Rent Caps – What’s my opinion as a letting agent in Scotland?

06 May 2016

So Labour have announced that part of their manifesto is to cap rent increases, offer tenants the security of longer term tenancies and crack down on letting agents fees in England, and a few of the other parties, Greens in particular have said they may back some of the policies. There is much debate about the pros and cons for the various parties impacted.

What’s my opinion as a letting agent in Scotland?

Offering longer term tenancies to tenants is no bad thing for landlords or for tenants, assuming both parties know and understand what they are signing up for. Many tenants don’t want a 3 year tenancy , they might only be visiting a particular place on a 6 month job contract, they don’t need a 3 year tenancy but assuming there was some sort of notice period built into the lease that is easy to address. For other tenants who do want the security of a long term lease, it does offer them something which is not normally available at the present time as most lease are for a max of 12 months (unless it’s a corporate lease which is often negotiated for a specific period, often with inflation linked rent increases built in) The security of knowing that they have a home for the next 3 years in my opinion is a good thing for the rental market and for the huge number of tenants looking for a secure home life for their family. That’s aid for many landlords they might struggle to commit to a 3 years tenancy, perhaps they really need to sell that property to finance another purchase, so it will mean more long term planning for them.

On the plus side it means more security knowing they will not have void period and have to go through the expense of finding a new tenant. The Scottish government are already undergoing a consultation on the private rented sector suggesting a scrap to the current position where a landlord can end a tenancy at the end of the lease for no particular reason.

Limiting rent increases to be in line with inflation over the course of the new proposed 3 year tenancy is probably the more controversial proposal.

While most landlords don’t increase rents significantly over the course of a tenancy, they want to have the ability to make increases if the market dictates that they can. In the Glasgow and Edinburgh rental market we increase rents at Fineholm by around 3.5% on an annual basis, that’s below inflation but sometimes if a tenant is in a property at a lower than market rent, the landlord might ask that a staggering rent increase is brought in to keep the rent in line with the market rate for the priority. That tends to happen where the tenant has been in the property for a while, starting the tenancy at a time where the rent was lower than the current market rate. Obviously if the new rent caps were brought in, this wouldn’t be happening, which might seem good for the tenant but not so much for the landlord.

What are the options for the landlord and what impact might that have on the market? He could choose to end that tenancy at the next exit point, so he can bring in a new tenant who will pay the market rate, or he might decide if he can’t maximise his investment , buy to let’s are not a good investment for him so reducing the supply of available rental properties and forcing rents up- exactly the reverse of what the policy is supposed to be doing.

It seems to me that the rent increase cap is focusing on the London market where perhaps big rent increases are more common, here in Glasgow and Edinburgh rent increases that are higher than inflation are pretty rare.

Abolishing letting agent fees is being suggested in England, we already have that here is Scotland so for some time agents have not been able to charge tenants fees. I reckon it’s forced rents up, so eventually tenants are paying them anyway. A cap would probably have been more effective.

Letting agents do a job, and they need to be paid for providing a service. The service is both for the landlord AND the tenant.

rent caps 3