The Scottish Government’s proposals on rent controls, which include the removal of the no-fault ground for re-gaining possession and the removal of the ability to continue tenancies on a month to month basis (periodic tenancies), have received a warning from the Council of Mortgage Lenders (CML).
CML has sent a response to a consultation document issued by the Scottish Government, and while it says it recognises that some of the proposals will benefit the sector, others are likely to have a detrimental effect.
CML’s main concern is about rent controls. Whereas Aberdeen and Edinburgh may have seen above average increases in rent levels, due to demand exceeding supply, rent levels in the rest of Scotland are complex picture – the long term solution has to be to increase the supply of housing in areas where there is an under supply, says the CML.
As reported by www.propertywire.com the CML has said:
“We believe that the introduction of rent control is likely to dampen appetite amongst institutional investors to invest in the sector, will impact adversely on the availability of buy to let mortgages, will result in higher rents being set at the outset to compensate for lower rent increases during the rental term and could impact on quality if a rental yield cannot be achieved to allow continued investment in the property,
“Overall we believe the introduction of any form of rent control is likely to reduce investment in the sector thus reducing the supply which is badly needed to meet housing need.
“Currently we do not believe there is any need for the Scottish Government to take any action as there is no evidence base which would justify it doing so,’ it adds. On the other hand CML welcomes the development of a model tenancy agreement and modernised grounds for possession, however, the report says,
“…we believe that a number of the proposals contained in the paper are likely to have the unintended consequences of both reducing investment in the sector and the supply of private rented sector housing,
“These include the removal of the no-fault ground for re-gaining possession, the removal of the ability to continue tenancies on a month to month basis at the end of their term and potential controls over rents.
“We believe that landlords need to have confidence in their ability to end a tenancy when they need to do so otherwise this may discourage future investment in the sector. Existing arrangements provide flexibility for both landlords and tenants. The proposal that the tenancy will automatically continue for the period of the original tenancy unless a notice to quit or a new tenancy contact is being drawn up will remove that flexibility,’ the document says.
“Landlords who consider they may need to return to their property at short notice are likely to withdraw these from rental market thus potentially the reducing number of properties available to rent. Tenants may also not want to continue in the property for the original rental period and this may lead to them vacating the property and thereby increase the number of abandonments,’ it adds.”
— LandlordZONE (@LandlordZONE) February 10, 2015