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Rent Pressure Zones in Scotland: Will we see one soon?

Monday 16 July 2018

Rent Pressure Zones (RPZs) created a stir amongst the Private Rented Sector when they were first announced as part of the Private Housing (Tenancies) (Scotland) Act 2016, with local authorities across the nation keen to investigate what this meant to them and whether it was the right thing to introduce to their area.

But after the initial frenzy of activity, actions haven’t exactly been forthcoming, as at time of print there are still currently no RPZs.

On Thursday 29 June 2017, The City of Edinburgh Council passed a motion agreeing there was the need for a report on the steps required to implement a city-wide RPZ to limit increases in high rents in the private rented sector in the city. Over a year has passed and there has yet to be a full report issued.

It appears local authorities are aware that, should they wish to introduce a RPZ, the requirements placed upon them are substantial, and credible evidence needs to be provided to show there is a clear case for a cap on rent increases. This evidence is not readily obtainable and neither will it be cost effective to obtain.

The Private Housing (Tenancies) (Scotland) Act 2016 gave local authorities the power to make an application to the Ministers for RPZ’s. An RPZ can cover the entire local authority area,certain post codes or certain streets. Creating an RPZ means that local authorities can cap the amount landlords can increase the rent as per the terms of the calculation set out in the Act.

In order to introduce a RPZ a local authority has to evidence that rents are rising by too much; that those increases are causing undue hardship to tenants; and that the local authority is coming under increasing pressure to provide housing as a result of those rises.

The Scottish Government recently published a document that made it clear to local authorities what would be considered credible and legitimate evidence in order for the Ministers to consider an RPZ application as valid.

The document states the local authorities must satisfy them: -

  • ‘Evidence of rent rises alone will not be sufficient to prove that they are rising by too much. Authorities also need to prove that rent rises in the proposed RPZ are causing undue hardship to tenants; and the rises are having a detrimental effect on the local authority’s broader housing system.’

and furthermore

  • ‘the evidence will be a mixture of quantitative analysis e.g. statistics which demonstrate rent increases, and qualitative analysis e.g. consultation with tenants. Councils will have to gather specific/ new evidence themselves where they do not hold this information already or where national data collections do not provide the level of detail required for an application. As such, councils might consider contracting with a third party with statistical and research expertise’

And this is where the local authorities are realising there is a stumbling block in their desires to make an RPZ application as there is currently no private rent data sources that would provide them with the required evidence. 

If a local authority wishes to carry out a data gathering exercise themselves, they would need to have a process in place to ensure annual rent increases are being tracked on an ongoing basis. However, with the recent financial cut-backs all 32 local authorities have recently been subjected to, the resources to carry out this work in-house will be very limited. They may also not have the finances to commission this work externally.

Logic would dictate that authorities could collaborate to gather the required date and share costs. However, using landlord registration as an example, where each authority operates and maintains its own register and there is no single shared database, it does not set a good precedent.

In April 2018, City of Edinburgh Council officers met with Association of Local Authority Chief Housing Officers (ALACHO), several local authorities including Aberdeen City Council, Highland Regional Council and Glasgow City Council as well as the Scottish Government to begin discussions on how they can share methodology for gathering evidence to meet the required standards.  Edinburgh Council have also commissioned a report on RPZ’s to provide further analysis on the profile of rents and household incomes across localities, postcodes and data zones in the city. This report is expected to be presented before the Committee in November 2018.

It is evident from their approach that local authorities would like to implement RPZ’s. With much of the data in relation to rents expected to be obtained from Rent Service Scotland, Rental Market Database as well as the various portals it is unlikely this can provide an accurate reflection of the current market.  And as RPZ’s only affect those tenants who have a Private Residential Tenancy, which came into effect on the 1 December 2017 it will be several years at least before relevant data can be gathered by the local authorities before they can submit an application that will not be subject to a legal challenge by landlords.