Scotland is in the middle of a housing crisis. The number of new-build homes started and completed last year fell by 24% and 11% , respectively, while a survey from the Scottish Association of Landlords (SAL) suggested that around 22,000 properties may have been removed from the rental market last year.

Whatever your view on the housing market, it’s clear that we need more new homes to be built for sale and more properties available for rent, particularly to accommodate the growing number of people who have no intention of buying.

In the rental market, the problem is only likely to get worse. The same SAL survey found that more than half of the property owners were considering reducing their portfolio, with 83% blaming "hostile" policy.

The clearest example of that has to be the recently revised rent cap. Though the changes are a move in the right direction, they are unlikely to repair the damage done to Scotland’s private rental sector, which provides hundreds of thousands of homes.

Prior to this month, any increases to private rents were limited to 3%, or slightly higher if they could prove significant cost rises. Now, although that figure has been raised to a maximum of 12%, there is still ambiguity over allowable increases.

Where the gap between the market rent and what a current tenant pays is 6% or less, the landlord is allowed to raise their rent to the market level. However, in cases where the market level is higher, the landlord can increase the rent by 6% plus 0.33% for each percent over 6% the market level exceeds what the tenant currently pays.

A rise of up to 12% may sound substantial. But, for landlords who have not been able to increase rents in any meaningful way since 2022, while potentially seeing huge rises to mortgage costs as interest rates spiked, it is going to make little difference. Clearly, and understandably to a point, the Scottish Government tried to limit rent increases that may have been passed on to tenants. It was also arguably designed to make more rental properties available for purchase.

Yet, it did little to fix the problem of rising rents; despite the cap, rents averaged a 12.9% increase during 2023 . And if you are selling a city centre flat in Edinburgh, it’s unlikely to be a first-time buyer, or even someone living locally, who is going to purchase it.

The rent cap has also caused a longer-term issue by restricting supply. While build-to-rent schemes have been postponed or shelved altogether, student accommodation and hotels continue to be developed, with a range of properties across Scotland being repurposed for those uses instead of housing.

It is difficult to know what would have happened if the rent cap had never been introduced, but similar policies have produced mixed results elsewhere. Either way, continuing to deter investment in the private rental sector is not the answer to solving any aspect of Scotland’s perennial housing shortage: in fact, it’s only going to make the problem worse.

Marcus Di Rollo is lettings director at full-service legal firm Gilson Gray

Agenda is a column for outside contributors. Contact: