Edinburgh Rental Legislation Update for Landlords - Autumn 2024

The political environment can have a big impact on landlords and the rental market appears to be in a state of constant change. We round up the biggest factors for landlords at the moment.

Rent Controls

The main topic of interest with regard to the Edinburgh rental market was the ending of the Cost of Living (Tenant Protection) (Scotland) Act 2022, whereby ‘in-tenancy’ rents could only be increased by 3.0% at the annual review date. That ended on 31st March this year.

Despite government concerns that rents would jump or spike after 18 months of limited increases, this didn’t really materialise. Rents did adjust to the levels at which they would likely have arrived anyway if the controls had not been in place.

So rather than overly depress the rents for the properties which continued to operate throughout, the unwanted policies largely only served to push some properties out of the market, and add further barriers to entry for others, and simply decreased supply at a time when demand continued to increase.

The evidence from this period may well help to inform the next policies being considered by the Scottish Government. Indeed, the long-awaited Housing (Scotland) Bill was introduced to the Scottish Parliament on 26 March 2024, just five days before the day the above act ended.

Since the act ended and rents have been left to open market forces once again, they have settled and demand has eased, whilst still remaining strong.

Scottish Government ministers may well now need to think more cautiously about whether they introduce some of the measures proposed in the new housing bill, given they mainly originate from the BUTE House Agreement, between the SNP and the Green Party, which didn’t end well and which was widely thought to be part of the reason for the poor SNP results in the last General Election.

The outstanding question over potential further rent controls has also been cited as the reason for c. £3.0bn worth of investment not coming into Scotland as Build-To-Rent developers and similar businesses look to divert funds to other areas of the UK with more assured future housing political landscapes.

Overall at present, local housing politics seems more settled and normal than they have for some time though and it is hoped a longer period of common sense stability will endure.

Short-Term Lets

We’d looked at this topic in detail previously and as we are now one year into the new legislation (commenced 1st October 2023) it is worth reviewing how matters have evolved.

Initial estimations and indeed the City of Edinburgh Council’s own figures suggested there were approximately 12,000 properties in the city being used as Short Term Lets. 

The council’s licensing and planning depts both had to revise their policies following two court cases which found their initial stances on the subject to be illegal.

Now that matters have settled, there have so far been only 823 full licences granted for ‘Secondary Letting’, where the whole property is let out and available on a year-round basis, as opposed to either ‘Home letting’ (whilst the owner is away on holiday etc), or ‘Home Sharing’ (where the owner is letting out a room in their own home). 

The total number of bed spaces potentially available per night in these 823 properties, according to the public register, is just 3,356. To put that into perspective, 218,970 people turned up to watch Taylor Swift when she performed at Murrayfield over one weekend this summer.

Despite being granted a licence, some operators are now also finding that their planning application for a ‘change of use’ is refused, and so we may see the numbers of STL’s in the city decrease rather than increase as these affected properties drop back out.

Edinburgh isn’t alone in seeing regulations being introduced to curb the AirBnB phenomenon.  The Mayor of Barcelona has recently stated that all 10,000 STL licences will be revoked in 2028, whilst New York has approved just 257 licences out of 3,250 applications this year.

Many cities around the world, which are attractive to tourists, have seen increased demand pressure on their housing stock and are taking measures to ensure some of these properties are directed back into residential usage. 

Overall, this hasn’t materially affected the wider private rented sector in the city as there has not been a heavy flow of ex-STL properties coming over into the long-term market. It’s been more of a drip feed than a flood.

Quality Of Property

‘Well-presented and sensibly priced’.

This mantra hasn’t changed in 25 years!  And that’s chiefly because it works well and has proven to be the best approach to providing homes for tenants by landlords.

Properties with good, clean, modern bathrooms and kitchens let well and at market leading prices. It is usually worth investing in upgrading these important rooms if they look tired or shabby.

Typically, we often see the increased rental value from undertaking such a project pay for itself within 2-3 years, and with fewer voids as tenants want to stay in good homes.

Energy Performance Certificates (EPC) - Updated

The Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 requires us to reach net zero by 2045, as well as to achieve a 75% reduction in emissions by 2030 and a 90% reduction in emissions by 2040. Energy efficient homes are a key part of the plan to do so.

EPC’s have been subject to constant Scottish Government review for many years. For the last five years, there has been an intention to revise the way in which EPC’s are undertaken and calculated, as well as a change to the acceptable minimum EPC levels for both private domestic homes as well as private rented homes.

The Scottish Government recently published its ‘Heat in Buildings’ programme which aims to deliver on these targets.

Its main focus is to introduce a new law that will require homeowners to make sure that their homes meet a reasonable minimum energy efficiency standard by the end of 2033, and private landlords will be required to meet this minimum energy efficiency standard by the end of 2028.

It also proposes prohibiting the use of polluting heating from 2045, which includes mains gas boilers, which currently account for c. 80% of all homes in Scotland.

The minimum EPC rating by 2028 is expected to be C but this has yet to be clarified.

Furthermore, the way in which the EPC rating is actually calculated is also set to be changed too so we won’t know yet whether any current ratings will need to be amended.

We also don’t know whether existing ratings will all need to be redone under the new calculations system.

We’ll watch this space carefully but may well see it being pushed forward again rather than becoming law in the currently anticipated timeframes.