The Scottish Government has recently published the much anticipated Private Housing (Tenancies) (Scotland) Bill.

The Bill contains some welcome provisions including a new standard model lease and the ability for tenants to refer excessive rent increases to an adjudicator; but there are two areas that are particularly controversial. These are:

• The removal of the ability for a landlord to get his property back simply on the basis that the contracted term has come to an end; and

• The Government will be able to declare an area as a “Rent Pressure Zone” which will limit rent increases in that area. The limit cannot be less than CPI (Consumer Price Index) plus one per cent and will be in place for a five-year period. The local authority must apply to the Government in order for them to use this discretionary power.

While the prospect of rent increase controls and a restriction on the ability for landlords to get their property back at the end of a lease has been on the horizon for some time, we now know more of the detail.

On one hand the Government claims that the purpose of the Bill is to “modernise the private rented sector” and to “ensure that everyone has a safe and warm place to stay”.

On the other hand, we think it is fair to say these proposals have been spreading fear and alarm throughout businesses operating in this sector – the landlords, funders, developers and operators of private rental property.

One of the main concerns stems from the fact that Scotland will have more draconian regulation than the rest of the UK, potentially putting off investors from investing in Scotland. This could mean fewer homes, less construction, and as a result, higher rents – the very thing that the Government is trying to prevent.

However it does seem that the incoming regulations will not be as wide-ranging as initially feared. The rent control proposals do not actually limit the amount of rent a landlord can charge at the outset of the lease, but rather the amount by which rent can be increased each year in certain areas designated as Rent Pressure Zones.

Landlords know they will be able to increase rents by at least CPI plus one per cent annually, helping them keep up with inflation. These rental increase caps can only remain in place for five years.

We are cautiously optimistic that this will not dissuade investment in the sector; however we do wonder whether it will achieve the Government’s goal of protecting tenants. It could in fact have the opposite effect for three main reasons:

Firstly, if rent increases are capped then this could be seen as a licence for landlords, who may not normally have increased their rents, to raise them to the level of the cap;

Secondly, a rent increase cap could cause developers to shy away from building in Rent Pressure Zones due to the limited prospects for rental growth, resulting in less supply and thereby exacerbating the original problem; and

Thirdly, new lets are not subject to any cap, which could cause a landlord who is in a Rent Pressure Zone to seek to impose the highest possible rent at the start of the tenancy. In fact we wonder if the very act of announcing the Bill has sent landlords rushing to review their rents before the regulations come in.

If we truly want a mature private rental sector, where renting is a lifestyle choice rather than seen as a secondary option if purchasing your own home is unaffordable, then we need high quality rental homes that are desirable and affordable. Rental increase caps and restrictions on removing tenants seems to be tinkering around the edges, imposing regulation to try to solve a much wider issue – the basic fact that it is a lack of supply that forces tenants to inhabit inferior properties at excessive rents. The way to ensure tenants have good quality homes at reasonable rents is surely to increase supply by encouraging and facilitating construction of much needed residential property. If the Government are serious about tackling this and are looking at reform, we would suggest they turn their attention to reform of the planning system to allow more homes to be built.

To finish on a high note, the First Minister announced on Thursday a commitment to a £3 billion programme to construct 50,000 new affordable homes. The devil will as ever be in the detail, but this announcement will be welcomed by housing associations, tenants and homeowners.

- Peter Chambers is a partner at Burness Paull.