What Would Rent Controls in Edinburgh Mean for the Property Market?

The New Year, could bring huge changes to the rental market in Edinburgh with the prospect of rent controls very much on the horizon. We take a look at what this could mean for tenants, landlords and the property market as a whole, with expert insight from Neil McInnes, Managing Director at Umega Lettings.

Major Changes Coming in December

This December the Scottish Government is due to announce a major change to the way the private rented sector works in Scotland. The Short Assured Tenancy, which forms the basis of most tenancies just now, is set to be replaced by the Private Residential Tenancy (PRT).

The change is mainly aimed at offering greater protection for tenants, especially those who stay in a property for a longer period of time. Perhaps the most eye-catching aspect of the changes though, is that the new PRT will essentially bring in an element of rent controls, limiting the extent to which landlords in some areas can increase rents for a sitting tenant.

In short, sitting tenants will be largely protected from large increases in rents via Rent Pressure Zones (RPZs) – areas where rents are considered to be rising too quickly – that can be designated from the 1st December. Under the new PRT, landlords won’t be able to raise rents for a property in an RPZ more than once a year for a sitting tenant. The landlord will also need to give the tenant three months’ notice of any increase and the tenant will be given an opportunity to negotiate and, if agreement isn’t reached, appeal the increase.

Will the Impact of Rent Controls be as Big as Perceived?

The subject of rent controls tends to bring out strong opinions. Depending on who you speak to you may be told that they will make housing more affordable and create a panacea of sorts for tenants, or you might hear that they will bring about chaos in the housing market and perhaps the end of civilisation as we know it.

Based on the proposals as they stand the reality is, perhaps unsurprisingly, that neither extreme scenario will come to pass. Neil McInnes of Umega Lettings, one of Edinburgh’s leading letting agents explains:

"Crucially, RPZs will not affect advertised rents for properties on the market. Advertised rents will still be subject to market forces. In areas where RPZs are introduced, if a sitting tenant does not agree to a rent increase from their landlord then it could be restricted to a limited increase once a year. The limit is looking like it will be 1% above the consumer prices index. In my experience, it’s unlikely for sitting tenants to experience rent increases above this level on a regular annual basis so the vast majority of landlords will be unaffected by RPZs.

"The statistics relating to rising rents across Scotland are taken from properties that are available on the market so represent changes in the asking (advertised) rents for properties. No reliable data are available on what rents increases are for sitting tenants in the private rented sector so it will be difficult to know that difference RPZs will make to tenants and landlords.

"Average tenancy lengths are increasing and more and more tenants are making their home in the private rented sector. RPZs provide tenants with security via the transparent way rent increases will be calculated which is helpful to both tenants and landlords over the long-term."

Area of the Market Where Rents are Rising Fastest Will be Unaffected

David Marshall, Operations Director with Warners Solicitors & Estate Agents added:

"As Neil has rightly said, rents tend to rise more quickly when properties come back onto the open market and for that reason the changes are likely to be of limited effect in terms of stemming rental inflation.

"Most landlords know that there is real value to having a good, reliable tenant who they know will look after the property and pay their rent on time each month. Because of that, they in the majority of cases they will be reluctant to increase rents too sharply as they will run the risk of losing a good tenant.

"Nonetheless, the changes should offer greater assurance for tenants who intend to stay in the same place for a prolonged period of time and that will certainly be good news for the
city’s renters."

If you have a property in Edinburgh and the Lothians which you are thinking of selling, or have any questions about buying and selling in general, feel free to get in touch today on 0131 667 0232 or by emailing property@warnersllp.com and one of our friendly team will be delighted to help.