Hansard

Thank you, convener, and good morning to committee colleagues. I am pleased to be at the meeting to present three sets of regulations that will support the expiry of part 1 of the Cost of Living (Tenant Protection) (Scotland) Act 2022 on 31 March 2024 and introduce some important measures that will continue to support tenants from 1 April 2024. As colleagues know, the emergency act came into force on 28 October 2022. Since then, it has continued to provide extra protection for tenants during very challenging economic times, including through the provision of a cap on in-tenancy rent increases and a moratorium on the enforcement of evictions. However, the measures in part 1 of the act were able to provide only temporary support during the worst of the cost crisis, and the legislation as approved by the Parliament in October 2022 clearly sets out that it could not be extended beyond 31 March this year. In order to support part 1 of the emergency act coming to an end, we have laid the three instruments that the committee is considering. The Cost of Living (Tenant Protection) (Scotland) Act 2022 (Saving Provisions) Regulations 2024 is a negative instrument that is intended to facilitate the transition away from the emergency measures by saving certain provisions as they relate to processes that commenced prior to 1 April 2024. For the rent cap, certain schedule 1 provisions would be saved for rent increase notices that have been served before 1 April, as well as any subsequent referrals, applications or appeals in relation to them. For the temporary eviction grounds, the regulations will mean that any eviction notice that has been served on the basis of those provisions prior to 1 April may proceed or be appealed. Similarly, provisions will be saved for any action for unlawful eviction that was raised before 1 April and any subsequent appeal. Those provisions will be familiar to members from other time-limited legislation that we have passed previously. In effect, they mean that any action that was started before the expiry date will not have to be restarted just because the source legislation has expired. The draft Cost of Living (Tenant Protection) (Scotland) Act 2022 (Expiry of Section 10: Extension) Regulations 2024 is an affirmative instrument that is technical in nature and it links to the third set of regulations, which I will turn to shortly. The regulations will modify the emergency act in order to change the time when section 10 and, by consequence, schedule 3 of the act will expire. Instead of expiring at the end of 31 March 2024, as part 1 of the act will, section 10 and schedule 3 will expire a year later, at the end of 31 March 2025. In line with the act’s requirements, the Scottish Government has laid a statement of reasons to accompany the draft regulations. The third set of regulations has probably engaged the most interest across rented sector stakeholders. The draft Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024 will change how rents in relation to private residential tenancies and statutory assured tenancies are determined on referral by a tenant to a rent officer or the First-tier Tribunal for Scotland. The process of adjudication has been in place since 2017. Although it was suspended during the period of the rent cap, it has now resumed in a modified form. The proposed changes to the adjudication process are intended to smooth the transition away from the rent cap and to protect tenants from steep rent increases, which some tenants would experience if, in a single step, there were to be a move back to open market rent from rent levels that have been suppressed during the period for which the emergency act has been in force. The legislation requires us to ensure that we reflect the interests of all parties in the rented sector. We recognise that landlords may have experienced rising costs, including from the need to improve and repair properties, which are usually recouped through rent. At the same time, although there have been some signs of improvement in the economic conditions for households in recent months, they follow a period of significant pressure such that, on average, households continue to face economic and financial conditions that are significantly more challenging than they were prior to the cost of living crisis. In particular, private rented sector households continue to report that they are, on average, under greater financial stress than the average for all households. Once the rent cap expires, we would expect that many rent increases that are proposed by landlords may proceed as normal, with tenants agreeing to pay the proposed increase. However, it is reasonable to expect that there may be situations in which tenants wish to refer a proposed increase for adjudication. The emergency act provides Scottish ministers with the ability to temporarily modify the basis on which rent increases are adjudicated. The long-standing rent adjudication process allows for rent service Scotland or the First-tier Tribunal to make a determination on the proposed rent increase. That is based on a comparison with the rent for other properties in the area, which is known as the open market rent. The amended adjudication proposal would see a third factor taken into account when a determination is made. Alongside the market rent and the rent that is being requested by the landlord, there will be an additional comparator. The final rent will be determined based on the lowest of the three figures and it may not be set at a rate above the rent that the landlord is requesting. The additional comparator will be based on the difference between the current rent and the open market rent, with the level of increase being determined on a sliding scale. When the gap between the market rent and the current rent is less than 6 per cent, the comparator will not come into play, so the rent increase will be either the rent that is being sought by the landlord or the market rent, whichever is lower. When the gap is between 6 per cent and 24 per cent, a sliding scale will apply, with an additional 0.3 per cent increase being allowed for each percentage point between the current rent and the market rent. The increase may not exceed 12 per cent of the overall rent. That will apply in all cases. The 12 per cent maximum would be reached only in cases in which market rents are 24 per cent or more higher than current rents. That underlying formula is necessarily more complex than a simple rent cap, and we want to ensure that both landlords and tenants have clarity. That is why a simple online rent calculator forms part of our awareness-raising work. It was launched last Wednesday, well in advance of the changes taking place. Just as people do not need to understand everything about the underlying technology of the smartphone or the device on which they will use the calculator, they do not necessarily need to know exactly how the underlying formula works in order to use it effectively. The online calculator will allow tenants and landlords to see quickly how various rent scenarios would affect their situation. They do not need to follow the formula in detail. I am aware that members have also been made aware of the recent Scottish Parliament information centre blog on the ending of the emergency measures, which includes an online calculator that is similar to the one that the Scottish Government has provided. When sample numbers are put into the calculator, it will illustrate the potential impact of the proposed changes. The transitional arrangements will amend the basis of rent adjudication for one year, from 1 April 2024 to 31 March 2025, but they may be extended for further periods of one year, if appropriate, with parliamentary approval. That would be based on an assessment of the circumstances at the time. As well as launching the online calculator to address the underlying complexity of the changes that we are proposing, we are running an awareness-raising campaign that is aimed at increasing awareness of tenants’ rights and empowering tenants to assert their rights if required. Our renters’ rights campaign launched last Wednesday and it will run for four weeks. We are keen to work with any tenant or landlord representative body to help to raise awareness of the changes and help people to understand how they will work in practice. The regulations that the committee is considering are vital as they signal a move away from the emergency protections that were crucial in protecting and supporting tenants during the worst of the cost crisis, while also acknowledging that challenges remain and that it is right that we protect tenants as we move towards the pre-cost crisis position. They also come as we prepare the housing bill to be debated in Parliament. That bill will set out how we aim to regulate rents in the long term alongside a wider package of changes to increase tenants’ rights and prevent homelessness. I thank the committee for its scrutiny of the instruments. I am happy to answer any questions. 10:15