Unintended consequences of PRS-meddling could cause real damage

You might recall a collective sigh of relief emitted by stakeholders in the housing market and private rental sector back in May of this year. 

It was prompted by the feeling among many that the Conservative Party’s majority win in the UK General Election, however slim, had effectively put an end to what were considered to be some of the more extreme policies Ed Miliband’s Labour Party had in its manifesto.

In the rental sector, these included plans to issue rental caps, landlord licensing, full buy-to-let regulation, which many felt would have damaged the attractiveness of the sector and certainly discouraged landlords from maintaining their presence in the PRS, let alone adding to their portfolios. 

This type of full-frontal market intervention was viewed with suspicion by many and, when the General Election result came through, there appeared to be almost unanimous approval.

Fast-forward to the end of this year and, while some of those policies have thankfully not made it onto the statute book in England and Wales, this cannot be said for everywhere. 

And this was before we had the sizeable stamp duty change announced by George Osborne in last month’s Autumn Statement.

In Scotland, for example, with its Parliament holding jurisdiction over the private rental sector, the Government has tabled the Private Tenancies Bill. 

This not only plans to introduce rent control zones, the level of which will be determined by Ministers, but it also wants to put an end to short assured tenancies and also won't allow landlords to repossess on a no-fault basis.

It is a considerable step-change for the Scottish PRS, and will see the reintroduction of rent controls in parts of the UK for the first time since the mid-1970s. 

Our own office footprint in Scotland is sizeable and, alongside lenders’ concerns about how this might play out in practice, we have our own worries regarding how this might impact on the supply of property for private tenants and how rental levels might be increased. 

On a wider level, this type of intervention will undoubtedly distort the rental market, and perhaps not just in the designated ‘zones’ – wherever they might be – but in areas outside the zones. 

Will landlords be content to have property investments in areas where they are subject to rental constraints set by the Government, or will they look to sell up in those parts of Scotland, move their investment to non-rental zone areas, or even stop providing rental properties to the market entirely? 

It is easy to understand why a number of lenders are fearful of a drop in buy-to-let lending north of the border, while from a letting agent perspective we would also be concerned about a drop in the number of properties we can offer tenant clients. And of course a fall in supply is likely to result in an increase in rent for those properties that are still available. 

Once again, it is the potential for unintended consequences which could cause the real damage and, in a marketplace which is very much in need of quality private rental housing, this may result in much less, rather than more, availability.

*Rob Clifford is a Director of Century 21 UK and Central Lettings Solutions, both part of Shepherd Direct