Affordable Housing Supply Programme: process and procedures MHDGN 2022/02

Annex C: Mid-market rent

Target tenant group

Mid-market rent is aimed at assisting people on low and modest incomes to access affordable rented accommodation and helps those who have difficulty accessing social rented housing, buying their own home or renting privately on the open market.  It is important however that prospective tenants are assessed on their ability to afford and sustain a tenancy, not just on their ability to meet specific income levels, and that they are not discriminated against as a result of the source of that income (for example, through a work or state pension or social security contributions).  Income criteria will be based upon figures in the local authority’s Local Housing Strategy, Affordable Housing Policy, or as otherwise agreed between individual local authorities and the relevant grant provider.  Projects aimed at higher income groups are ineligible for funding.

Grant applicants and form of tenancy

While mid-market rent grant applicants can be RSLs, local authorities, local authority arms-length external organisations or RSL subsidiaries, it will be for the local authority arms-length external organisation or RSL subsidiary to provide households entering into a tenancy with a Private Residential Tenancy.  In this respect, the Scottish Government has developed a digital tool to help landlords to create a Model Private Residential Tenancy Agreement. 

Policy monitoring data collection

The Scottish Government has developed an electronic survey in order to collect policy monitoring information from all mid-market rent providers/ letting agents and households.  The ‘SmartSurvey’ system is GDPR compliant, easy to use and secure, adapts to any device, and only takes a few minutes to complete.  Access to the data held is limited to a small number of Scottish Government staff and the SmartSurvey account is username and password protected.  Individual tenants, landlords or households cannot be identified through the system.  The information collected will help to (a) ensure that mid-market remains affordable to households in the target tenant group (b) shape future policy on mid-market rent and (c) provide valuable policy monitoring information.

Grant recipients are expected to arrange for the survey to be completed when tenants collect the keys or have access to the property, and for every new let or subsequent let of the property.  The steps for completion are as follows:

• Step 1 – The mid-market rent provider/ letting agent completes Part A of the survey and upon completion it will say ‘Thank you for completing the survey.’
• Step 2 – When the mid-market rent provider/ letting agent clicks Next Page, the survey continues to Part B for the tenant to complete including the privacy notice for the tenant.

Letting agent regulation – code of practice and registration

Part 4 of the Housing (Scotland) Act 2014 introduces a robust framework for the regulation of letting agents in Scotland.  This includes:

• a mandatory register of those carrying out letting agency work, with an associated fit and proper person test and minimum training requirements that must be met to be admitted
• a statutory Letting Agent Code of Practice
• a new way for tenants and landlords to resolve complaints for breaches of the Code through the First-tier Tribunal for Scotland (Housing and Property Chamber), and
• powers for the Scottish Ministers to obtain information and of inspection to monitor compliance and support enforcement.

The Letting Agent Code of Practice came into force on 31 January 2018.  It (a) sets out the standards of practice that those carrying out letting agency work (as defined by section 61 of the Housing (Scotland) Act 2014) must meet in how they deliver their services and (b) gives tenants and landlords the ability to challenge poor practice. 

Paragraph 22 of the code makes it clear that a letting agent must not unlawfully discriminate against a landlord, tenant or prospective tenant on the basis of their age, disability, sex, gender reassignment, marriage or civil partnership, pregnancy or maternity, race, religion or belief or sexual orientation. 

Applying blanket policies such as insisting that an applicant must be able to afford rent without recourse to housing benefit, or refusing to accept a guarantor where there is no credit history, may breach the requirements of paragraph 22.  Grant recipients which are subject to the code (see below) should ensure that their advertising, credit checking and allocation policies and practices support people on low and modest incomes to access mid-market rent and do not inadvertently discriminate against groups with protected characteristics.

Whether an RSL or its subsidiary, or a local authority or its arms-length external organisation, is required to follow the code of practice for its mid-market rent properties and join the register of letting agents will depend on: the exact circumstances of its business model, the work it does, and what type of landlord it manages properties for (private or social).

Where an RSL or its subsidiary, or a local authority or its arms-length external organisation, only manages properties that it owns directly, it will not be expected to register.  However:

• if an RSL or local authority manages properties it has leased to its subsidiary/ arms-length external organisation, the RSL or local authority will be expected to register, and
• if an RSL or its subsidiary, or a local authority or its arms-length external organisation, manages properties for a private landlord (not a local council or an RSL) it will be expected to register.

Any grant recipient which is unsure whether letting agent regulation applies to its particular circumstances should seek its own legal advice on whether it is required to comply with the code of practice and register.

The Scottish Government has published a guide to letting agent registration.  This provides further information for those undertaking letting agency work to help them understand what will be required for registration.

Service charge

In the event that a service charge is to be included within the monthly rent, the tenancy agreement should make clear what services are included and a breakdown of the prices of each.  This should be made clear in all correspondence (including advertising).  A breakdown of the services included within the rent should also be shown to prospective tenants.