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Linking rent rises to wages could have a ‘severe’ impact on the PRS

A proposed Bill to protect private sector tenants by introducing measures to limit rent increases could drive many buy-to-let landlords out of the market in Scotland. 

The Fair Rent (Scotland) Bill, which has been put forward by the Labour party in Scotland, would have an adverse impact on the private rented sector north of the border, according to a property management firm. 

Apropos by DJ Alexander Ltd believes that the Bill, also known as the 'Mary Barbour Bill', will deter many people from investing in the buy-to-let sector, while also pushing many existing landlords out of the market, reducing the supply of much needed homes in Scotland’s PRS. 

The property management firm believes that Scottish Labour’s plan to tie private sector rent increases to average wages is unnecessary given that 15 out of 18 areas of Scotland experienced below inflation advertised rent increses between 2010 and 2018. 

The three areas to see above-average rent inflation during that period were Forth Valle, at 0.8% above inflation; Greater Glasgow at 12.6% above inflation; and Lothian at 23.6% above inflation. 

In 2018, the average rent in Scotland for a one-bedroom property increased by 1.7% and for a two-bedroom by 1.5% in a year at a time when inflation was 2.4%.

David Alexander, joint managing director of apropos by DJ Alexander Ltd, said: “The importance of the Private Rented Sector in Scotland has never been greater. 

“Between 1999 and 2018 the PRS in Scotland has grown from 5% to 14% of total housing stock whilst social housing has declined from 32% to 23% over the same period. The need for a strong and sustainable PRS is, therefore, essential in providing homes for Scotland’s growing population.”

“Scotland’s 158,505 landlords provide 414,000 properties yet pay substantially higher sums both to buy properties and in personal taxation than their counterparts south of the Border. Their costs are higher at the same time that rent rises across nearly every area of Scotland are below inflation.”

Alexander continued: “Clearly rental demand is greatest in Edinburgh and Glasgow and rents have been rising at a greater pace in Lothian and Greater Glasgow. But this is due to the enormous growth in population, particularly in Edinburgh, over the last ten years or so resulting in demand outstripping supply in the housing market.

“Between 2008 and 2018 Edinburgh and Glasgow’s population grew by 13.0% and 8.9% respectively at a time when the Scottish population increased by 4.6%. Edinburgh’s increase was the second-largest percentage growth in the UK [after Manchester].

“At the same time, Edinburgh has the highest percentage of working-age people in employment and the highest skilled workforce in the UK compared to any other major UK city. Scotland’s capital also has the third-highest average hourly pay of £15 per hour.”

He concluded: “If legislation is introduced which seeks to limit rents in growth areas such as Edinburgh and Glasgow the economic impact could be severe. If the PRS reduces in size, there is insufficient social housing being built to house the tens of thousands of workers who want to work in Scotland.

“If landlords are pushed out of the market by unrealistic financial constraints at a time when margins are already being squeezed by financial, legislative and regulatory changes then landlords will leave the market. 

“A better solution would be to work with landlords to ensure the PRS is operating fairly, efficiently and transparently offering the best housing solutions to individuals. This could be coupled with an immediate housebuilding programme to build affordable housing, which might usefully be linked to key worker incentives. 

“Legislation which simply equates average incomes to rents will produce a disproportionate impact in different parts of Scotland and will not achieve the desired aim of making Scotland’s two largest cities more affordable.”

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    Over two thirds of the Scottish Parliament are anti landlord, but so far everything that they have done has proven to be anti tenant!

    I could live with linking future rent rises to wage increases, but after suffering frozen rents from 1998 until 2016, the recent 30% rent increases due to market forces have simply redressed the balance.

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    All very good linking rents to wages but what about all the extra costs now being imposed on us this money has to come from some where, it's not coming out of my profits so it has to come from increased rent, the end user always pays.

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