A Judicial Review has backed the Scottish government’s ambition to implement rent controls.

Many agents believe the policy is hugely detrimental to the Scottish private rental sector and the decision confirmed by the courts now enables the Scottish government to start implementing what many property professional view as a fundamentally flawed policy.

A rent freeze for existing tenancies was implemented in September 2022 – becoming law in October 2022. The original aim behind the Scottish government’s decision was to stop tenants from being evicted by a landlord needing or wanting to raise rents. However, in reality it has proven serious potential to drive away much needed investment by landlords to providing high quality and safe housing which is desperately needed.

Propertymark has been among a host of advocates seeking legal counsel regarding the legitimacy of this proposed new legislation. The argument was that the new proposed laws would prove disproportionate and unfair between tenant and landlord, with Propertymark playing a lead role on petitioning a Judicial Review which was submitted to the Court of Session in Edinburgh in January 2023.

The petition argued that by discriminating against certain sections of society, the new legislation had the potential to breach the European Convention of Human Rights, which, despite Brexit, still has jurisdiction on such subjects currently.

From 1 April 2023, the Scottish Government committed a U-turn by implementing a rent cap instead of a rent freeze. This limited rent rises in the private sector to between 3-6 per cent, and these changes were made as part of the Cost of Living (Tenant Protection) Act 2023.

There had been calls for England to follow suit, as recent media reports have questioned whether Scotland’s policy of rent controls could become instructive for England. However, Michael Gove’s latest decision has been to not follow the Scottish model.

Currently the Scottish government’s policy of rent controls has not resulted in any measurable benefits, and in fact rents continue to increase across Scotland, recording an overall 13.7 per cent annual rise as at Q3 2023, sending average rents within the region of £1115 per month.

Many landlords have expressed serious concerns they may be forced out of the sector entirely. However, the true extent of any exodus to date remains unknown until the next Scottish Housing Survey is published in full (having been scaled back since the onset of the Covid-19 pandemic).

Nathan Emerson, CEO at Propertymark, said: “Propertymark are enormously disappointed and concerned at today’s outcome from the Judicial Review regarding rent controls across Scotland.

“The private rented sector is a crucial provider of housing and has been incredibly let down by a clear lack of understanding which is now driving good landlords away from the private rented sector. The economics of providing high quality homes is becoming alarmingly unviable.

“Private landlords currently commit to providing homes on a huge scale across Scotland and they must be assured that they can cover all costs. When developing policies that directly affect the private rented sector it’s vital that ministers fully understand the investment economics that sit behind the supply of high-quality homes to rent. Ministers must ensure housing policies include wide ranging impact assessments to ensure the system is fully workable for landlords, tenants, and agents alike.”