Anna Gardiner: Argentina can provide lessons for Scotland’s housing market

Buenos Aires and Brechin. Two locations you wouldn’t normally expect to be able to draw comparisons between. Yet, in terms of recent government policies on housing, it isn’t too difficult to draw parallels between the bustling Argentinian capital and many of our Scottish towns and cities.

In Spring, the Scottish Government published a new Housing Bill, on which many different opinions and perspectives have been published on Scottish Housing News recently.
Scottish Land & Estates was one of several organisations to jointly instigate a judicial review into the Cost of Living (Tenant Protection) (Scotland) Act 2022 and whilst that process was ultimately unsuccessful, our message that rent caps do not serve either the tenant or landlord well is being borne out.

A recent survey by the Scottish Association of Landlords (SAL) found around 22,000 fewer homes were available to rent in Scotland at the start of 2024 compared to the same period last year.

With our focus on representing Scottish rural landlords, Scottish Land & Estates has also witnessed a decline in homes to rent in rural areas. Between the start of 2022 and the end of 2023, across 18 local authorities with rural areas, 11 had seen decreases in the number of properties available for rental. In the Highlands, 806 fewer properties were available over that period whilst in Dumfries & Galloway, the reduction was 674.

And during the last year, according to the Scottish Government’s housing market review released in April, rents have risen significantly as supply has decreased.

So where does Buenos Aires fit into this particular issue? Delivering on his pre-election promise, one of President Javier Milei’s first actions in office was to deregulate the rental market, scrapping rent controls put in place by his predecessor, Alberto Fernández.

Under those rules, tenancies were a minimum length of three years and permissible annual rent increases were capped at a weighted average of inflation and wage growth. The results, of course, were predictable, with huge swathes of landlords fleeing the rental market and others switching to short-term lets. Rather than delivering a better deal for tenants, rental prices exploded as the choice for tenants was curtailed.

Since President Milei consigned the rules to the scrapheap, it is reported that Buenos Aires has seen a 240% increase in the number of homes available to rent – and this has coincided with a drop in rent charged to tenants of around 22%.

These are huge figures – and an example that neither the Scottish Government nor their former Scottish Green Party colleagues are likely to be referring to as justification for the proposed rent controls contained in the draft Housing Bill.

However, given the end of the Bute House Agreement, we firmly believe there is an opportunity for the Scottish Government to change course.

In the context of the newly declared housing emergency in Scotland, the Bill as drafted represents a missed opportunity to tackle the cause – not the symptoms – of a shortage of housing across the country. This is especially true in rural areas, where the housing shortage is a constraint on the rural economy and remains a key driver of rural depopulation.

There is a housing crisis in the rural and island areas – and housing delivery needs to be encouraged. Housing construction and upgrades in these areas already have major viability challenges due to cost of materials and skills shortage. There are also significant regional differences in the economics of housing delivery in the context of the achievable rents in rural and island locations, relative to the higher costs of maintaining homes and providing essential services such as water. Uncertainty of future income streams, as a direct result of the government’s actions, has added to this and is being shown to be a disincentive to those who could deliver new housing and have been providing private rented housing.

One SLE member, among those in our membership who provide 13,000 homes for families living in rural areas, recently explained that the economics are gradually making it impossible to let housing unless you are close enough to a city to charge a viable rent. In their case, the water management overheads for their private water supply (mains water is unavailable) adds £740 per cottage per year, and their maintenance and running costs per cottage is close to £4,000.

They explained: “Many people in our area can barely afford £4000 rent per year because there is no public transport and they need a car, so we are only just breaking even and if we try to pass on the costs of water to tenants, they will go into debt… if you add all our capital costs into the equation, you can see that we are operating at a massively unsustainable loss. We are a sheep farm with a handful of cottages, that normally could not begin to afford this, but we are one of the few that have a windfarm, so we are subsidising our tenants.”

Whilst Buenos Aires isn’t the first thought when it comes to Scottish housing, there is a salutary lesson for the Scottish Government as it mulls over the contents of the Housing Bill that will ultimately become legislation. From a rural perspective, anything that government can do to ensure more houses are built and existing landlords aren’t driven out of the sector will go some way to mending the damage inflicted by counterproductive policies of the past few years.