Government rent control plans could ‘bake in’ above inflation rises, MSPs told

The Scottish Government’s plans for rent controls could “bake in” increases above inflation for tenants, MSPs have heard.

Housing minister Paul McLennan announced amendments to the Housing (Scotland) Bill currently working its way through Holyrood that would see rents capped at inflation plus 1% in rent control zones, up to a cap of 6%.

Under the legislation, councils would be able to create rent control zones in areas where they fear housing costs could be rising too quickly.

But at a meeting of the Local Government, Housing and Planning Committee on Tuesday, tenants union Living Rent expressed concerns the plans – which have been proposed as amendments to the Bill – could normalise an increase in rent.

Ruth Gilbert, a representative of Living Rent, told the committee: “We are very concerned that the formula could result in a rent cap which bakes in rent increases over inflation.

“By including an additional 1% on top of (the Consumer Price Index), this formula will lead to rent increases systematically above inflation.”

Living Rent has argued for the rent increases to be tied to wage growth rather than inflation.

“Rents tied to CPI rather than, for example as we have proposed, wage inflation is punitive and will not protect tenants.

“The committee should ask why landlords can expect above inflation profits year-on-year when workers’ wages do not keep up.”

Natasha McGourt, a member of the committee’s tenants panel and the founder of Tenants Rights Scotland, said she feels the proposals are a “fair offer” for renters, while Generation Rent deputy chief executive Dan Wilson Craw proposed the increase be pegged to the lowest rate of inflation or wage growth.

But Robin Blacklock, the managing director of real estate consultancy Dowbrae Limited, said the use of CPI would help to deal with landlords’ costs.

“I think the amendment to cap any rent increases in a controlled area to CPI plus 1% does provide a clear and transparent and reasonably fairly understood process,” he said.

“I think CPI plus 1% also accounts for landlords’ rising costs.

“If you capped at CPI without plus 1%, then the highest a landlord can ever get is the mid-point of what all the costs are doing.

“If that’s the case then any investor would be better putting their money in the bank or in gilts.

“CPI plus 1% allows for that little bit of flexibility to reflect their costs.”