Feature: Why Scotland needs to attract more landlords into the private rented sector, rather than driving them away
By Riccardo Giovanacci, managing director of Newton Lettings
In an ideal world, home ownership would be the accepted way for everyone to live, with people enjoying the security, warmth, shelter and sense of belonging that comes with being able to shut your own door behind you.
But this is not an ideal world – in fact, it sometimes feels that each passing day makes it less ideal – and home ownership remains, and will remain, out of the reach of substantial proportions of the population.
In this real-world scenario, in which continuing lack of housing stock is stifling residential sales, the role of landlords in the private rented sector [PRS] can only become more important, since they provide a viable, and vital, alternative for many individuals and households.
But in the current climate, especially in Scotland, the positive contribution that the PRS makes to the ongoing housing crisis can seem not only to be overlooked, but to be actively denigrated and obstructed.
The trope of the Rogue Landlord is deeply embedded in a great deal of current thinking around housing needs and, indeed, it can sometimes feel to an objective observer that it is the main driver of policies – policies which are pushing increasing numbers out of the sector just at the time when they are most needed.
The reality is that the overwhelming majority of players in the PRS are well aware of, and fully on side with, the understanding that they can’t treat the market like the Wild West, and they are wholly supportive of cleaning up and regulating the sector.
So, it is perhaps not unreasonable to propose some counter-arguments to the perception that landlords are pushing up rents at a prodigious rate just at the time that many tenants are facing a very real and very well-documented cost-of-living crisis.
In fact, when I started in this business some 15 years ago, rents in Scotland were not only very cheap in comparison to other parts of the UK, but had been stagnant for some considerable time.
Yes, rental increases were marginally higher than in England at the start of the year, but what is not generally known is that they were substantially lower in the preceding six years, so Scotland is only belatedly catching up.
It should also be noted that Scottish Government data shows that, in recent years, rental increases have only risen at a rate very similar to inflation, and it would be wholly unreasonable to suggest that this should not be the case – after all, nobody expects a loaf of bread to cost the same this year as it did in 2012.
It could be further argued that, with inflation soaring as it is now – the latest projections are for 15% – tenants are actually benefitting from a cut in rental costs in real terms.
What landlords and agent have to do is be much better and much more proactive about explaining to tenants and their representative organisations the reasons behind increases, such as the greater costs that they face.
At the moment, many “accidental landlords” from 2008, and others who are just fed up with the regulatory burden, are exiting the market, further reducing the stock available and stoking demand for what remains.
The only way to ease the pressure on stock – and the consequent rent inflation – is to attract more landlords into the market, but little, if anything, is being done at political levels to encourage this. Quite the reverse – the inclination seems to be to drive them out.
Some measure of tax incentive would be the obvious way to stem the haemorrhaging of stock, but that seems unlikely in the current climate. Nor is there any real likelihood of a return to offsetting mortgage costs against tax.
Perhaps what might attract more entrants to the market is the reality that there are still some good deals to be done if people are prepared to look just that bit harder and, in inflationary times, the PRS is a much better bet than keeping depreciating money in the bank.
We need to attract property owners who are not in it for a quick buck but are more old-school, and prepared to invest for the long-term.
There are huge numbers of people who, for lifestyle reasons, want to rent for long periods in the manner of the European model and responsible landlords are perfectly equipped to meet that demand – if only they are given the chance.