Plans to bring in a freeze on rents in Scotland could lead to a fall in the number of properties available in the sector, Holyrood ministers have been warned.
First Minister Nicola Sturgeon promised emergency legislation to halt rent rises as she announced her plans to tackle the “humanitarian emergency” linked to the cost-of-living crisis.
The Scottish Government will also freeze fares on publicly owned ScotRail trains till at least March next year, and in November this year will increase the Scottish Child Payment – which goes to low income families – as well as expanding eligibility for the scheme to all youngsters under 16.
But her plans for emergency legislation to bring about a rent freeze – which would apply to both private tenants and those in the social rented sector – have sparked concerns among the property sector.
Scottish Property Federation director David Melhuish said the freeze would “do nothing to address the wider challenges of supplying enough homes for people to buy or rent”.
He added: “If anything, this policy threatens to derail efforts to improve the supply of new, purpose-built homes for rent as investors pause to ask what else the Scottish Government might be prepared to do.
“We fear there will be a further loss of homes in the Scottish private rented sector and the long-term consequences on investment in the nascent build-to-rent sector.
“Already since this announcement we are aware of a multimillion-pound investment that has been put on pause.”
He said the Scottish Government must “ensure there is support for affected property owners, who are also facing significant cost increases”.
"Our members are doing everything they can to support their tenants as the cost of living crisis takes hold
If a rent freeze continues without increased government support, we risk housing associations being unable to build the new social homes that Scotland desperately needs." pic.twitter.com/HYPUTc5j9g
— SFHA (@sfha_hq) September 6, 2022
The Scottish Federation of Housing Associations meanwhile warned a rent freeze might put the goal of building 110,000 affordable homes by 2032 in jeopardy.
SFHA chief executive Sally Thomas said they understood the “motivation to restrict increases in rents”.
But she warned: “If a rent freeze continues without increased government support, we risk housing associations being unable to build the new social homes that Scotland desperately needs, and it is more than likely we won’t achieve the target of 110,000 new affordable homes by 2032.”
However the Scottish Trades Union Congress welcomed the freeze, with general secretary Roz Foyer saying announcements in Ms Sturgeon’s programme for government showed that the “powers of our Parliament can bring positive change”.
Ms Foyer insisted: “The Scottish Government is to be commended for freezing rents. If implemented correctly – and we are pressing for further answers – this will help thousands of households across Scotland when they need it most.”
Peter Kelly, director of the Poverty Alliance, also said that the measure would “help tenants across the country”.
He welcomed this, and measures such as the increases in the Scottish Child Payment.
But Mr Kelly was also adamant more could be done, noting: “The First Minister said that it is not a lack of political will that prevents us from further action to help people with this cost crisis – it is a lack of money.
“So, the upcoming emergency budget review must focus on getting additional cash into the pockets of people on low incomes.”
The Scottish Retail Consortium meanwhile said the freeze in rail fares could help boost shopper numbers in city centres.
Director David Lonsdale added that while there was “little by way of immediate relief for the costs crunch facing firms” it was “heartening” that ministers had pledged to work with businesses in a review of regulations.