Anna Gardiner: Argentina can teach lessons to Scotland’s housing market

Buenos Aires and Brechin. Two locations you wouldn’t normally expect to compare. However, when it comes to recent government policy on housing, it’s not too difficult to draw parallels between Argentina’s bustling capital and many of our Scottish cities.

In the spring the Scottish Government published a new Housing Bill, on which a wide range of views and perspectives have recently been published in Scottish Housing News.
Scottish Land & Estates was one of several organizations to jointly bring a judicial review of the Cost of Living (Tenant Protection) (Scotland) Act 2022 and although this process was ultimately unsuccessful, our message that rent caps do no good to the tenant , nor to the landlord, well, this is confirmed.

Recent research by the Scottish Association of Landlords (SAL) found that there were around 22,000 fewer homes available to rent in Scotland at the beginning of 2024 than at the same time last year.

While focusing on representing Scottish rural property owners, Scottish Land & Estates has also seen a decline in the number of homes for rent in rural areas. In the period from the beginning of 2022 to the end of 2023, in 18 local authorities in rural areas, 11 recorded a decline in the number of properties available for rent. There were 806 fewer properties available in the Highlands over the period, while in Dumfries & Galloway the reduction was 674.

And according to the Scottish Government’s property market review, published in April, rents rose significantly last year while supply fell.

So where does Buenos Aires fit into this particular issue? Fulfilling pre-election promises, one of President Javier Milea’s first actions while in office was to deregulate the rental market and abolish rent controls introduced by his predecessor Alberto Fernández.

Under these rules, the lease term was at least three years and allowable annual rent increases were limited to a weighted average of inflation and wage increases. The results were, of course, predictable – a huge number of owners fled the rental market, and others switched to short-term rentals. Instead of providing tenants with a better deal, rental prices have exploded as choice for tenants has been limited.

Since President Milei trashed these rules, the number of homes available for rent in Buenos Aires has reportedly increased by 240%, coinciding with a decline in rent collected from tenants by approximately 22%.

These are huge numbers – and an example that neither the Scottish Government nor its former colleagues in the Scottish Green Party are likely to cite to justify the proposed rent controls in the Housing Bill.

However, given the end of the Bute House Agreement, we strongly believe that the Scottish Government has the opportunity to change course.

In the context of the recently declared housing emergency in Scotland, the draft bill in the pipeline represents a missed opportunity to address the cause – rather than the symptom – of housing shortages across the country. This is especially true in rural areas, where housing shortages limit the rural economy and remain a key factor in rural depopulation.

There is a housing crisis in rural and island areas and the provision of housing should be encouraged. Housing construction and renovation in these areas already pose significant profitability challenges due to material costs and skills shortages. There are also significant regional differences in the economics of housing delivery in terms of affordable rents in rural and island locations, compared to the higher costs of maintaining homes and providing basic services such as water. Added to this is the uncertainty of future income streams as a direct result of government action, which is proving to be a disincentive to those who could deliver new housing and have been providing private rental housing.

One SLE member, among those who provide 13,000 homes to families living in rural areas, recently explained that economic reasons are gradually making it impossible to rent unless one is close enough to the city to charge a profitable rent. In their case, the overhead costs associated with water management under a private water supply (mains water is not available) add up to £740 per cottage per year, and the costs of maintaining and operating the cottage amount to almost £4,000.

They explained: “Many people in our area can barely afford rent of £4,000 a year because there is no public transport and they need a car, so we are just breaking even and if we try to pass on the cost of water to tenants they will go into debt… if we add all the our capital costs, we will see that we are incurring huge, unsustainable losses. We are a sheep farm with a few cottages that wouldn’t normally be able to afford it, but we are one of the few that own a wind farm, so we subsidize our tenants.”

While Buenos Aires is not the first thought when it comes to Scottish housing, there is a salutary lesson for the Scottish Government as it considers the content of the Housing Bill that will ultimately become legislation. From a rural perspective, anything the government can do to ensure more homes are built and do not drive current owners out of the sector will go some way to repairing the damage done by counterproductive policies over the last few years.