Markets are braced for a fast and forceful increase in interest rates on Thursday as the Bank of England continues its game of catch-up with inflation. A 0.5 percentage point increase in the cost of borrowing is a foregone conclusion, though some suspect a tougher 0.75 point rise to the current rate of 1.75% could be deployed.

The ramifications of this will be significant, not least in the property sector. And while much has been made of the additional strain in store for mortgage holders, a bigger crisis is potentially looming in the chronically impaired rental property market.

The story of the UK’s dire rental sector is nothing new with the recurring themes of maintenance issues, affordability, and fierce competition to secure tenancies. The situation has further deteriorated of late as the number of homes available to rent privately has declined by 50% since the onset of the pandemic, according to professional body Propertymark.

The wider market has been buoyed for years by UK interest rates well below the long-term average, having fallen to 0.5% at the height of the financial crisis in March 2009 and remaining adrift of 1% until May of this year. Cheap borrowing and relentless government focus on home ownership drove a steep increase in house prices that is only now showing the first signs of slowing.

Because mortgage repayments are often cheaper than renting an equivalent property, rising prices have a disproportionate impact on tenants. This erodes their ability to save up for ever-increasing mortgage deposits, leaving those who aspire to ownership locked out.

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Now the cost-of-living crisis is accelerating rental inflation, with many tenants feeling they are being strong-armed into paying more for less.

Latest figures from the Office for National Statistics show that private rental prices in the UK rose by 3.4% during the 12 months to August, the largest annual increase since the ONS started tracking this data in 2016. The rate in Scotland outpaced the UK average, coming in at 3.6% with monthly rentals in Glasgow and Edinburgh now averaging about £1,000 and £1,200 respectively.

Tenants also suffer disproportionately from poor insulation and disrepair, making rising energy costs harder to bear. According to campaign group Living Rent, 49% of Scottish housing stock has an energy efficiency rating of ‘D’ or below, but that figure rises to 57% among private rented homes.

This was perhaps at the back of the First Minister’s mind when earlier this month she announced emergency legislation to temporarily freeze rents and ban evictions until March of next year to assist the 700,000 people living in privately rented homes in Scotland, plus a further one million in homes owned by councils or housing associations.

It was a strange U-turn by the Scottish Government, which threw its weight behind a winter eviction ban during the depths of the pandemic but in June of this year failed to back a rent freeze motion brought forward by Scottish Labour MSP Mercedes Villalba in response to the cost-of-living crisis. It also left the door wide open to fierce criticism from the property industry, with the head of Scottish estate agency DJ Alexander describing the move as a “sign of desperation”.

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“The proposed announcement by the First Minister of a rent freeze for tenants in the private rented sector tells you all you need to know about the Scottish Government’s commitment to consultation and fairness,” David Alexander said.

“With the burden of the cost of the freeze being placed upon landlords the First Minister seeks to gain cheap political points whilst not addressing the fundamental failings of her own government’s housing policy.”

Housing is a devolved issue, putting it squarely within the remit of the Scottish Government which has advanced some policies welcomed by tenants’ campaigners.

Among these was the abolition of Right to Buy in 2014, which is blamed for a shortage of housing in the social sector after more than 500,000 Scottish homes were sold off during the lifetime of that policy. In 2017 the Scottish Government also did away with the equivalent of England’s Section 21 Notices, bringing an end to so-called “no fault” evictions.

It would be obtuse to ignore how the lack of social housing has contributed to pressures in the private rental market, and it is on this front that Mr Alexander specifically takes First Minister Nicola Sturgeon to task. There are currently 132,000 people on the social housing waiting list, he says, but only 1,000 more social housing homes available now than when Ms Sturgeon’s SNP party came into power in 2007.

Meanwhile, the Scottish Federation of Housing Associations argues that social housing landlords already operate under “substantial” limitations as set out in the Scottish Social Housing Charter, which has kept rents at about half of that in the private sector.

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Rent controls already exist in various forms around the world and are supported in the UK by tenants’ rights groups like Generation Rent. Critics – mainly from the property industry – argue that they will discourage investment and encourage neglect of existing stock.

They also warn that more landlords will withdraw from the market, creating a greater shortage of rental housing. That could theoretically free up homes on the lower rungs of the property ladder for first-time buyers, though issues with affordability would still be a limiting factor.

But with cumulative rents in Edinburgh and Glasgow up by more than 40% during the last decade and more interest rate hikes to come – the costs of which will be passed on to tenants – it is clear that the market in its current form is unsustainable. Rather than shrinking the private rented sector, what is needed is a carefully constructed system of rent control that could include a “points-based” scheme favouring owners of higher-quality and energy-efficient properties.

This must be accompanied by an expansion in social housing stock. The Scottish Government has committed itself both to this and – as part of the cooperation agreement between the SNP and the Scottish Green Party – to the introduction of rent controls within the term of this government. These two programmes need to work hand in glove and unlike this winter’s emergency freeze on rents, they must take on board input from the industry.