Scotland business

Private landlords give warning over law changes

tenement housing Image copyright Thinkstock

Proposed changes to the law on private rented homes could drive landlords out of the sector, they have warned.

A survey by Citylets found nearly a third of them could leave the private rental sector (PRS) or cut back on their portfolio of properties if the grounds for repossession are changed.

Another alliance of professionals in the sector is warning against rent controls in city "hot spots".

They were responding to reform proposals from the Scottish government.

Ministers want to change the standard tenancy arrangements, which allow landlords to repossess homes after a fixed term let has ended.

It would still be possible to repossess the home for other reasons, including owners wanting to live in the property themselves.

The planned changes would allow tenants to challenge rent rises through arbitration, and ministers could cap rent rises if the market overheats in limited areas.

The proposals from ministers are expected to lead to legislation later this year.

'Unintended consequences'

The Citylets survey found 31% of urban landlords would leave the sector or cut back on their investments if the "no fault" grounds for repossession are removed.

Some 39% of the 500 landlords surveyed said they are likely to leave or cut back if rent controls are introduced in city "hot spots".

Of those with five or more properties, more than half said they would pull back their involvement. And 73% of all those responding said they feel "vilified" by policy-makers.

Thomas Ashdown, founder of Citylets, said: "I no longer see how it is possible to contend that the current plans are consistent with the oft-stated aim to see the private rented sector made better without deterring investment and threatening supply. Even allowing for some cooling off of sentiment, the findings are clear.

"There is clear inevitability of unintended consequences to what is being proposed. This seems set to exacerbate the housing crisis and create more homelessness, not less."

Another group, known as PRS4 Scotland, highlighted the impact of rent controls, claiming the proposed legislation is "anti-tenant as well as anti-landlord".

David Alexander, of the DJ Alexander agency, argued: "Potential landlords will be scared off from entering the sector while many existing ones are likely to disinvest, which can only lead to a reduction in stock.

"At a time when young couples are finding difficulty in raising the large deposits required by mortgage lenders, what we need are more, not less, homes for rent. Politicians and pressure groups who believe that rent controls are a panacea should be careful what they wish for."

He also said that "hot spots" will be hard for ministers to define, as cities have different markets within them.

"How will the boundaries of hot-spots be measured?" he asked. "Who will decide if one street is part of a hot-spot while another is not?

"It seems like a very difficult exercise for civil servants to carry out as well as being costly for the Scottish taxpayer."

'Simplified system'

The Scottish government consultation is due to end on May 10.

When publishing the proposals, housing minister Margaret Burgess explained: "These changes to existing tenancy laws are designed to improve security for tenants and provide safeguards for landlords, investors and lenders.

"Our vision is for a private rented sector that provides good quality homes and high management standards, inspires consumer confidence, and encourages growth through attracting increased investment.

"By creating a new and simplified system we will have better property management, while tenants and landlords will be provided with more clarity and a better understanding of what the tenancy agreement means for them."

She added: "Tenants will have more security and can no longer be asked to leave their home simply because their tenancy agreement has reached its end date. They can assert their rights without fear of eviction."

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