Kenneth Gibb from the UK Collaborative Centre for Housing Evidence and University of Glasgow ponders the unenviable choices facing the sector.
The energy price crisis, evidence of unaffordable rents, rising interest rates and the wider cost-of-living crisis are combining to create unprecedented financial pressures for many millions of British households in the coming months. Governments in different parts of the devolved UK are now proposing broad brush rental sector measures to both curb the growth in rents and provide struggling tenants with certainty about their housing costs.
In England this is mainly taking the form of a proposed rent cap for social sector rent increases in the new financial year starting in the Spring of 2023, and Wales has also announced a rent cap. In Scotland, emergency legislation is being rushed through to create a rent freeze till the new financial year, alongside a winter evictions ban (except for criminal and ASB reasons) across all rented housing (private rented sector, social housing and student accommodation). At the same time the Scottish, Welsh and Northern Irish governments are developing plans for long-term models of rent control for their private rental sectors (see reports by CaCHE on rent control and further work to come out in November for the Scottish Parliament CPG on housing).
The experience of major temporary interventions during the pandemic has clearly influenced the minds of policy makers, such as in the Scottish Government. At the same time, the UK government has previously capped (or reduced) rents, in part to save on housing benefit. We note that in Scotland, the actual impact on rental income for most landlords will be zero because rents are already set and, for social tenants receiving housing benefit, there’s no gain from curbing higher rents.
The period beyond this financial year is the current area of most controversy for the social housing sector. The rent cap in England will be 7%; what will it be in Scotland? The legislation merely says a decision will be made in consultation with the sector ‘in due course’. Social landlords need to set their rents for 23-24 in the next few weeks, so they do face considerable uncertainty. And, as has been thoroughly rehearsed in the recent debates in Holyrood, rent uncertainty undermines social landlord business plans that would use rents they invest in the housing stock, contribute to achieving net zero and towards building new homes – all key policies of the Scottish Government. Until now, Scottish Governments have not in the past interfered with rent-setting in a sector that’s managed to keep rents at lower social levels.
Not surprisingly, most of the debate in the PRS has been about the opposed interests of tenants facing rapidly rising rents in Scotland’s cities versus those of landlords facing multiple financial challenges, and indirect but multiples sources of mounting evidence that landlords are exiting the sector. While very much aware of the affordability burden on vulnerable households (and noting the UK government’s ongoing discussion about the real value of critical benefits as even a 10% increase fails to keep up with inflation), policymakers do need to think systemically. Scottish social housing new build is slowing down because of the economic difficulties we face, not to mention the future rent cap, so just where are people to go in the short to medium term if rental markets shrink? A smaller PRS in the long term may well make sense but there needs to be much more additional social and affordable housing to compensate.
There are clearly major and unenviable trade-offs between the short run and the long term, between affordability now for vulnerable households and the resilience of key long-term housing policies. These rent caps and freezes are blunt instruments, redolent of the measures during Covid-19 – they had both foreseen and unforeseen negative consequences then, and interventions like the freeze and cap will do so, too.
