The Cost of Living (Tenant Protection) (Scotland) Act 2022: report to the Scottish Parliament - 1 June to 30 September 2023

1. Introduction

1.1 The costs crisis continues to exacerbate existing social and economic pressures faced by those living in a rented home, making them more vulnerable as a whole. The latest 'Understanding Scotland: Economy' report, carried out in August 2023^[3], found that around six in ten (58%) Scots surveyed believe that their own personal financial situation has worsened in the last 12 months, only slightly down from 63% in February 2023 and 60% in May 2023.

1.2 63% of social rented households and 40% of private rented households in Scotland are estimated to be financially vulnerable, with savings which would cover less than one month of income at the poverty line, compared to 24% of households buying with a mortgage and 9% of households owning outright. Private renting households continue to report higher levels of concern about paying mortgage/rent^[4] than households in all tenures: the proportions were 27% for private renters and 12% for all tenures.

1.3 Although showing a recent downward trend, fuel poverty rates remain significantly higher than before the cost of living crisis. In 2019 the national fuel poverty rate was 24.6% - around 9 percentage points lower than the estimated rate for October – December 2023. It is estimated that 46% of households in the private rented sector and 52% of households in the social rented sector will be in fuel poverty for the first part of the coming winter period. By comparison the fuel poverty rate for owner occupiers in 2019 was 17%, around 6 percentage points lower than October-December 2023.

1.4 The Act came into force on 28 October 2022 as a temporary response to the ongoing emergency situation caused by the impact of the costs crisis on those living in the private and social rented sectors, and students living in college or University Halls of Residence and Purpose Built Student Accommodation in Scotland.

1.5 The intended effect of the temporary Act is to:

• protect tenants by stabilising their housing costs through the introduction of a temporary, variable rent cap;
• where possible, during the costs crisis, reduce impacts on the health and wellbeing of tenants caused by being evicted and/or being made homeless by giving them more time to find alternative accommodation; and
• seek to avoid tenants being evicted during the cost of living crisis (unless an exemption applies), through a moratorium on evictions.

Changes to the emergency Act since introduction

1.6 The social sector rent cap (paragraph 3, Schedule 1 of the Act) was expired on 26 February 2023 following the development of an agreed approach on rent setting for 2023-24, taken forward on a voluntary basis, with social housing landlords. Social housing landlords are "not for profit" organisations and all rental income is used to support the delivery of housing and associated services for tenants.

1.7 Under the Scottish Government's Social Housing Charter social landlords are required to set rents and service charges in consultation with their tenants so that a balance is struck between the level of services provided, the cost of the services and how far current and prospective tenants and service users can afford them. The aim of the agreed approach to rent setting has been to keep rent increases well below inflation to ensure that rents remain affordable, whilst still supporting continued investment in the sector.

1.8 On 31 March 2023, the rent cap in relation to student residential tenancies (paragraph 4, Schedule 1 of the Act) was suspended due to evidence of the minimal impact that rent cap was having in this sector. These tenancies are regulated by the terms of the contract between the accommodation provider and the student, and by common law. These contracts typically cover the whole academic year and there is only a very slight possibility of a contract that permits in-tenancy rent increases arising. As such, the rent cap measures were having minimal impact on the student residential sector. It should be noted that suspension of the measures mean that they cease to have effect but there is a power for the provisions to be revived during the lifetime of Part 1 of the Act should evidence support that being necessary and proportionate. Although assurances were received from the majority of institutional and Purpose Built Student Accommodation ("PBSA") providers that there would be no in-contract rent increases, and evidence to date supports this, these assurances do not cover all providers with certainty, so suspension (as opposed to expiry) was considered appropriate.

1.9 Information on the provisions expired or suspended, and the reasons for their inclusion in the expiry and suspension regulations, is provided within the Policy Note for those regulations.

1.10 On 1 April 2023, further regulations came into force that extended the emergency Act beyond its initial first six month period, for a further 6 months until 30 September 2023. The regulations also varied the rent cap provisions in relation to the private rented sector, increasing the 'permitted rate' by which rent can be increased during a tenancy from 0% to 3%. This decision was taken following a comprehensive analysis of the latest economic context and consideration of a wide range of evidence from stakeholders. A Statement of Reasons providing a full justification and evidence base underpinning that decision was published alongside the regulations.

Our approach to reporting

1.11 Section 9 of the Act sets out statutory reporting requirements for Scottish Ministers. This means that every three months Scottish Ministers must review and report on the need for the provisions in the Act to either be continued or to suspend, vary or expire, where appropriate, based on the evidence available at the time. The statutory reports must undertake a review of the operation of the measures with a view to considering whether they remain necessary and proportionate in connection with the cost of living (section 9(1)(a) in accordance with sections 9(2) and 9(5)).

1.12 Before Scottish Ministers prepare a report, section 9(3) of the Act sets out that they must consult stakeholders who represent the interests of tenants and landlords that may be affected by the provisions in Part 1, and also with Local Authorities. Scottish Ministers may also consult other persons considered appropriate. Section 9(4) also sets out that Scottish Ministers must include a summary of how those views were taken into account in finalising their report. The report details engagement with stakeholder groups – representing tenant, landlord, financial institutions/investors and local authorities – in order to understand and gather evidence on the impact of the provisions, since they came into force.

1.13 The report must also set out the steps the Scottish Ministers have taken to meet the requirements in section 3 (information and advice for tenants) to demonstrate action taken to ensure that tenants affected by the provisions of Part 1 receive appropriate information, advice and support for the period during which Part 1 remains in force.

1.14 When extensions to Part 1 were sought, a Statutory Statement of Reasons setting out the justification and evidence base for it was required. During reporting periods that a Statement of Reasons was laid, it replaced the need for a formal report on the review of the operation of the provisions in Part 1 of the Act for that reporting period (section 9(8)).

1.15 Since the Act came into force, the following statutory report and Statement of Reasons have been published:

• The Cost of Living (Tenant Protection) (Scotland) Act 2022: First Report to Parliament
• The Cost of Living (Tenant Protection) (Scotland) Act 2022: Proposed Extension - Statement of Reasons (January 2023)
• The Cost of Living (Tenant Protection) (Scotland) Act 2022: 2^nd Proposed Extension - Statement of Reasons (June 2023)

Status Update

1.16 The tables on pages 8 and 9 of this report, provides detail on the status and operation of the provisions in Part 1 of the Act.

1.17 In addition, and in line with the range of evidence and supporting information provided in the accompanying documents and Impact Assessments that were published alongside the Cost of Living (Tenant Protection) Bill when it was introduced to Parliament last year, this report also provides an updated overview of the current economic context underpinning the provisions (see Section 4).

1.18 As outlined above, our approach to reporting will ensure that Parliament is given as much information as is available on the operation of the Act. Where supplementary information has been provided, this is indicated within the 'Operation of provision in the reporting period' column within the table on pages 8 and 9, with further detail available in section 6 of this report.