The Cost of Living (Tenant Protection) (Scotland) Act 2022: report -1 October to 31 December 2023

6. Operation of Part 1 and assessment of necessity and proportionality

6.1 Paragraphs 1 & 2, Part 1, Schedule 1: Rent cap for private residential tenancies

Description and Operation of the Provisions

6.1.1 The Act introduced a temporary cap on in-tenancy rent increases for the majority of private sector tenancies, which was backdated to 6 September 2022 in order to prevent landlords seeking to increase a tenant’s rent between the Programme for Government announcement of the ‘rent freeze’ and commencement of the Act. For tenancies where a valid rent increase notice was issued before 6 September 2022, the existing legislative requirements continue to apply.

6.1.2 The rent cap was initially set at 0%, and applied to most existing tenancies in the private rented sector. Any rent increase notice issued for applicable tenancies on or after 6 September 2022 was void while the cap was at 0%.

6.1.3 On 1 April 2023, 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 overview of the latest economic situation and consideration of a wide range of evidence from stakeholders, and a Statement of Reasons providing a full justification and evidence base underpinning that decision was published alongside the regulations.

6.1.4 This meant that from 1 April 2023, private landlords were once again able to issue a rent increase notice (for applicable tenancies), so long as the increase was within the permitted rate. As before, landlords can still set the rent for any new tenancy, as the rent cap only restricts in-tenancy rent increases.

6.1.5 Notwithstanding the rent cap, landlords continue to have a safeguard available to them, and can apply to Rent Service Scotland (RSS) to increase the rent for a let property above the rent cap in connection with defined ‘prescribed property costs’. Landlords must give their tenant notice in writing when they make such an application. The regulations that came into force on the 1 April also varied the prescribed property costs safeguard from 3% up to 6%.

6.1.6 An application using the safeguard may only be made if a landlord has had an increase in defined costs, during the preceding six months, ‘prescribed property costs’ are defined as follows:

• the interest payable in respect of any mortgage or standard security over the rental property;
• any insurance premium payable by a landlord relating to insurance connected to offering the property for rent, for example ‘landlords’ insurance’ (excluding general building and property insurance); and
• any ‘service charge(s)’ related to the rental property that are recoverable from the tenant via their rent as part of the contractual arrangement between tenant and landlord.

6.1.7 A landlord can apply to increase the rent to recover up to the lower of either 50% of the increase in these costs or 6% of the existing rent. The existing protection which only allows a landlord to raise rents once per 12 months still applies.

6.1.8 If an application is approved by RSS, the resultant rent increase will not come into effect until (at the earliest) 12 weeks after the date the landlord made the application. A landlord or tenant is able to appeal the RSS’ decision by applying to the First-tier Tribunal for Scotland (Housing and Property Chamber) within 14 days to have the RSS calculation reviewed.

6.1.9 As of 31 December 2023, Rent Service Scotland (RSS) have received the following applications:

6.1.10 As of 31 March 2023, 47 Landlord applications for 3% prescribed property costs were received, with 20 incomplete applications having to be returned and 0 withdrawn. 38 decisions were made and 9 decisions have not been made as no supporting documentary evidence of costs were received. Of the 47 applications, 47 were for interest payable in respect of a mortgage or standard security, 0 were for landlord insurance other than general building and contents and 0 were for service charges relating to the property.

6.1.11 Since 1 April 2023, 65 tenant verification applications have been received, 6 of which may be exempt from the rent cap and were therefore not verified, and 29 decisions have been made by the Rent Officer. Of the 29 decisions:

• 18 were verified at the 3% cap;
• 11 applications had rent increase notices that exceeded the 3% cap and these were capped at 3% by the Rent Officer. Of the 11 which exceeded the cap:
  • 3 were between 5 and 7%
  • 2 were between 7 and 8%
  • 2 were between 15 and 16%
  • 1 at 25%
  • 3 above 30%

6.1.12 Since 1 April 2023, 1,366 landlord applications for 6% prescribed property costs have been received of which:

• 49 landlords are still to submit additional information after being requested
• 182 applications have been withdrawn
• 22 applications were withdrawn and another application submitted
• 1 application is waiting to be processed
• 1,112 applications have been accepted onto the system of which:
  • 18 applications are waiting to be processed or are in progress
  • 1,094 decisions were made by the Rent Officer:

6.1.13 The table below shows a breakdown in the type of prescribed property costs applications submitted and accepted:

6.1.14 Of the 1,112 applications accepted, 44 applied stating they had an increase in more than one prescribed property cost. Additionally, not all applicants requested an increase in rent due to a rise in mortgage costs. One applicant only requested an increase in rent due to a rise in their insurance costs. 7 applicants requested an increase in rent due to a rise in their service costs. This was also the only prescribed property cost all 7 applicants claimed for.

6.1.15 Two landlords have challenged the Rent Officer’s decision and have requested the First-tier Tribunal review the decision taken by the Rent Officer. In one of the cases, the First-tier Tribunal made the decision to increase the rent by 6%. We are waiting the outcome of the second review.

6.1.16 RSS received 557 enquiries regarding the landlord prescribed property cost applications and tenant verification applications. 308 were received by e mail and 249 by telephone.

Consultation

6.1.17 The call for evidence, along with informal consultation with stakeholders, has provided valuable information on the views of key stakeholders on the operation and impact of the rent cap measures. These are summarised in section 5 of this report. Scottish Ministers have considered these as part of assessing the continued necessity and proportionality of the measures.

6.1.18 During this reporting period the Scottish Government has continued to meet with a range of key stakeholders to discuss proposals for future rented sector reform, including opportunities for stakeholders to give their views on the ongoing operation and impact of the rent cap provisions.

Necessity and Proportionality

6.1.19 During this reporting period, in order to assess the use and continued necessity and proportionality of the private rented sector rent cap and safeguards, the Scottish Minsters have taken into account:

• the evolving economic context of the costs crisis and the likely impact on households resident in the private rented sector;
• information from key stakeholders regarding the impact and effect of the measures on landlords and tenants; and
• information from other sources to seek to identify any unintended or unanticipated impacts that may have arisen as a result of the measures.

6.1.20 The concerns detailed by consultees in the call for evidence (see section 5 of this report), and through wider ongoing stakeholder engagement, are acknowledged. In terms of testing the validity of these concerns, and assessing the wider impact of the rent cap measures, at this time there is limited data available to evidence a direct link between the rent cap provisions and wider changes to the rental market, a key issue flagged by many stakeholders. The Scottish Government will continue to closely monitor information as it becomes available and has considered all available evidence and data at this time.

6.1.21 Having carefully considered the responses from consultees we remain of the view, based on the overall evidence set out in section 4, that the rent cap provisions remain necessary and continue to pursue the prescribed aims of the Act. The economic data demonstrates that although there have been some improvements the costs crisis continues to have a challenging impact on household finances. The measures remain in the public interest seeking to ensure that tenants are, protected against the impact of the wider economic conditions, through stabilisation of their housing costs.

6.1.22 The Scottish Government remain of the view that the measures have continued to strike a proportionate balance between the protection of tenants and the rights of landlords via the safeguards built into the legislation. The purpose of including the provision for landlords to make an application to have an above cap rent increase takes account of the individual circumstances of landlords. Scottish Ministers made use of the powers to amend the level of the rent cap and the landlord safeguards in April 2023 – as a direct response to consideration of the available evidence and wider economic circumstances. We have reviewed the and they continue to strike an appropriate balance.

6.1.23 Latest data from Rent Service Scotland on the operation of the prescribed property costs safeguard makes clear that landlords are successfully making use of it, as set out in paragraphs 6.1.12 – 6.1.15.

6.1.24 The current framework is finely balanced, and we will continue to closely monitor the available economic data and evidence of the impact of the measures. Evidence on whether, or not, recent improvement in some economic indicators will continue and will translate into a sufficiently improved financial position for privately renting households such that the measures cease to be appropriate, will continue to be closely monitored alongside the impacts of the Part 1 measures. We continue to consider emerging and contemporaneous evidence on an ongoing basis.

6.1.25 The Part 1 measures could only ever remain in force until 31 March 2024 at the latest, which means that we have entered the final three months of the emergency rent cap. The evidence provided by stakeholders and the evidence set out in section 4 shows improvements to some economic indicators. However, the recent growth in nominal earnings has not been enough to offset the large increases in energy and other prices since the cost of living crisis began, and overall living standards remain significantly below their pre-crisis level. The latest survey evidence continues to show that privately renting households are experiencing greater financial challenges than the average for all households. All factors considered, we remain of the view that the measures continue to be necessary and proportionate.

6.2 Part 1, Schedule 2: Protection against eviction

Description and Operation of the Provisions

6.2.1 Part 1, Schedule 2, temporarily pauses the enforcement of eviction orders and decrees in the private rented, social rented and student accommodation sectors from 6 September 2022 onwards, with relevant exemptions in relation to specified circumstances, and it also amends the process for the determination of damages for an unlawful eviction.

6.2.2 The temporary moratorium on evictions aims to help to reduce the negative impacts on the health and wellbeing of tenants caused by being evicted and/or being made homeless during the costs crisis. It will provide more time for people to seek support and to find alternative accommodation that meets their needs at an affordable rent.

6.2.3 A number of safeguards have been put in place to allow the enforcement of evictions in limited circumstances. The pause does not apply where:

• the tenant has engaged in antisocial or criminal behaviour (student residential tenancies, private and social sectors);
• the tenant has abandoned the property (private and social sector);
• where the property is to be sold by a lender (private sector only);
• the tenant is no longer an employee of the landlord (private and social sector); and
• the property is subject to demolition or requires substantial work and suitable alternative accommodation will be available for the tenant (social sector only).

6.2.4 There are also three amended/new temporary grounds for eviction where the moratorium does not apply:

• landlord intends to sell the let property due to financial hardship (this applies to private sector only)
• landlord intends to live in the let property due to financial hardship (private sector only)
• tenant has substantial rent arrears which add up to 6 months’ rent or more in the private rented sector, or £2,250 or more in the social rented sector (private and social rented sectors).

6.2.5 If an eviction order is granted by the Tribunal or Sheriff Court for any of these reasons, the eviction order can be progressed in accordance with the rules that apply to these eviction grounds. Where an eviction order or decree was granted before the legislation came into force or where the landlord raised eviction proceedings before the legislation came into force and served an eviction notice before the announcement on 6th September 2022, the case will not be caught by the moratorium and will still be able to be enforced in line with normal legal requirements.

6.2.6 Where a landlord is prevented from enforcing an order for eviction while the moratorium is in effect, the enforcement of that order can only be delayed for a maximum period of 6 months.

6.2.7 Recent data from the Tribunal up to 9 January 2024 shows that there have been 2046 eviction applications that fall within the scope of the Cost of Living Act’s provisions. Of the 2,046 applications received, 661 are awaiting outcome. The remaining 1,385 applications are broken down as follows:

6.2.8 The majority of these eviction applications, 1,428, were in relation to private residential tenancies. Of these, 422 were granted, 21 refused, 11 dismissed and 464 are awaiting an outcome. The remainder 510 were either rejected (88) or withdrawn (422).

6.2.9 The table below provides a breakdown by grounds used for cases which were granted, refused and dismissed. In addition to the 18 grounds of eviction set out in the Private Housing (Tenancies)(Scotland) Act 2016, there are 3 new grounds under the Act – 1A (landlord intends to sell due to financial hardship), 4A (landlord intends to live in the let property due to financial hardship) and 12A (substantial rent arrears).

6.2.10 Of the 422 granted the two main grounds used were rent arrears and intention to sell. It is important to note that applications for eviction can use more than one repossession ground, and so the number of grounds in the table, if totalled, will therefore total to more than the number of cases.

6.2.11 Latest available figures from the Scottish Courts on the total number of social sector summary cause eviction applications registered at courts each month show a decrease over the period since August 2022, with the number of applications registered falling from 458 in August 2022 to 225 in April 2023, although numbers across more recent months have risen slightly to 391 in October 2023. It should be noted that these are overall figures and do not specifically identify the number of applications that fall within the scope of the emergency legislation. Also note that whilst eviction application figures in October 2023 remain above the monthly levels seen prior to this each month between April 2020 and July 2022, the Coronavirus (Scotland) Act 2020 was in force from 7 April 2020 to 30 September 2022 and had a significant impact on the number of summary cause eviction applications registered by the courts during this period.

6.2.12 Latest published figures from the Scottish Housing Regulator on the number of social sector properties recovered following court eviction actions^[30] are on a financial year basis only and so provide no information on trends since September 2022, nor do the figures specifically identify the number of properties recovered that fall within the scope of the emergency legislation, of which it could take a number of months for these to progress from application to outcome. Across the latest financial year 2022-23, there were a total of 618 properties recovered, an increase from the 383 properties recovered in the previous year 2021-22, but substantially lower than the 1,866 properties recovered in the pre-pandemic year 2019-20, with numbers since 2019-20 being likely to have been affected by the Coronavirus Act measures in place. Across the latest financial year 2022-23, 17% (104) of the properties recovered were for anti-social behaviour, a higher percentage than the 4% (79) of properties recovered for anti-social behaviour in 2019-20.

6.2.13 Feedback from the latest call for evidence once again shows that social sector landlord representatives see the eviction moratorium provisions as having a minimal impact, due to eviction already being a last resort for social landlords. However, concerns were raised again about the definition of substantial rent arrears in the emergency Act, as it is being perceived by some tenants as an acceptable level of debt to accrue before action can be taken.

6.2.14 In engagement with student sector stakeholders who provide student accommodation, it remains the position of the sector that evictions are rare, with only one example of eviction in the last 5 years being cited, and that being on the basis of anti-social behaviour, not relating to rent arrears.

6.2.15 Data from the First-tier Tribunal for Scotland (Housing and Property) Chamber indicates that they have received 14 applications for unlawful eviction damages from November 2022 to end October 2023.

Consultation

6.2.16 In this reporting period, in order to assess the continued necessity and proportionality of the provision, the Scottish Government has considered various sources of information, formally and informally, including a further call for evidence issued to a range of key stakeholders - including landlords, tenants, housing rights organisations, investors and educational establishments and providers of student accommodation.

6.2.17 In addition to the call for evidence, we have engaged with those representing landlords, letting agents and tenants in both the private and social rented sectors as well as Local Authorities, the Scottish Housing Regulator and Lenders. We also continue to engage with The Society of Messengers-at-Arms and Sheriff Officers on the operation of the eviction moratorium in practice.

Necessity and Proportionality

6.2.18 During this reporting period, in order to assess the use and continued necessity and proportionality of the eviction moratorium provisions across the private, social and student accommodation sectors, the Scottish Minsters have taken into account the evolving economic context of the costs crisis which continues to place pressure on households, along with evidence from key stakeholders regarding the impact and effect of the measures on landlords and tenants. Each sector is considered in turn as follows:

Private rented sector

6.2.19 The Scottish Government continues to view the moratorium as providing tenants with important additional protection and peace of mind while the rent cap remains in place by:

· firstly, avoiding landlords ending a tenancy to raise the rent. Although it is a criminal offence to evict a tenant without a court or Tribunal order or decree, the moratorium provides additional protection to tenants from unfair or unlawful eviction action pursued by private landlords in order to seek a new tenant (which would allow them to set a new, higher rent afresh because the rent cap only applies to in-tenancy rent increases) in direct response to the temporary rent freeze; and secondly, to help reduce impacts on the health and wellbeing of tenants associated with being evicted, and by providing those being evicted with additional time to access support and find alternative accommodation. We consider that the measures, alongside the landlord safeguards and exemptions, continue to remain proportionate in order to pursue the aim of helping reduce impacts on the health and wellbeing of private rented sector tenants by being evicted and/or being made homeless at a time when they continue to struggle as a result of financial stress caused by the costs crisis, and providing those being evicted with additional time to access support and find alternative accommodation.

6.2.20 Therefore, the measures remain a proportionate and necessary approach at this time. The Part 1 measures could only ever remain in force until 31 March 2024 at the latest, so we have entered the final three months of the evictions protections.

Social Rented Sector

6.2.21 We know that social rented households are more likely to have lower incomes than households in other tenures, with Scottish Household Survey results for 2022^[31] showing 53% of social rented households having a net income of £20,000 or less, compared to 30% of private rented households, 35% of households who own outright, and 10% of households buying with a mortgage.

6.2.22 Social rented households are also more likely to be financially vulnerable (defined as households with savings which would cover less than one month of income at the poverty line), with Scottish Government Statistics on Wealth in Scotland^[32] showing 63% of social rented households being estimated to be financially vulnerable, compared to 40% of private rented households, 24% of households buying with a mortgage and 9% of households owning outright.

6.2.23 Around two-thirds (65%) of social rented households are receiving some level of support for housing costs through Housing Benefit or Universal Credit, with the equivalent figure for private rented sector households being 28%^[33].

6.2.24 Social sector stakeholders continue to note that evictions are always a last resort and therefore the moratorium does not impose a significant impact. Therefore, the evidence of impact indicates that this is not an immediate and significant obstacle to sector practices. We consider that the measures, alongside the landlord safeguard and exemptions, continue to remain proportionate in order to pursue the aim of helping reduce impacts on the health and wellbeing of social sector tenants by being evicted and/or being made homeless at a time when they continue to struggle as a result of financial stress caused by the costs crisis, and providing those being evicted with additional time to access support and find alternative accommodation.

Student Rented Sector

6.2.25 Whilst evictions in the student sector are reported as being extremely rare by sector, there remains a possibility that evictions could take place.

6.2.26 In addition, the majority of those in halls of residence and PBSA are under 21. Taken alongside the wider economic landscape associated with the ongoing costs crisis, we consider these provisions continue to be necessary in order to help reduce impacts on the health and wellbeing of tenants by being evicted and/or being made homeless at a time when they are already struggling as a result of financial stress resulting from the costs crisis.

6.2.27 Given the reported infrequency of eviction action, alongside the landlord safeguard and exemptions, the interference with landlords’ rights imposed by the moratorium is relatively minimal and is proportionate with the aim of the Act as regards these provisions, and with providing those being evicted with additional time to access support and find alternative accommodation.