Edinburgh City Council is very excited about Rent Controls

18:10 PM, 12th July 2017, About 7 years ago 39

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Edinburgh City Council is very excited and pleased with itself. It has just approved action with a view to implementing rent controls.

https://www.commonspace.scot/articles/11326/hope-future-cross-party-rent-controls-breakthrough-edinburgh-city-council

It is possible that once this is established in Edinburgh other councils may follow suit and, as we all know, it is quite likely the idea could then catch on down south. At the national level, the reintroduction of rent controls is official Labour Party policy and at the London level, Mayor Sadiq Khan has also called for them. The ‘red Tories’ are quite likely to follow suit.

However, as Kristian Niemitz at the Institute of Economic Affairs has pointed out:

‘Most authors who call for rent controls do not present a detailed policy argument. They merely describe the problem of high rents, and then present rent controls as a self-evident solution. They tend to see the case for rent controls as so obvious that it requires no further explanation, and assume that opponents of rent control are either acting in bad faith, or are just not interested in the problem (see e.g. Dorling 2014) (https://iea.org.uk/wp-content/uploads/2016/09/The-key-to-affordable-housing-PDF.pdf).

There are many reasons why rents controls are not the answer for Edinburgh. There are even more pressing reasons why if these do go ahead in Edinburgh, there is even less reason for them being phased in in other areas of Scotland and the UK:

Over the period 2010 to 2016, average rents in Scotland went up by around 2% each year. This is roughly in line with the CPI over this period. There are no ‘soaring’ rents in the vast majority of Scottish local authority areas with a few exceptions. Figures for 2015-2016 show that rents have stabilised and in many cases gone into reverse (http://www.gov.scot/Publications/2016/11/3295/1).
When businesses – and renting out houses in the PRS IS a business – are hampered by having controls placed on what they can charge, they may just decide that it’s not worth the bother. Landlords in Scotland, like the rest of the UK, have already had the notorious Section 24 imposed on them – whereby they can face a potentially infinite tax rate – so shoving a lid on a boiling saucepan isn’t much of a solution. Many landlords will just sell up – landlords with only one rental property will find this very easy to do and if thousands of these properties are bought by first time buyers, these will be lost to the rental sector. At a time when the nation needs an exponential increase in housing of all tenures, there will be a contraction in the private rented sector (also due to the recent Government ‘war on landlords;’ with the negative environment serving as a disincentive to the expansion of supply).

As Niemitz further states:

‘…the ‘marginal landlord’ will exit the market, and the ‘marginal tenant’ will enter. There will be more people chasing fewer properties.’

With reduced supply in the rental sector, only those with the greatest means and who meet the best rental criteria will be able to access rented housing (landlords won’t have to take on the riskier tenants). The logical conclusion is that those with the lowest net incomes in society will be pushed downwards and out into the realm of homelessness. The local government bill for temporary accommodation will rise everywhere along with all the social and psychological ills associated with this.

Edinburgh City Council is unfortunately falling into a trap by progressing a policy which has been shown in history to be highly destructive. It will cause much suffering and misery, with the quality and quantity of rental housing deteriorating as a direct result. Only then will the idiots in Town Hall reverse this stupid and ill-conceived measure; after the damage has been done.

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Comments

Dr Rosalind Beck

23:25 PM, 16th July 2017, About 7 years ago

Reply to the comment left by "Steve Hards" at "16/07/2017 - 22:36":

Yes, it won't be worth accidental landlords or people with one second property who are not sure what to do with it, letting it out. This will mean loads of empty houses.

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Arnie Newington

23:50 PM, 16th July 2017, About 7 years ago

A couple of points about the new Scottish tenancy agreement:

1 The purpose built student accommodation is exempt giving them a massive advantage over private landlords.

2 The Scottish Government have advised that there is nothing to stop you getting student tenants to sign their notice when they move in.

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Rod Adams

6:57 AM, 17th July 2017, About 7 years ago

Point 2 is interesting. Have they written this down anywhere? I've a feeling this could be regarded as going against the lack of no fault termination so if the tenant decided to stay there is not much the landlord could do.

Regards,

Rod.

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Rod Adams

7:36 AM, 17th July 2017, About 7 years ago

If point 2 is correct it would also be a way to circumvent rent controls as they apply to increases on rent on an existing tenancy and not to a new tenancy. By getting the tenant to sign notice to quit at the start of the tenancy a new one could be created every year or so with a new rent set. Seems too simple and too good to be true.

Regards,

Rod.

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Steve Hards

17:13 PM, 17th July 2017, About 7 years ago

Reply to the comment left by "Rod Adams" at "17/07/2017 - 07:36":

The spirit of the law is that tenants have security to not be kicked out of their rented homes, so a tribunal (if it came to that) would surely rule in favour of the tenants if they wanted to cancel the termination notice they signed when they moved in. Also, under consumer or contract law, if they had had to sign the termination notice to get the tenancy, it surely would be coercion and therefore enforceable.

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Annie Landlord

19:44 PM, 17th July 2017, About 7 years ago

Reply to the comment left by "Arnie Newington" at "16/07/2017 - 23:50":

Presumably Arnie there will be a separate tenancy agreement for purpose built student flats then? And will that only be for 10 months?

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TheMaluka

19:52 PM, 17th July 2017, About 7 years ago

Reply to the comment left by "Arnie Newington" at "16/07/2017 - 23:50":

Point 1, whatever happened to this level playing field?

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Arnie Newington

23:29 PM, 17th July 2017, About 7 years ago

Reply to the comment left by "David Price" at "17/07/2017 - 19:52":

Probably brown paper envelopes!

As it was only at the last minute that they decided purpose built student accommodation (expensive rabbit hutches) should be exempt.

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Mandy Thomson

8:11 AM, 6th August 2017, About 7 years ago

Reply to the comment left by dp1 Django at 13/07/2017 - 15:40You said, "Rent controls take away the ability to re-invest in the property and keep quality high" very true, especially in tandem with yet another financial restriction placed on landlords - much stricter lending criteria.

Where previously 125% rent cover (for BTL mortgage repayment purposes) was acceptable, lenders are now demanding 145% - meaning many landlords with a highly leveraged business model are unable to borrow enough.

Earlier this year I was forced to raise a tenant's rent for this reason (I had previously never increased a rent, only reduced it - my properties are in London). Even after taking this measure, I was still unable to release as much equity as I needed.

Rent control on top of this really will damage the PRS and reduce much needed housing stock further.

BTW, we already have efficient rent control - if tenants simply can't afford a rent or they believe the rent on offer doesn't represent good value for money, they will look elsewhere - I'm talking about the vast majority of renters here on average incomes - yes, in LONDON.

Last year, I put a well presented 1 bed flat in South London on the market, at the lowest market rent for the type of property and area. Most of the people who came to view could afford a more luxurious flat in a better area and rejected it. It took several weeks to let. The vast majority of those people were only on average incomes or slightly above.

Perhaps as a society we should be asking why, when we are no longer in recession, there are many ADULTS living in a wealthy country in the 21st C on incomes so low they are unable to afford a market rent for a basic property in the first place, and address the issues behind this? Oh silly me, I forgot - it's much easier to put a sticking plaster on an open wound rather than actually treat the wound!

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