Housing Scotland Bill must be changed

The Housing Scotland Bill must be changed to reflect reality.

Following a recent report by the Institute for Economic Affairs (IEA) which examined almost 200 studies covering a period of 60 years into the impact of rent controls, it is clear that they have never worked.

The IEA paper found that rent controls increase prices, reduce the number of properties available and decrease the quality of housing. Investment in housing falls resulting in greater demand and higher rents for tenants.

Lower returns on investments can also discourage landlords from carrying out repairs, as well as reducing the quality of housing available, the IEA report found and that rather than resolving housing problems rent controls actually exacerbate the situation.

The IEA paper states that: “The finding that rent controls reduce the supply and quality of rental housing, reduce housing construction, reduce mobility among private tenants, and lead to a misallocation of the existing rental housing stock, is as close to a consensus as economic research can realistically get.”

No additional funding

This report appeared in the same week that Scottish council leaders have warned that the additional costs involved in monitoring rents in their areas proposed in the Housing Scotland Bill would be unaffordable. Edinburgh City Council has stated that it would cost them over £5.5m to assess the rents of properties in the private rented sector which they would be unable to afford. The Bill states that councils will have to collate data to assess whether an area should have rent controls imposed but no additional funding has been allocated by the government.

This is further proof that the Scotland Housing Bill, in its current form, is simply unworkable. The IEA report states, what everyone in the sector already knows, that rent controls have never worked and never can work because they simply make the situation worse for tenants rather than better.

They lead to reduced investment, fewer homes, which are of poorer quality, resulting in greater demand and higher rents for tenants. There must now be some reflection on whether the Scotland Housing Bill can continue in its current form given that, if it is implemented, it will make a terrible situation even worse.

Encourage sensible reflection

The further criticism of the Bill by council leaders was entirely predictable given their parlous financial state and the decision to impose further costs on organisations which are already at breaking point.

The number of homes in the private rented sector fell by 60,000 in Scotland following the introduction of rent controls in 2021. It has risen by just under 10,000 in the intervening period but is still lower by 50,000 due to the policy of introducing rent controls. Clearly returning the stock levels to their previous peak would go some way to meeting demand and stabilising rent prices.

I would hope that the IEA report and the concern by council leaders will go some way to encourage sensible reflection by the Scottish Government on amending or even scrapping the Scotland Housing Bill. In its current form it is unworkable, unaffordable, and will only make Scotland’s current housing emergency worse.