Green light for new ‘rent control areas’

Councils in Scotland will have the authority to limit rent increases on certain properties to a maximum of 6% under legislation approved by MSPs.

The government’s Housing (Scotland) Bill, passed by 89 votes to 28, grants local authorities the power to introduce rent controls in designated areas. These measures are part of wider reforms aimed at improving tenant protections and addressing homelessness.

Under the new law, councils can designate specific zones where rent hikes will be restricted to no more than one percentage point above inflation, measured by the Consumer Price Index, with an overall cap of 6%. These controls are expected to be implemented by 2027.

The bill also includes provisions requiring local authorities to respond more promptly when tenants face the risk of homelessness, along with new measures to support victims of domestic abuse.

Housing Secretary Mairi McAllan described the reforms as a step towards establishing a “gold standard” in tenant protections and homelessness prevention.

However, housing campaigners have criticised the rent control measures for excluding mid-market rent properties, build-to-let homes, and student accommodation, arguing that the legislation falls short of addressing broader affordability issues.

Graham Crocket, national estate agency director at Aberdein Considine, commented: “The implementation of the Housing (Scotland) Bill 2025 is a turning point for landlords, property buyers and the wider property market. While the government frames this Bill as a step towards fairness and affordability, the ripple effects could be profound.

“With rent controls, enhanced tenant protections and new transparency requirements becoming law, landlords and investors will need to carefully reassess their positions, while first-time buyers could be among those best placed to benefit.

“For landlords, especially those operating in high-demand urban areas, the Bill represents a tightening of margins and a loss of flexibility. The prospect of capped rent growth and longer notice periods may prompt a sell-off of rental housing stock, particularly for older flats and tenements. This shift could flood the second-hand market with properties previously held for investment.

“If this happens, first-time buyers could find themselves with more choice and negotiating power than before. In cities like Glasgow and Aberdeen, where affordability ratios are more favourable, the impact could be especially pronounced. Entry-level homes may see a softening in price, giving new buyers a foothold in markets that have long felt out of reach.

He said: “For one, mortgage rates appear to be beyond their peak and set to drop in the coming months and years. The lowest buy-to-let (BTL) mortgage rates are now available at a fraction of domestic mortgage rates albeit with a lower loan to value ratio. That has driven new landlords into the space, with UK Finance recently reporting a 39% rise in lending to new landlords.

“Despite advantageous BTL mortgage rates, the Scottish Additional Dwellings Supplement tax at 8% is more punitive than the English system and raises the barrier to entry for casual investors – i.e. those with one or two properties as a retirement nest egg. However, there is still value to be had for professional landlords who may purchase whole portfolios rather than individual properties.”

Gibb points out that one group that may be adversely affected is the amateur or ‘accidental’ landlord.

He continued: “It’s been widely reported that there has been an exodus of accidental landlords from the sector and the rise of professional landlords, who are building portfolios as income replacement businesses.

“That may sound negative, but it can have a positive impact for tenants. Having a more professional, engaged and motivated landlord who understands the rules and regulations, and complies with them through a professional agent, can raise the overall standards in Scotland’s private rented sector.

“Prospective professional landlords should be warned, though, that landlording isn’t a passive investment. In fact, it’s a highly involved enterprise. Whereas investment in a stocks and shares ISA may generate around a 4% return with minimal input, a property requires ongoing management and upkeep, and is much more tightly regulated.

“For example, should a tenant’s boiler break, it’s the landlord’s responsibility to pay for repairs or replacement. They also have to comply with safety certification, deposit protection regulations, GDPR, anti-money laundering, and myriad other legislative requirements.

“Even with strict regulations and ongoing management of a property portfolio, investing in the sector is still an attractive proposition.”

He added: “Scottish rent cap legislation, which limits annual increases in rents at the consumer price index+1%, means that before accounting for the increasing asset value of a property (where Scotland’s growth is outstripping the rest of the UK), on the current trajectory, investors can expect returns in excess of the leading ISA rates.

“Returns, however, are dependent on properties being occupied, and one of the key risks that landlords are concerned about are void periods. They needn’t be.

“Demand for private rented properties in Scotland, especially in the big cities, is outpacing supply.  Since Dwello opened its doors in May this year, the average void time between taking on a property, listing it, managing viewers, and a tenant moving in, is only 18 days. In fact, in July alone, we received 1,458 enquiries for the 30 properties we marketed that month.

“So despite the doom-mongers predictions about the impact of the Housing Bill (Scotland), property is still a safe and profitable investment. Just be prepared to put the work in.”

Rent controls set to pass in new housing bill

Read the orginal article: https://propertyindustryeye.com/green-light-for-new-rent-control-areas/