The new Private Residential Tenancy (PRT) started on the 1 December 2017 and with it the new Rent Pressure Zones (RPZ). Councillors now have the power to request rent caps in areas where rents are too high. If the Local Authority (LA) receive multiple complaints about the rent prices or tenants are seeking help for hardship, the LA can make an application to the Scottish Government to make that area a Rent Pressure Zone and cap the rent increases within it.
If an area is specified as a rent pressure zone, any rent increase is capped at the level of the Consumer Price Index plus one percent annually. Rent Pressure Zones can last for a maximum of 5 years.
This means that the rent in these areas will only be able to be raised by a controlled amount although an application can be made to a rent officer if significant improvements are made to the property. These improvements would have to be more than mere decoration or anything that is already considered a landlord obligation. For example, getting a new boiler so your property passes its Gas Safety would not entitle you to a rent increase, but improving the property by installing a new kitchen might.
Only tenants that have signed a PRT will have their rent capped, the same does not apply for those tenants with a Short Assured Tenancy. If your lease was signed after 1st December 2017, this applies to you.
Currently no areas have been specified and a lot of criteria will need to be met before an area is categorised as an RPZ. Evidence must be laid before Scottish Ministers to prove tenants are suffering hardship directly due to the rent prices and Ministers must liaise with tenants and landlords in the area. However, the idea has received backing from SNP, Labour and the Greens. Edinburgh Greens are requesting Edinburgh be the first area to utilise the RPZ’s. This is probably because the Lothian area has the highest inflation in private rent in Scotland.
Had rents tracked the CPI over the last ten years, they would now be well above their current level in Aberdeen and well below their current level in the strong Edinburgh market.
Obviously, tenants will benefit from the predictability of the capped rent increases. However, not all landlords seek a rent increase every year and an unintended consequence of the introduction of the RPZs may be that rents are increased on a more regular basis.
The caps may also help tenants to budget and therefore less likely to fall in to arrears. This in turn should minimise the need for costly eviction actions which are stressful for both tenants and landlords.
It is also important to note that when a property is placed on the market landlords are free to set the rental price in line with the market and without reference to any previous rental cap.
With all of this in mind, even a rental cap should not stop landlords seeing a return on their investment.