent controls to protect Scotland’s tenants”

Living Rent, Scotland’s tenants’ union, has welcomed proposals to limit rent increases in private rented homes but cautioned that new measures need to go far enough in order to properly protect tenants.

The proposed Fair Rents (Scotland) Bill, would cap annual rent increases to the “Consumer Price Index plus 1%” and allow private tenants to request a Rent Officer to determine a “fair open market rent” if they felt they were being overcharged.

Responding to the consultation on the bill, Living Rent supported both measures but cautioned that the proposed limit on rent increases is too high. It adds that a one-size-fits-all approach will not be able to take into account local conditions, and called for local authorities to be able to set lower limits in their areas

The union reiterated their calls for a strong system of rent controls, designed not just to limit increases but to bring rents down, that limits carry over from tenancy to tenancy, and for rents to be linked to properties rather than tenancies and to the quality of a home. They argue that this is a vital way to both ensure affordability and incentivise urgent improvements in the private rented sector.

The report also argues that improvements to the quality of PRS housing will make an important contribution towards meeting Scotland’s emissions targets by improving energy efficiency.

Gordon Maloney, co-author of the union’s response, said:

“It is clear that rents in Scotland are utterly out of control, and we desperately need measures to limit them. After the failure of the Scottish Government’s Rent Pressure Zones, this bill is an important step towards ensuring tenants have somewhere safe, secure and affordable to live. But the devil is in the detail. New measures must ensure genuine affordability for tenants and not create loopholes for landlords to exploit, such as lifting the cap on rent increases in between tenancies.”

Polling for Living Rent has previously shown overwhelming public support for such measures, with 75% of Scots - and 85% of SNP voters - backing calls for a national system of rent controls.

Read our full response below:

Living Rent submission to the Fair Rents (Scotland) Bill

The Member in Charge thinks there is a need to make private rents fairer for tenants and to create a better balance of power between private landlords and tenants. Do you agree with this overall policy aim? If so, do you think the Bill will help achieve this outcome?

Agree: We say daily that the balance of power between private landlords and tenants is dangerously skewed in favour of landlords and we believe that the pandemic has only further illustrated this. We believe that this bill represents an important step towards achieving this outcome, but remain concerned that in a number of respects it does not go far enough.

Section 1 of the Bill prevents a landlord of a private residential tenancy from increasing rent in any year by more than the Consumer Price Index plus 1%? Do you agree with this? Section 1 also gives the Scottish Government a power to vary the cap by order. Do you agree with this?

Partially agree: We do agree with the principle of preventing the landlords of private residential tenancies from increasing rents by set amounts, but we are concerned that the stated metric of the Consumer Price Index plus 1% is too high a benchmark. We would, though, support the legislation stipulating that annual increases could not be more than CPI + 1%, but believe that there should also be no minimum level for caps, and that both local and national limits could be set at lower limits.

On the metric itself, we believe that CPI is a flawed measure. We have previously called for the creation of a specific metric - a “Rent Affordability Index” - that would be designed specifically to assess what is affordable for tenants.

We also agree with giving the Scottish Government the power to vary the cap by order, but believe that this process should also involve local authorities, and that in some regions, where affordability issues persist despite rent increases rarely exceeding CPI + 1%, the case for specific localised caps, to reflect local incomes, is strong.

Furthermore, we believe it is vital that any limits are ‘grandfathered’ and carry over from tenancy to tenancy. We have long argued that, unlike the ‘rent pressure zone’ model, it is important that rent levels are linked to the property, not the tenancy. 

Without this, and if increases are only capped within a tenancy (sometimes referred to as “third-generation rent controls”), it means that a tenants model would have rent increases limited while in their tenancy, but that their landlord would be able to increase rents without any limit if that tenant moves out and another moves in. This limitation creates three challenges:

• It disincentivises tenants from moving. This creates problems for tenants if and when their circumstances change, as well as creating potential barriers for new tenants to find accommodation. Additionally, it can create incentives for landlords and letting agents to find ways to seek out ways to evict their tenants. Within-tenancy controls are a heavily criticised feature of the rent control models in New York and San Francisco. Far from constituting an argument against rent controls, however, this evidence, is an argument for stronger regulation, not weaker, and ensuring that limits are carried over from tenancy to tenancy.
• It creates a situation where RPZs offer no protection to more precarious tenants who, for whatever reason, cannot or do not want to stay in properties for longer periods of time than 12 months. There is even a danger that limits on increases within RPZ tenancies could lead to landlords artificially increasing rents in between leases to compensate for limits to increases within tenancies. That would mean that while the regulations may protect tenants who stay for the maximum period of five years of an RPZ, tenants who move regularly could end up paying more. This point is noted by the Cambridge Centre for Housing Policy & Research in an extensive comparative study of rent regulations across Europe, concluding that tenants who stay longer than the average may benefit, while “those who stay for a shorter-than-average period will pay ‘too much’”.
• There is little evidence that this model of rent controls will do anything to limit rent increases in the long term. This point is also noted by Shelter Scotland, which notes that “with above inflation rent increases still possible during tenancies, and with no controls on initial rents, upward pressure on housing costs could continue under this model”.

Section 2 allows a tenant in a private residential tenancy to apply to have a “fair open market rent” determined by a Rent Officer. Do you agree with section 2?

Agree: We strongly support the ability of tenants in private residential tenancies to apply for a “fair open market rent” to be determined by a Rent Officer, and for tenants to be able to appeal these decisions to the First Tier Tribunal.

We also strongly support the inclusion of quality issues as determining factors in these judgements. We regularly see tenants living in properties in an appalling state of disrepair, and the measures available for tenants to seek redress of this are too limited and cumbersome.

We do believe, however, that in determining a ‘fair’ rent, consideration should be given to more than just quality - and certainly more than wider market rents. We have long argued for the creation of a ‘rent affordability index’ that would attempt to establish not just what are fair rents, but what are genuinely affordable rents, taking into account local earning conditions and the income distribution of private renters.

Furthermore, we believe it vital that for tenants to have confidence in any such system, that while a Rent Officer should be entitled to reject a request to determine a ‘fair open market rent’, they should not be able to set, suggest or indicate that the rent should be higher than it currently is.

We further believe that it is important for the timescales involved in this to be as rapid as practically possible. Rent increases can cause extreme distress to tenants, and we would be concerned that a slow, unclear or difficult process would render this important measure unworkable. If tenants know they will have to wait months for a decision, there is a real danger that they would prefer to move out of a property than go through a lengthy appeal process. This undermines the proposals and also creates the real danger of landlords using unaffordable rent increases as a means of evicting tenants, thus undermining the important steps made in the 2016 Act to improve security of tenure.

In any answer to question 3, the Committee also welcomes your views on—

• The right set out in section 2 to appeal a Rent Officer’s determination to the First-tier Tribunal
• The matters set out in section 2 that must be taken into account in determining what is a “fair open market rent”

Section 3 requires the following to be entered into the Scottish Landlord Register: the monthly rent charged for a property, the number of occupiers, and the number of bedrooms and living apartments. The MSP who introduced the Bill thinks this change will help ensure we have more public data about private rent levels. Do you agree with section 3?

Agree: We do support this measure, and argue that debate around private rented housing is informed by high-quality, holistic data. To this end, we strongly support this data being made publicly accessible.

However, as we have detailed before, we do not believe that Rent Pressure Zones are a sufficient model, and as such do not believe that the goal of this should be to facilitate the introduction of RPZs. We published a policy paper last year outlining what we see as the problems with RPZs, and while collating the required data is indeed one of them, we have identified a number of other crucial issues. We believe that the limited scope of Rent Pressure Zones, the fact that they don’t take account of quality issues, and that caps on increases are only within tenancies, mean that they will not effectively protect tenants from unfair rents. Our full report can be read here: https://commonweal.scot/policy-library/rent-controls-scotland-needs

What financial impact do you think the Bill will have – on private tenants, on landlords in the private rented sector, on local authorities, on Rent Services Scotland, on the First-tier Tribunal, or on anyone else.

It goes without saying that reducing rents in the private sector could have an enormous and positive impact on private tenants, who the Joseph Rowntree Foundation have described as the ‘new face’ of poverty in Scotland. We believe that effective rent controls - which both reduce rents and limit future increases, would be a powerful way of improving the quality of life of private tenants across Scotland.

Of course, though, the inequality and poverty faced by private tenants in Scotland is worse for some than others. In particular, the gender and ethnic pay gap means that high rents in the PRS, which are unaffordable for all tenants, are particularly unaffordable for women and BAME people, who are disproportionately likely to live in the PRS. Reducing rents, therefore, has the ability to also represent a significant step forwards in gender and racial equality.

We believe that effectively limiting rent increases will have a profoundly positive impact in a number of other areas as well, both for local authorities, the NHS, the Scottish Government and the public purse more widely. 

• High rents in the PRS are kept high through a number of public subsidies; including discretionary housing allowance and the housing element of Universal Credit. They are also effectively subsidised by, for example, student support. Reducing rents would relieve the pressure on these funds and free up enormous amounts of public money.
• The cost to the NHS of poor quality housing is well established. Ensuring that rent appeals take account of quality issues could prove to be a powerful tool for incentivising rapid improvement in the quality of private rented sector homes, while also improving health and wellbeing in Scotland.
• The proportion of people presenting as homeless from the private rented sector is disproportionately high and high rents are a leading cause of this. Reducing rents could mean a significant reduction in homelessness.

We welcome any other comments you may have on the Bill that you think are relevant and important, including its likely impact (positive or negative) on equalities, human rights and quality of life issues.

As well as the health impacts (and associated savings to the NHS) outlined above, we believe that there are two other crucial reasons to effectively link quality to rent controls.

• Scotland’s PRS is amongst the most energy inefficient of all of Scotland’s housing.  Given that roughly half of Scotland’s CO2 are from heating, the potential for effectively incentivising these improvements to dramatically reduce the carbon impact of Scotland’s PRS is an important opportunity.
• Additionally, improving the energy efficiency of Scotland’s PRS would represent a significant step forward in tackling fuel poverty in Scotland.