A senior lettings agent and property management company owner has set out how rent controls could work in very specific circumstances - but he warns that a widespread application of them would be a straitjacket for the market.
David Alexander, who runs DJ Alexander - one of the highest-profile property management firms in the industry - says that he does not damn rent controls in every circumstance.
In an article in The Scotsman, Alexander writes: “What could be workable, for example, is a light-touch system where, especially in areas of high demand, annual rental rises to sitting tenants are increased by inflation plus, say, one or two per cent (assuming annual inflation was fairly stable and the landlord’s net rental return, after inflation, was not overtaken by swiftly rising costs).”
However, Alexander then speaks out against what he calls “rent controls of a more draconian nature.”
These have been put forward in recent days by the new SNP-Green Party partnership which has a combined majority in the Scottish Parliament.
Details have not yet been finalised but rent controls, at least as envisaged by the Greens, would be points-based and ensure that housing costs represent no more than 25 per cent of a household’s income, with tenants’ unions rolled out across the country.
Alexander, in his article this week, says the bureaucracy behind rent controls would be extreme, to calculate maximum rents in properties based on type, location and square footage.
He continues: “Contrary to what some believe, landlords are not making squillions. There is still a fine balance between rental income and capital growth on one side and operating costs and (increasingly so) taxation on the other. It wouldn’t take too much of a tilt in the wrong direction for many landlords to call it a day and sell up.”
Alexander accepts that some would welcome landlords returning their homes, via sale, to the owner occupied market. But he then asks: “Where does this leave those – up to 20 per cent of the adult population – who need to rent privately either through choice or because of the shortage of public housing?”
You can see his article here and more on the Scottish rental sector reform plans here.