Cost of Living (Tenant Protection) (Scotland) Act 2022 - 2nd proposed extension: statement of reasons
We have prepared this Statement of Reasons to set out why The Cost of Living (Tenant Protection) (Scotland) Act 2022 (Amendment of Expiry Date) Regulations 2023 should be made.
Footnotes
1. Cost of Living (Tenant Protection) (Scotland) Act 2022.
2. Cost of Living (Tenant Protection) (Scotland) Act 2022 (Amendment of Expiry Date) (No.2) Regulations 2023 ("the extension regulations")
3. Scottish Government, Cost of Living Bill - Key Statistics.
4. Understanding Scotland Report Wave 6.
5. From YouGov online polling for Scottish Government; fieldwork: week 137 – 1-3 November 2022; week 158 – 28-30 March 2023; weekly sample of c.1,000 adults aged 18+ across Scotland each wave; weighted to be fully representative demographically and geographically. Base size for private renters is 117 for March 2023 and 145 for November 2022. Data tables for all adults can be found at Public attitudes to coronavirus, cost of living and Ukraine: tracker - data tables.
6. This was part of a prompted list of potential concerns in the next 2-3 months.
7. 66% of private renters compared to 54% of all tenures said they were either Struggling a little OR Struggling somewhat OR Struggling a lot, which has remained relatively steady since polling in November 2022 (then 64% of private renters compared to 53% all tenures as a whole).
8. Not managing very well OR Having some financial difficulties OR In deep financial trouble. This has increased slightly since polling in November 2022 (which showed 25% among private renters compared to 21% for all tenures as a whole).
9. Either To some extent OR To a large extent.
10. ONS, CPIH-consistent inflation rate estimates for UK household groups.
11. See Section 4, Updated Economic Context, at Cost of Living (Tenant Protection) (Scotland) Act 2022: first report to the Scottish Parliament.
12. These have been updated where additional data has been released since the report was published.
13. ONS indicative modelling estimates.
14. Bank of England, Monetary Policy Report – May 2023, based on the mean CPI projection conditioned on market interest rate expectations, with other policy measures as announced.
15. Scottish Fiscal Commission, Scotland's Economic and Fiscal Forecasts – May 2023.
16. Rightmove, Rental Trends Tracker – Q1 2023.
17. City Lets, Quarterly Report – Q1 2023.
18. Zoopla, UK Rental Market Report - March 2023.
19. See Figure 1 below.
20. The Cost of Living (Tenant Protection) (Scotland) Act 2022 (Amendment of Expiry Date) (No. 2) Regulations 2023
22. Glasgow University to increase rents by nearly 10% - BBC News
23. Scottish Household Survey Annual Report Tables 2019
24. Scottish Government Statistical publication on Wealth in Scotland 2006-2020
25. (As reported in Cost of Living Bill - Key Statistics, based on DWP StatXplore Tables for May 2022, compared with latest available rented stock figures)
26. Briefing on reform of the law on damages for unlawful eviction - August 2020.
27. Cost of Living (Tenant Protection) (Scotland) Bill: business regulatory impact assessment.
29. Cost of Living (Tenant Protection) (Scotland) Bill: data protection impact assessment.
30. Cost of Living (Tenant Protection) (Scotland) Bill: equalities impact assessment.
31. Cost of Living (Tenant Protection) (Scotland) Bill: Fairer Scotland Duty assessment.
32. Cost of Living (Tenant Protection) (Scotland) Bill: island communities impact assessment.
35. Cost of Living (Tenant Protection) (Scotland) Act 2022 - proposed extension: statement of reasons.
36. Scottish Housing Regulator, Rent increases by Scottish social landlords 2023/24 - March 2023.
37. Scottish Government, Cost of Living Bill - Key Statistics.
38. The average two-bedroom private rent was £736 in the 12 months to September 2022 (see Table 6 in Section 8 of Scottish Government, Private Sector Rent Statistics, Scotland, 2010 to 2022.) This dataset is primarily based on new let rents, but even when reducing this figure by 10% to reflect that rents for existing tenants tend to be lower than new let rents (see discussion in Annex C of the Cost of Living (Tenant Protection) (Scotland) Act 2022 - proposed extension: statement of reasons), a 3% increase would equate to £19.87 per month and a 6% increase to £39.74 per month.
39. This estimate was informed by findings from the RentBetter research on landlord behaviour, as discussed in the BRIA/Financial Memorandum.
40. As discussed later, under a Private Residential Tenancy, the rent cannot be increased more than once in a 12 month period, and landlords are unlikely to raise the rent in the first 12 months of the tenancy. There are around 340,000 privately rented properties, and at any one time around 65% of tenants have been at their current address for more than 12 months. Using these two statistics and assuming that rental anniversary dates are evenly spread over the year so that half of anniversary dates fall within a six month period gives the estimate of 110,000 properties where landlords could potentially increase the rent for a sitting tenant during a 6 month period.
41. Up to a 3% increase in rent was permitted for the alternative ground of increases in prescribed property costs during this period, but only 47 applications were received.
42. See Table D2 for estimates of properties affected for high and low assumptions of the share of landlords who wish to raise rents.
43. Zoopla, Rental Market Report.
44. See Table 6 in Section 8 of Scottish Government, Private Sector Rent Statistics, Scotland, 2010 to 2022. The data covers the 12 month period to September 2022. While average rents in September 2022 to March 2023, the relevant base period, are likely to be higher than this, it should be noted that the published rent statistics are derived largely from new let rents, and rents for existing tenants tend to be somewhat lower on average than new let rents. For simplicity, and in the absence of precise information to calculate the net impact of these offsetting adjustments, which would in any event not materially affect the estimates set out here, we have used the published average rent figure.
45. Data limitations mean that the estimates relating to number and type of mortgages discussed in this and following paragraphs should be regarded as indicative. The estimated costs also depend on future trends in interest rates.
46. According to MoneyFacts, the average advertised 2-year fixed mortgage rate has declined from 6.47% in November 2022 to 5.26% in May 2023, while the 5-year fixed rate has declined from 6.32% to 4.97%. These data are for residential mortgages, but buy-to-let mortgages are likely to have followed similar trends.
47. It should be noted that while the Bank of England rate has increased by a cumulative 4.4 percentage points since December 2021, the increase in mortgage rates has been smaller than this because the margin of mortgages rates over bank rate has decreased.
58. The number actually affected by the cap will also depend on the share of landlords who wish to raise the rent for a sitting tenant. In the central case above it was assumed that 50% of all landlords who could raise rents for a sitting tenant do in fact wish to do so. Within this overall share, there are likely to be higher or lower shares for particular segments of the market, such as those with mortgages.
49. Since most fixed rate periods are for at least two years (as mentioned above).
50. If the increase in mortgage costs during the six months prior to a rent notice being served were £20, since an application under the prescribed property cost ground is based on a 50:50 sharing between landlord and tenant, this would support a £10 increase in the rent on this ground. In such a case, whether it would make sense for a landlord to use the general maximum 3% rent uplift or submit an application for prescribed property costs would depend on whether they had incurred other prescribed property costs.
51. See Figure 1 in the main body of this document, as well as the discussion in the paragraphs immediately above Figure 1 which relate to the interpretation of this data source.
52. Cost of Living (Tenant Protection) (Scotland) Act 2022: first report to the Scottish Parliament.
Contact
Email: housing.legislation@gov.scot
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