r/Glasgow Tools

Title
Author	Divola
Comment	I'm a bit on the edge about rent control. While the rental market is clearly not a competitive one (landlords are able to exert quite a bit of market power for a variety of reasons) and thereby a well-positioned rent ceiling can actually increase the supply of rental units, my hunch is that there'd be political pressure from a lot of sides to place it an unsustainably low level - thereby you get too many landlords exiting the market, and therefore a shortage of rental units. The last thing I want as a renter coming into a city would be to have to wait years for a property to open up for me to rent - what use are low rents for me in this case? Also rent control sounds like sth that would push even more landlords over the edge and push them to convert their units to Airbnbs. I think the place to start is short-term lets. I don't think stricter licencing and supply restrictions are really the way to go as landlords would always be looking at the barrel with the honey and would be willing to go through lots of hoops to get into it. This is especially true if we create an artificial shortage of Airbnb units where prices would be extremely high. I think it's good to instead put a cap on Airbnb prices, for example in the following way - every licenced property will have an automatic rental valuation, revised every month (Zoopla's algorithm is a great starting point), and no Airbnb (or a similar type of short-term let) is allowed to earn a revenue higher than 75% of its rental valuation in that month. Any excess revenue will have to be surrendered to the government. This will encourage a lot of landlords to instead convert their properties to long-term lets, which would drive down rental prices and increase the choices available to tenants at any price point. It will also, inevitably, create some degree of saturation on the rental market, beyond which excess Airbnbs would be put on sale, bringing down prices for FTB, and presumably shielding them from the competition of investors as Scotland wouldn't be particularly attractive for BTL investors anymore given low yields in both Airbnb and long-term rentals. I don't expect this process to be as frictionless as I described but it definitely seems like it can lead to good results. Of course, such a cap will practically kill short-term rentals in Scotland, which do have their place, not only for tourist accommodation but also for people just coming into a city and having to go on viewing for rental properties, etc. New hotels will probably be built off the back of that additional demand even without the government nudging it, but if there's still too little tourist accommodation, the government can also step in and build some. Ideally, these new hotel developments would be concentrated in the outskirts of cities, so the centres stay reserved for residents.
Reddit Link	https://www.reddit.com/r/glasgow/comments/qdief2/anyone_else_completely_scunnered_by_the_property/hhshv0q/
Created	Sat 23rd Oct 2021 11:20pm
Status	normal ()

I'm a bit on the edge about rent control. While the rental market is clearly not a competitive one (landlords are able to exert quite a bit of market power for a variety of reasons) and thereby a well-positioned rent ceiling can actually increase the supply of rental units, my hunch is that there'd be political pressure from a lot of sides to place it an unsustainably low level - thereby you get too many landlords exiting the market, and therefore a shortage of rental units. The last thing I want as a renter coming into a city would be to have to wait years for a property to open up for me to rent - what use are low rents for me in this case? Also rent control sounds like sth that would push even more landlords over the edge and push them to convert their units to Airbnbs.

I think the place to start is short-term lets. I don't think stricter licencing and supply restrictions are really the way to go as landlords would always be looking at the barrel with the honey and would be willing to go through lots of hoops to get into it. This is especially true if we create an artificial shortage of Airbnb units where prices would be extremely high. I think it's good to instead put a cap on Airbnb prices, for example in the following way - every licenced property will have an automatic rental valuation, revised every month (Zoopla's algorithm is a great starting point), and no Airbnb (or a similar type of short-term let) is allowed to earn a revenue higher than 75% of its rental valuation in that month. Any excess revenue will have to be surrendered to the government.

This will encourage a lot of landlords to instead convert their properties to long-term lets, which would drive down rental prices and increase the choices available to tenants at any price point. It will also, inevitably, create some degree of saturation on the rental market, beyond which excess Airbnbs would be put on sale, bringing down prices for FTB, and presumably shielding them from the competition of investors as Scotland wouldn't be particularly attractive for BTL investors anymore given low yields in both Airbnb and long-term rentals. I don't expect this process to be as frictionless as I described but it definitely seems like it can lead to good results.

Of course, such a cap will practically kill short-term rentals in Scotland, which do have their place, not only for tourist accommodation but also for people just coming into a city and having to go on viewing for rental properties, etc. New hotels will probably be built off the back of that additional demand even without the government nudging it, but if there's still too little tourist accommodation, the government can also step in and build some. Ideally, these new hotel developments would be concentrated in the outskirts of cities, so the centres stay reserved for residents.