SHELTER is one of the most basic human needs. But in our society, a roof over your head is far from being an established right. When Holyrood gets back to work next week it has the chance to move things forwards.
The new housing bill, published in March and included in September’s Programme for Government, moves into its next stage.
The bill aims to increase tenants’ rights in the private rented sector, and for the first time establish a regime or rent controls across the country. For those who make money from tenants these proposals are the work of the devil and are being fiercely contested by powerful interest groups.
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First, let’s get a bit of context.
A generation ago, renting from a private landlord was either a legacy arrangement or the preserve of younger people starting out on their own. The sector had declined to just 5% of all households in Scotland and was widely regarded as a short-term option for a transient section of the population.
That has all changed. Choking off public sector housebuilding and the right to buy saw social housing decline. Meanwhile, rocketing house prices shut off the option of buying for many on average incomes. As a result, private renting has tripled in the last 20 years and now accounts for one in six of all households.
A lot of people have become landlords who would never have considered it before. Buying and renting property seemed like a good, even lucrative, investment. Not only do you get a return on your investment through annual rents which beats pretty much any other savings option, but the capital value of your asset increases as house prices rise. Yes, once in a while values might drop, but over time they always go up. It’s the ultimate win-win.
A home needs to provide two main things to allow society to flourish. First it must offer security, which is why tenants’ rights matter.
Secondly, it must cost an amount that means you can live a reasonable life with what you have left. This is important not just to individual quality of life but to society as a whole. If your rent is so great that you cannot afford to buy stuff, the local economy suffers.
However, when it comes to costs, the sector is unregulated, and tenants have zero protection against major hikes in their rent.
Private landlords are meant to register with their local council and have to answer many questions about their property. The level of rent they charge is not one of them. And since there is no public record of rents, there is no way to say for sure what the increases have been, or should be, on any given property.
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The online rental network Canopy has just published a report on affordability of private rents. Overall, UK rents now equate to 35.7% of average incomes – and more than 40% in Edinburgh. That’s higher than ever.
And most people earn less than the average. Try renting in Edinburgh – where average rents are now £1192 a month – on minimum wage. It’ll cost two-thirds of your full-time take-home pay. Simply put, it’s impossible.
This is why the central objective of the new housing bill is to create the architecture for a system that regulates rents throughout the country ensuring that landlords can get a reasonable return but protecting their tenants against exorbitant increases.
It’s the sort of decent policy that many other European countries already have, and yet the suggestion has been met with apoplectic fury by those representing would-be investors in the sector.
We are told that even the possibility of rent controls means that pension funds will switch investment in build to rent schemes from Edinburgh to Manchester. They claim that the new bill means they can never put up rents, citing the emergency rent freeze during the pandemic as evidence.
It’s nonsense, of course. No-one has said that rents can never go up, just that they can’t rip people off by jacking them up by more than anything elsehuge amounts. Long-term controls that allowed owners of a development to increase rents year on year by the rate of inflation are not only possible, but likely under a regulatory scheme.
People with loads of money always seem to resent social controls on how much more they can make by investing their wealth.
Large investors now claim that rent controls will actually reduce the supply of new rented accommodation, because landlords will opt out of the sector choosing to sell instead. But the truth is the house is still there and someone will still live in it – overall housing supply is unaffected. Indeed, former rental properties going on sale will increase supply and put a brake on house price inflation.
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The very same argument was deployed against the minimum wage. We were told it would reduce the number of jobs available because employers couldn’t afford higher rates. It didn’t. They were wrong then and they are wrong now.
There are plenty of places around the world where rents are regulated, and all the evidence suggests it has no affect on the supply of homes for rent.
Let’s hope the Parliament has the backbone to resist the exaggerated claims and threats of a self-interested investor lobby, and base policy on the evidence.
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