Dumfries and Galloway’s biggest housing association is warning a rent freeze aimed at helping cash-strapped tenants could cost it millions of pounds in lost revenue.
The Scottish Government brought forward emergency legislation at Holyrood last week to peg rents at current levels at least until March, 2023.
The Cost of Living (Protection of Tenants) (Scotland) Bill hands Scottish ministers temporary powers to cap rent increases at zero per cent.
But Loreburn Housing Association fears any freeze beyond March would mean less cash to build affordable homes.
Deputy chief executive Gary Allison said: “Our business plan had a planned rent increase contained within it for next year subject to consultation with our customers.
“If this were to drop to zero, we are looking at a cash inflow reduction of £3.17m over the first five years and £43.7m over the life of the plan.
“In relation to new build development, all registered social landlords put up their housing stock as security against new borrowings.
“A rent freeze will lower the value of our housing stock, meaning we can borrow less and have less to invest into building new homes and upgrading existing homes.
“Housing associations throughout Scotland have expressed concerns over this legislation. At Loreburn we are no different.
“Rent freezes risk jeopardising the Scottish Government’s targets both on affordable housebuilding and on energy efficiency and investment works planned into the future.”
Mr Allison also warned rocketing interest rates were having a “major impact” with long term debt interest now priced at 5.5 per cent.
Loreburn previously secured a 30-year fixed rate loan of £30m at 2.22 per cent.
He said: “On this £30m loan we could be looking close to £1m extra interest payable on today’s rates.
“Lower rents and higher interest payments means less money to spend on housing stock.”
According to Mr Allison, social rents are around half private sector levels – and lower in Scotland than elsewhere in the UK.
Loreburn rents were frozen in 2017/18 and 2018/19 and rose by just two per cent last year.
And although the 2023 increase – if allowed – would be “significantly below inflation” it would be
“vital” to future investment plans.
He added: “Our vision remains to create great places to live and to achieve this we must invest in new and existing homes.”
Evictions will be also be “prevented” under the legislation except in specific circumstances.
Galloway and West Dumfries MSP Finlay Carson claimed Scottish ministers had ignored housing associations for “good headlines”.
He said: “The reality is their rent freeze could reduce the housing stock available to housing associations across Dumfries and Galloway which is the last thing we need when the demand is so high.”
The Scottish Greens hailed the rent freeze as providing “vital protections” for tenants over the winter.
“That is why the rent freeze and eviction ban are so crucial.”
