John Swinney’s ‘first refusal’ plan for tenants will worsen housing crisis

The SNP leader’s policy means the owner of a rental property would have no control over its sale value, writes ​​David J Alexander.

Is John Swinney coming for your home? That is the only conclusion from his statement that he will introduce what is effectively the compulsory purchase of landlord properties to give tenants a home at a lower price than the market would provide. Mr Swinney explained that private tenants will have “first refusal” if landlords put their home up for sale if the SNP wins the May Holyrood election. Under the plans, when the owner of the property decides to list it on the market, renters would be given a period of exclusivity to purchase it “at a fair market rate”.

This means that the owner of a property has no control over its sale value. What this would mean in practical terms is completely uncertain. Who would determine the “fair market rate” if not the marketplace? Why would anyone invest in the private rented sector (PRS) in these circumstances? Would anyone even be able to invest in the PRS under these circumstances as lenders would be less willing to lend if the value of a property is to be determined by an external source unrelated to the market. How would the government guarantee that investors would be able to cover any outstanding mortgage on their property if an indeterminate body decided fair value?

Why stop at landlords? Why not extend this to everyone who owns a home? If it becomes legal to fix a price on a landlord’s home, why not anyone else? If Mr Swinney believes that it is the Scottish Government’s right to determine prices in the property market, then where does it end? Why not determine that all property should be sold at a price determined by government?

The Scottish government’s own rules on the compulsory purchase of properties state that there must be “a compelling case in the public interest”; that “owners have the right to object”; and that “owners are entitled to compensation based on market value, often with additional statutory payments for disturbance”.

There are around 340,000 properties in the PRS, with just under three quarters of a million people living in these properties. This proposal would make the Scottish market less appealing to investors, which could result in a decline in the availability of places to rent. This would leave the Scottish government having to provide homes for hundreds of thousands more people at a time when waiting lists for social housing are at record levels; the number of those homeless or living in temporary accommodation is at an all-time high; and the levels of private and social newbuild starts are at a 12-year low.

If this is the answer to the current housing emergency, then I think things are about to get worse before they get better. The real solution to the current emergency is to engage with all parts of the housing sector to increase the volume of newbuilds through encouraging housebuilding; to grow greater investment in the private rented sector to provide more homes which stabilises rent levels; and to invest much more in social housing to start to address the enormous waiting lists that currently exist. Anything else will not address the current housing emergency.