Why Scotland's rent control plan is based on prejudice against landlords – and will only increase rents

How that happens is subject to debate. But in the round, we want housing in Scotland to be effective.

Politicians with an interest in housing, of which there is a rising number in these times of crisis, want this too. In passing laws and devising regulations, Scotland’s elected representatives believe they are doing what is best. This is especially the case for renters, who find themselves pinched by a cost-of-living crisis and a housing emergency. Times are difficult.

Sincere but incorrect

This is why many at Holyrood, including the Scottish Government, are intent on introducing rent controls in Scotland. Ministers and MSPs see renters in Scotland, buffeted by economic factors and a sluggish economy, and believe that capping rents would make an appreciable difference in their lives. We at the Scottish Association of Landlords (SAL) appreciate this motive; it is as sincere but it is also incorrect.

It needs to be said plainly and unequivocally: despite politicians’ best intentions, rent controls will increase rents and make life harder, not easier, for hard-pressed families.

In liberal Western, capitalist democracies, the laws of supply and demand pervade. If a commodity is subject to an artificial ‘price ceiling’ (the economists’ term for a cap) then the unintended consequence of a shortage in supply, which in turn pushes up prices, will not be far behind.

Investor flight

At the Scottish Association of Landlords (SAL), we’ve already seen some diligent, professional landlords consider pulling their properties from the market, or even go so far as to remove it already, due to ongoing worries around rent controls. These examples are anecdotal, but there are enough of them to suggest an overall mood in the sector.

Landlords, the vast majority of whom are part of an industry that provides an excellent service to people when they need it, are nervous that their investments will be undermined by barrelling towards such a poor economic decision. With this in mind, their flight from the market is entirely understandable and predictable.

As landlords ourselves, cynics might suggest that in making this argument, we are simply trying to feather our own nests. We are used to being smeared by opportunistic politicians with axes to grind and not enough evidence under their noses; our skins have gotten pretty thick over the years. But we care about our sector and we want it to be world-leading. Some, however, will never believe us, preferring to rely on stereotypes.

Expert review

If only there was a wide-ranging review that looked comprehensively at rent controls and found that in 14 out of 17 studies, rent controls led to higher rents. Such a study would also be valuable if it could shed some light on the other potential impacts of rent controls, such as misallocation of housing, reduced residential mobility, and negative impacts on supply and construction.

If all of this information were compiled and published by a reputable think-tank with a record of supporting business and a firm understanding of the levers of economics, so much the better. Thankfully, such a review does exist.

Earlier this year, the esteemed Institute for Economic Affairs (IEA), published its review, Rent Control: Does it work?, which found that, in the uncontrolled sector, rent controls push rents up in the first instance. There is also the impact on supply and market confidence which, it is reasonable to infer, will push rents up further.

Listen to landlords

SAL’s members are committed to creating a housing sector that works for everyone. That is why we are urging the Scottish Government to reconsider this sure-to-backfire policy. It’s not just about our members, who are facing difficult choices and uncertainty, but also about their tenants who we must also safeguard against such consequences.

We are calling on the government to work with the sector, to understand its challenges and opportunities, and to commit to listening to us, rather than those with narrow, uninformed, and prejudiced opinions. We have a huge amount of knowledge and housing expertise built up that we would be glad to share.

Any politician, of whatever political stripe, who may be reading this should know that an opportunity to engage is right around the corner. SAL is hosting our annual conference, Scottish Letting Day, at Edinburgh’s Murrayfield Stadium on November 19 and we invite you to join us. We would be delighted to share with and learn from you.

At the end of the day, we agree on what we want to achieve – a prosperous, thriving, flexible, and sustainable housing sector that works for all. We believe also that those we have disagreed with, as well as those we have not, also want this.

Cognitive dissonance

However, what will not help us get there is for the Scottish Government to make things worse by pursuing rent controls and, inevitably, bringing about dire and irreparable damage through unintended consequences, of which rising rents are one severe, urgent example.

There is still time to reverse course and avoid causing this damage in the first place. If our politicians are interested in securing economic victories, rather than scoring shallow political points, then the window of opportunity to do so is still open, but it is narrowing.

Previously, housing minister Paul McLennan has said he wants to “reset” the Scottish Government’s relationship with landlords. We applauded this sentiment at the time and continue to. In our view, a great way to hit reset would be to protect tenants from rent increases by abandoning rent controls, as cognitively dissonant as that may seem.

John Blackwood is chief executive of the Scottish Association of Landlords