DJ Alexander: Rent controls have led to ‘unintended consequences’

The firm said that the latest statistics on rent levels in the private rented sector (PRS) show that rents have been rising at a far faster and higher rate than before controls were introduced in September 2022.

In the 12 years from 2010 to 2022 average rents for a one-bedroom flat rose by £138 – a 31.2% increase and matching the annual level of inflation for that period.

In the two years since rent controls were introduced, rents for the same size of property have risen by £130, representing an increase of 22.4% and a substantially year-on-year increase than the preceding 12 year period.

There is a similar story for two and three-bedroom properties which increased by 32.8% and 34.4% respectively over the 12-year period but have increased by 27.1% and 25.4% over the last two years at a time when inflation was 10.9% for the two years.

In addition, the figures show that for all property sizes in the 14-year period from 2010 to 2024, 12 out of the 18 areas of Scotland had percentage rent rises below the cumulative rate of inflation of 50%. In a further four areas the increases were between 0.4% and 13.5% above inflation over 14 years. It is only Lothian and Greater Glasgow which rose markedly above inflation by 54.4% and 31.8% respectively.

The property firm concludes that while most of Scotland saw rent increases roughly in line with inflation over the 14 years from 2010-2024, Lothian and Greater Glasgow experienced substantially higher rises. However, before the rent cap, average rent rises across Scotland were generally at or below inflation.

David Alexander, CEO of DJ Alexander Scotland, commented: “What the rent cap legislation did was put the brakes on property investment in the private rented sector (PRS), led to some landlords leaving the market, and has consequently increased demand to unprecedented levels which remain to this day.

“By interfering in the market and by imposing controls the law of unintended consequences has resulted in tenants being charged more, with increases rising at a faster rate, and with a market that is overheating with little sign of this being resolved.

“The logic of the findings of the latest data is that we need to scrap plans for rent controls and rent caps, the Scottish Government must work with the PRS to grow the sector as a sustainable and valued element of the housing offering in Scotland to ease demand, and let the market find its own level again.

“The market has worked successfully for decades yet the last two year’s interference has led to unprecedented demand resulting in large increases in rents.”

Mr Alexander concluded: “It is clear that intervention has done more to harm tenants’ pockets than anything else that could have happened. It is only by learning this lesson and reacting sensibly to it that the current levels of demand in the PRS will be calmed. Failure to do this will simply cause further rises in the future.”