Meeting of the Parliament 31 October 2024
I am pleased to make a statement to the Parliament on the rent control measures in the Housing (Scotland) Bill. In March this year, the bill was introduced to the Parliament, bringing forward a package of reforms that will help to ensure that people have a safe, secure and affordable place to live.
Today’s statement provides an update to the Parliament on the Government’s intentions to lodge an amendment at stage 2 on the rent control measures as they are currently set out in the bill. The amendment will deliver on the commitment to provide further certainty on how rent control will be implemented—a commitment that was set out in the programme for government, which was published in September.
The proposal that I will set out offers clarity on how rents will be capped in areas where rent control is applied. The Government remains committed to delivering long-term rent control in order to stabilise rents, where needed, to protect the social and economic interests of tenants who rely on the private rented sector for a home.
Eradicating child poverty remains the Government’s priority, and I am sure that we can all agree that having a home can make a direct contribution to achieving that. That is why, as part of our approach to tackling the housing emergency, we are ensuring that families can have secure and affordable homes that meet their needs.
The Government has a strong record of acting to protect tenants, recognising that households in the rented sectors are more likely to be in relative poverty and to be financially vulnerable. Scotland has the strongest tenants’ rights in the world, and the Government acted to mitigate the impact of the cost of living crisis on tenants through the emergency Cost of Living (Tenant Protection) (Scotland) Act 2022, which protected tenants by stabilising their housing costs and preventing most evictions. In the United Kingdom, Scottish tenants alone had that protection.
The introduction of a long-term system of rent control for Scotland builds on that record, working towards a fair and well-regulated private rented sector that delivers for tenants and responsible landlords. It is another step in ensuring that we make further progress towards Scottish tenants being able to access a secure and affordable rented home.
However, it is clear that that must be done in a balanced way that provides appropriate protection for the property rights of landlords and continues to support investment in private rented housing. That will make sure that the system of rent control that is introduced continues to support the supply of rented housing while recognising that the rented sector is a critical part of Scotland’s overall housing system. The amendment that the Government will lodge at stage 2 has been developed in a way that recognises that the need to strike such a balance is a key driver in the approach to implementation.
Over the past few months I have been grateful for the opportunity to give evidence to both the Local Government, Housing and Planning Committee and the Social Security and Social Justice Committee as part of that process and to see and hear the evidence that has emerged as part of their considerations. I have also continued to engage with a wide range of stakeholders and have had the opportunity of hearing in detail from tenants, landlords, investors and developers on the rent control measures in the bill.
Through the work of the housing investment task force, there has been an opportunity to work directly with investors and developers to understand how we can establish a system of rent control that both works for tenants and supports continued investment in private rented housing. In recognition of the role that social landlords play by offering properties at mid-market rent levels to support those on lower incomes, it has also been helpful to hear from Scottish Federation of Housing Association members on how rent controls will affect registered social landlords that offer mid-market provision.
It has been positive to see that, across all stakeholders, there is a consistent view that Scotland needs a thriving private rented sector—one that offers good-quality, affordable housing options and values the benefit that investment in rented property delivers. It is clear that all those involved in the rented sector recognise the contribution that a good-quality, affordable, and well-regulated housing system makes to tackling poverty.
In those discussions, there have been on-going calls for further certainty on how rent control will be implemented and how rents will be capped in areas where rent control applies. To respond to that, the programme for government made a commitment to lodge an amendment to the bill to set out clearly how rent increases will be capped in areas where rent controls apply.
Having considered how best to formulate the cap, the Government will lodge an amendment at stage 2 that will explicitly set out that, where a rent control area is designated, the cap that would apply to rent increases while rent control is in force would be set at the level of the consumer prices index plus 1 per cent, up to a maximum increase of 6 per cent. That would mean that, where a rent control area is in place, in most cases rents would be able to increase by CPI plus 1 per cent of the existing rent. Where the relevant CPI figure exceeds 5 per cent, the increase permitted would be capped at 6 per cent of the existing rent. The rent cap will apply to rent increases both during the term of a tenancy and between tenancies in the period where an area is designated for rent control.
Lodging such an amendment will respond directly to calls for greater certainty and will offer more clarity to tenants, landlords and those who invest in and develop rented homes. Setting out the form of the rent cap in this way—with CPI as its basis—will allow for a reflection of the costs to landlords of offering a property for rent while providing protection for tenants by limiting more significant rent increases. That approach has been shaped by input from stakeholders on how to develop an approach to rent control that provides protection for tenants while continuing to support investment in new and improved private housing.
I turn to other measures in the bill on which stakeholders would welcome further detail on how rent control will be implemented. The bill contains powers for Scottish ministers to make regulations that allow for certain types of property to be exempted from rent control and for rents to be increased above the level of the rent cap in some circumstances. The bill currently sets out that any such exemptions or modifications on how the cap will apply are to be supported by consultation with tenants, landlords and others who may have an interest.
It is essential that the circumstances of such exemptions or modifications to how the cap is applied are subject to full and open consultation that will allow everyone who is affected to have their views considered. That will ensure that the impacts of any decisions on how the powers are used can be fully understood and the measures are developed in a way that is not only fair but robust in the face of challenge and that can be clearly set out in legislation.
In order to respond to the calls for further clarity in respect of those aspects of the rent control system at the earliest opportunity, the consultation that will support decisions on how the powers might be used will take place in early spring 2025. It will build on the work that has already been carried out to support development of the rent control measures in the bill and, in particular, the landlord and tenant questionnaire that was issued in October 2023.
That questionnaire sought views on allowing increases above the rent cap where there had been improvements to the quality of fixtures and fittings or the energy efficiency of the rented property, or where the landlord’s costs incurred in letting the property had increased.
Reflecting on the important part that investment plays in growing the supply of housing, including in the private rented sector, the questionnaire sought views on circumstances in which exempting certain types of property from rent control could be considered. Specifically, it highlighted rented property offered for social good, with rents controlled below market level, and purpose-built accommodation for rent at scale.
The feedback from the questionnaire will feed into the development of the consultation, and there will be continued engagement with stakeholders on the circumstances in which it might be appropriate to exempt certain types of property or to apply a modified rent cap over the next few months. That engagement will inform what is brought forward in the consultation in early spring 2025.
The Government remains committed to bringing forward a system of rent control that works for Scotland—a system that supports the stabilisation of rents for tenants while ensuring that there can be a balanced approach that provides appropriate protection for the property rights of landlords and supports investment in the development of rented homes.
The amendment that the Government will introduce at stage 2 to set out the form of the rent cap will help to support the delivery of those aims. I look forward to continuing to work with Parliament as the bill continues its progress.