Housing (Scotland) Bill: business and regulatory impact assessment summary

Options

The options for each of the measures in the Bill are set out in the Policy Memorandum.^[13] Broadly, these are: Do nothing; Non-regulatory action; and Legislate. The Policy Memorandum sets out why legislation is considered to be the most appropriate option.

Sectors and Groups Affected

The Bill covers a wide range of provisions and also a wide range of sectors and groups. A short summary of the key groups affected is set out below in relation to Rented Sector Reform, Homeless Prevention, and Mobile Homes. Further details of specific groups affected by specific measures is set out in the individual policy BRIAs.

Rented sector reforms

The key groups and sectors affected by the various rented sector reforms in the Bill include, but are not limited to:

• Tenants in the private and social rented sectors
• Students living in the mainstream private rented sector
• Private and social landlords
• Residential investors
• Letting agents
• Scottish Courts and Tribunals Service
• Scottish Housing Regulator
• Sheriff Officers
• Rent Service Scotland
• Tenancy Deposit Schemes
• Surveyors
• Support and representative organisations for housing and homelessness
• Local authorities

The Rented sector reform BRIA summarises the cumulative impact of the various measures on the PRS. There is evidence from recent research and engagement that some landlords may be considering partially or completely divesting from the private rented sector in response to proposed regulatory changes. An example is given of a qualitative study with landlords and letting agents in Scotland as part of the Rent Better project,^[14] where interviews were carried out between September 2021 and February 2022. The outcome of this study was that 15 out of the 37 landlords interviewed felt that the ‘balance had tipped’ for them and they would be leaving the sector, typically over the next two-five years. More recently, in the BRIA engagement with business on the proposals in the Bill, undertaken in November and December 2023, 26 of the 35 respondents to a question about whether they were planning to leave the PRS indicated that they intended to divest partially or fully from the sector.

In order to respond to such concerns, the approach taken in developing the various provisions in the Bill has been to build in a significant degree of flexibility and a number of safeguards to mitigate any unintended consequences. For example, with respect to evictions, there is a requirement on the Tribunal and Courts to consider all the circumstances of a case, including the detrimental effect of a delay to the enforcement of an eviction on private landlords in relation to financial hardship, health or disability. In relation to keeping pets and making changes to let property, these protections include the ability for landlords to refuse a request where it is reasonable to do so, or to set reasonable conditions for approval. And in terms of concerns around resourcing, this will continue to be monitored ensuring early intervention where necessary.

There are also protections in the Bill in relation to rent control which contains powers for Scottish Ministers to create exemptions or modifications to how rent control applies to safeguard the interests of landlords where appropriate. For example, Scottish Ministers will have the power to provide for circumstances where a rent increase above the rent cap could be allowed, in particular by specifying types of property or other circumstances relating to the tenant or landlord where the restrictions on rent increases would not apply.

The details of any safeguards would be set out in secondary legislation to ensure that delivery and implementation of the measures is sufficiently flexible to take account of emerging issues, current market conditions and pressures. Scottish Ministers would be required to consult on proposals for safeguards to ensure transparency and allow those affected to have their views considered.

Overall, it is the Scottish Government’s view that the package of provisions being taken forward for rented sector reform strikes a reasonable and proportionate balance between increasing protections for tenants and providing appropriate safeguards for private landlords.

The Rented sector reform BRIA^[15] also summarises the cumulative impact of the measures on the social rented sector. The proposed measures are already followed as best practice by social landlords. Thus, the impact of individual measures as well as the cumulative impact of all measures on social landlords is not expected to be significant.

Homelessness Prevention

The key groups and sectors affected by the homelessness prevention measures in the Bill include, but are not limited to:

• Relevant bodies listed within the Bill, many of whom are also public bodies
• Local authorities
• People at risk of becoming homeless
• Support and representative organisations for housing and homelessness

The Bill proposes to make a legislative basis for local authorities to assist households who are threatened with homelessness earlier; and to introduce the ‘ask and act’ duty requiring relevant bodies who may come into contact with people who are at risk of homelessness to ask about their housing circumstances and then to take actions (within their own powers) to prevent homelessness.

Mobile Homes

The provisions on mobile homes are expected to affect:

• residents of residential mobile home sites who have or will have pitch agreements under the Mobile Homes Act 1983, including some Gypsy/Travellers.
• mobile home site owners and operators, including social landlords who provide Gypsy/Traveller sites.

At present, there is a presumption that the pitch fee will increase or decrease by a percentage which is no more than any percentage change in Retail Price Index (“RPI”), since the last review date, unless this would be unreasonable. The Bill will amend the presumed basis of pitch fee uprating under the Mobile Homes Act 1983 from the RPI to the Consumer Price Index (“CPI”) with permanent effect, for both existing and future contracts. This is primarily because the Retail Prices Index (RPI) is no longer judged to be a reliable measure of inflation.

Costs and Benefits

Rented Sector Reform

The Rented sector reform BRIA^[16] provides details of the costs to the Scottish Government, including the collective costs for all rented sector reforms, and the specific costs associated with each of the individual measures.

Part 1 (Chapters 1 and 2), Powers for Scottish Ministers to introduce rent control areas

The introduction of a national system of rent control in the private sector through the measures included in the Bill will contribute towards achieving the Scottish Government’s overarching objective of improved outcomes for tenants. Rent control is designed to help stabilise rents in areas where market rents have been increasing particularly steeply, whilst ensuring there can be a balanced approach that provides appropriate protection for the property rights of landlords and continues to support investment in the rented sector.

The main beneficiaries of rent controls will typically be tenants, who will potentially benefit from lower and more stable rents than would otherwise have been the case. There are issues related to poverty, financial vulnerability, and affordability in the PRS, particularly for those on lower incomes. The aim of the rent control measures will be to help stabilise rents in areas where there has been a significant upward trajectory leading to rents becoming unaffordable for tenants. This will help to avoid the potential costs of rent unaffordability, including the impact on tenants’ health and wellbeing, their ability to afford other essentials such as food and heat, and potentially their capacity to remain in accommodation without risk of homelessness.

Evidence suggests that there are also potential benefits for landlords in the form of longer tenancies and tenants being more incentivised to maintain their properties (leading to lower void and redecoration costs). However, possible unintended consequences for landlords have been identified, such as reduced incentives to invest in new supply, reduced incentives to invest in property maintenance, reduced labour mobility (particularly if rent controls operate differentially with respect to geography and/or type of tenancy covered), and spill-over impacts on neighbouring markets, or non-controlled segments of the market.

The proposed measures in the Bill will create the framework to deliver a nationally consistent approach to the consideration of the need for rent control, whilst maintaining the link to local circumstances. The features of the framework, set out in the Rented sector reform BRIA,^[17] have been designed taking into account feedback from consultation, and also the lessons from international experience of rent control.

In addition to the costs to the Scottish Government, details of the anticipated costs for Rent Service Scotland, the Tribunal, local authorities and private sector landlords are set out in the Rented sector reform BRIA.^[18]

Part 1 (Chapter 3), Frequency of rent increases in non-rent control areas

The measures in the Bill are intended to build on the existing requirements in the 2016 Act on the frequency at which rents can be increased, making clear that rent increases in non-rent control areas cannot take place during the first 12 months of a tenancy.

This will benefit tenants in non-rent control areas entering into a new private residential tenancy (“PRT”) who will be in a better position to plan financially, in the knowledge that their rent will be stable for a reasonable, initial period when taking on a new tenancy. This will also allow them to make a more informed choice at the crucial point of searching for properties.

The measures are not anticipated to give rise to additional costs for landlords. Whilst some landlords may have sought to increase rents shortly after a tenancy starts, this does not appear to be widespread in practice and the potential for impact in terms of foregone rent is minimal. For those landlords who do want to align rental anniversary dates across their portfolios, it will still be possible to do so by waiting more than 12 months to apply the first increase after a change in tenancy. Some landlords may already take this approach in cases where a PRT begins less than three months before the annual increase date used by a landlord.

Part 1 (Chapter 3), Capping of rent increases on referral or appeal

The proposed measures would remove the ability of the Rent Officer or the Tribunal to determine a rent above that requested by the landlord if that requested rent was lower than market rent. Legislating is the only option that would remove the disincentive to private tenants to seek a determination on a proposed rent increase on the basis that a referral may result in a higher rent than that originally proposed by the landlord.

This measure will benefit tenants by removing the current risk to tenants with a PRT or an Assured Tenancy that the rent may be set higher than that proposed by the landlord. This is currently perceived as a barrier for some tenants who may otherwise seek a review of a proposed rent increase. Removing the concern that the rent might be raised above that asked for by the landlord following adjudication should give tenants greater confidence to challenge rent increases which they feel are not justified. This could lead to a benefit to tenants, including a lower rent increase and providing them with greater predictability once they have received a rent increase notice.

Details of possible costs for Rent Service Scotland and the Tribunal are set out in the Rented sector reform BRIA.^[19] No additional costs for private landlords or their agents are expected.

Part 2, Evictions: duties to consider delay

The measures provide for the introduction of a requirement for the Tribunal and the Sheriff Court to always consider (except in limited circumstances) whether it would be reasonable to delay the enforcement of an eviction in the social and private rented sectors. This delay would be for a period of time based on the individual circumstances of the case, taking account of the impact on both the tenant and the landlord. This is the only option that can deliver the additional protection during the eviction process sought.

This new legislative requirement would be particularly helpful for those tenants whose circumstances mean that they, or a member of their household, would benefit from a delay, but who are not aware of the potential for the Court or Tribunal to grant a delay and who would therefore not proactively seek one.

While the overall impact in terms of number of cases is expected to be small, this measure provides an additional layer of protection for tenants. The knowledge that they could benefit from such protections if needed may also help tenants feel more secure in their tenancies.

Details of additional costs for the SCTS, both the Tribunal and the Courts, are set out in the Rented sector reform BRIA.^[20] Costs to private landlords are not expected to be significant, while costs to social landlords are expected to be very small. Additional costs for letting agents are expected to be minimal while no additional costs for sheriff officers are anticipated.

Part 2, Evictions: damages for unlawful eviction

This measure would provide a permanent change to the basis of the calculation for unlawful eviction damages, from damages based on the difference between the valuation of the property with and without tenants to a multiple of monthly rent (between three and 36 times the monthly rent).

Private and social tenants will benefit as it would be easier for them to challenge and seek appropriate compensation where an unlawful eviction occurred. In particular, they will not have to incur the cost of a professional valuation, which could cost in the region of £1,000. While this approach benefits all tenants who are unlawfully evicted, it will be particularly beneficial for lower-income tenants who can least afford the cost of a professional valuation, helping to improve their access to justice.

Tenants may also benefit from this measure if it reduces the number of unlawful evictions that take place in the first place, by making it more difficult, more expensive, and higher risk for a landlord to pursue an unlawful eviction rather than going through the lawful routes.

Responsible landlords and letting agents will also benefit from changes to the current system which mean unscrupulous behaviour is more easily challenged and regulations are better enforced. This would help to ensure a level playing field.

In relation to costs, there are no anticipated additional operational costs to private landlords who comply with the law in relation to this measure. There have been no known cases of unlawful eviction in the social housing sector to date, so there are no anticipated costs to social housing landlords. The measures will result in professional surveyor valuations no longer being required as part of an application for unlawful eviction damages. However, based on the low level of unlawful eviction applications made to the Tribunal, the financial impact on surveyors is considered minimal.

Part 3, Keeping pets

The measures will introduce a new statutory term to the PRT and the Scottish Secure and Short Scottish Secure Tenancies, so that all tenants with the relevant tenancies have the right to request to keep a pet and not be unreasonably refused.

This option will benefit all private and social housing tenants with a relevant tenancy to give them additional rights in relation to having a pet. This will improve the renting experience for private and social housing tenants, giving them more control over keeping a pet. It will make a positive difference to people being able to feel ‘at home’ in rented accommodation.

Private landlords might incur additional costs from any damages due to pets. The measures being progressed include important safeguards for landlords which will help to ensure that the measures are reasonable and landlords rights protected. For example, the right to refuse where reasonable to do so and to set reasonable conditions for approval. Private landlords are also expected to benefit, as evidence suggest pet owners usually stay longer in their rental homes than other types of renters. This could mean lower turnover of properties reduced operating costs for landlords. Evidence also suggests that pet ownership can help landlords to foster positive relationships with tenants.

Details of costs for the Tribunal and for private landlords, are set out in the Rented sector reform BRIA.^[21] Any additional costs to letting agents will depend on what services they provide to an individual landlord, the existing policies and practice of their business and the individual circumstances of any request to keep a pet and whether the request is approved or not. No additional costs on social landlords are anticipated as social tenants are currently allowed to keep pets with written permission from their landlord and social landlords set out any rules and processes for keeping pets in their pets’ policy. Therefore, existing processes will remain largely unchanged.

No significant increase in costs is anticipated for the tenancy deposit schemes, as any costs incurred would be offset by the uplift in interest revenue that could be generated from additional funds held, if at least some landlords ask for an additional deposit due to a pet.

Likewise, any additional costs for tenants are likely to be minimal and associated with the time taken to make a pet request, and where necessary, an application to the Tribunal to challenge a decision to refuse, or a condition for approval by a landlord or agent that they think is unreasonable. There may also be additional costs for tenants associated with any reasonable condition of approval made by the landlord, for example a supplementary deposit. This deposit, minus any reasonable deductions for damage, should be returned to the tenant at the end of the tenancy.

Part 3, Making changes to let property

The proposed measures will create a legal framework for the introduction of greater rights for most private tenants to make certain changes to their home. All private tenants with a PRT would be afforded additional rights to make certain small changes without the permission of the landlord (category 1) and a right to request other larger changes which cannot be unreasonably refused (category 2). The details of what is a category 1 or 2 change will be defined in secondary legislation. This will help to improve the renting experience for tenants with a PRT by giving them more control over their home and helping to support mental health and wellbeing. Evidence illustrates the link between being able to feel secure and at home in a rented property, and health and wellbeing benefits for tenants.

Evidence shows that being able to make changes to rented property is particularly important for low-income renters and for families with children.

Tenants will benefit from a clear process for asking for a larger change with prescribed timescales within which they should receive a response from their landlord.

There may be some additional costs to landlords from tenants having greater flexibility to make changes to their home. The measures therefore include important safeguards for landlords which will help to ensure that the measures are reasonable and landlords rights protected. For example, the right to refuse where reasonable to do so and to set reasonable conditions for approval. Landlords will benefit from a clear regulatory framework for considering and responding to requests to personalise a home. There may also be some benefits for private landlords from reduced tenant turnover, with tenants choosing to stay in properties longer. Evidence suggests that allowing changes to be made to let property increases the likelihood that tenants will look after the property. This could potentially result in lower costs for the landlord at the end of a tenancy.

Letting agents who manage a request for a change on behalf of a landlord will benefit from there being a clear regulatory framework for considering and responding to requests and from the guidance by the Scottish Government to support implementations. These will make it easier for an agent to manage a request on behalf of a landlord.

Details of costs for the Tribunal and for private landlords, are set out in the Rented sector reform BRIA.^[22] Any additional costs to letting agents will depend on the existing fee structures a letting agent has in place and whether these are based on the work undertaken or a percentage of rental income basis.

Any additional costs for private tenants are likely to be minimal and associated with the time taken to make a request for a category 2 change, and where necessary, an application to the Tribunal to challenge a decision to refuse, or a condition for approval by a landlord or agent that they think is unreasonable. There may also be additional costs for tenants associated with any reasonable condition of approval made by the landlord, for example a supplementary deposit. This deposit, minus any reasonable deductions for damage, should be returned to the tenant at the end of the tenancy.

No significant increase in costs is anticipated for the tenancy deposit schemes, as any costs incurred would be offset by the uplift in interest revenue that could be generated from additional funds held from the additional funds held from additional deposits requested by landlords.

Part 4, Unclaimed tenancy deposits

The proposed measures will allow for the use of unclaimed tenancy deposit funds and limit the use of the unclaimed funds (currently around £4 million of tenancy deposits) to ensure they are used for the benefit of tenants living in the private rented sector.

Former tenants will also benefit from measures in the Bill that give Scottish Ministers a power to pay back a tenancy deposit after unclaimed funds have been transferred to Scottish Ministers, where they have a reasonable excuse for not having made a relevant application for the return of the deposit within the prescribed period.

Tenancy deposit schemes will benefit from a consistent and clear definition of an unclaimed tenancy deposit, helping in the monitoring and administration of scheme requirements.

There may be some additional costs for the three approved tenancy deposit schemes associated with the implementation of these provisions. However, it is anticipated that any additional costs can be offset against the interest generated by unclaimed deposit funds.

Part 4, Ending joint tenancies

The proposed measures will allow one joint tenant to be able to terminate a joint tenancy for all without the agreement of all joint tenants. This can only happen after the tenant who is seeking to end the tenancy has provided the other joint tenants, and their landlord, with two months’ appropriate notice of their intention to end the tenancy.

This will benefit private tenants by ensuring that no joint tenant can be indefinitely held to a rental contract against their wishes, while giving the remaining joint tenants reasonable notice to allow them to find an alternative tenant where they wish the current tenancy to continue or make alternative plans.

Private landlords will benefit from clarity about the process, including through the requirement for them to be notified of the intention by a joint tenant to end the tenancy. This will help landlords to engage proactively, allowing them and the remaining joint tenants to see if it is possible to agree an assignation or the creation of a new tenancy.

The Rented sector reform BRIA^[23] sets out that any additional costs for private landlords or letting agents are expected to be minimal. No additional costs for the approved tenancy deposit schemes are expected. There may be some additional costs for tenants who make use of the new procedure to end a joint tenancy in relation to the serving of the pre-notice procedure. Their liability for rent, however, is likely to be significantly lower than it is under the current arrangements.

Part 4, Social landlords: delivery of notices

The provisions will provide a wider range of options for delivery of rent notifications, with delivery by email or secure access tenancy management IT systems also possible if this is agreed between the landlord and the tenant.

There could potentially be savings for social landlords over their current methods of delivery, with potential savings in postal costs and staff time. Social tenants could potentially benefit from quicker and more convenient delivery of notices.

Part 4, Converting older tenancies

Subject to consultation, the measures will enable the Scottish Ministers to set a date in secondary legislation when tenancies under the Housing (Scotland) Act 1988 (‘the 1988 Act’) will convert to Private Residential Tenancies under the 2016 Act.

If used, this power will enable tenants with tenancies under the 1988 Act to benefit from the protections under the 2016 Act, as well as proposed protections in this Bill, sooner than otherwise would have been the case. A reduction in the number of tenancy regimes in the private rented sector will also reduce complexity and confusion for tenants.

Details of costs for the Scottish Government, Rent Service Scotland and the Tribunal are set out in the Rented sector reform BRIA.^[24] There may be some small administrative costs to some private landlords. Letting agents may also incur some additional costs, due to the requirement to provide tenants with written tenancy terms and prescribed information relating to a PRT. However, they will be able to recover these costs from landlords through their usual business charges.

Part 5, Social landlords pre-action requirement where domestic abuse is a factor in rent arrears

This proposed measure will make current landlord ‘positive practice’ in domestic abuse financial control cases in Scotland a statutory requirement for all social landlords. Tenants or their representatives will also be able to challenge compliance with the new pre-action requirement in court, if required.

Social tenants, in particular women and their children, who experience domestic abuse financial control will receive greater protection to remain in their home, or to be re-housed, by ensuring rent arrears accrued because of domestic abuse are not a barrier to accessing social housing in the future. Evidence shows that people, particularly women, who experience domestic abuse may also be subject to financial abuse which leaves them vulnerable to rent arrears.

Any implementation or on-going costs for the SCTS are expected to be covered by existing court processes and budgets. This measure is not expected to result in material additional costs for social landlords, as they are already required to do all that they can to resolve rent arrears with a tenant before raising eviction action in court.

Homelessness Prevention

The Homelessness Prevention: Final Business and Regulatory Impact Assessment (“Homelessness Prevention BRIA”)^[25] sets out the benefits and costs of the options, with the full details of how these costs have been derived set out in the Financial Memorandum.^[26]

The introduction of new legislation is an opportunity to ‘re-balance’ the system

to put preventative action on an even footing with crisis response so that the service a household receives is appropriate to their needs (i.e. at risk of homelessness or homeless). The new legislative provisions will extend the need to prevent homelessness to relevant bodies who may come into contact with people who are at risk of homelessness, by requiring them to ask about a household’s housing circumstances and then to take actions (within their own powers) to prevent homelessness. This is known as the ‘ask and act’ duty and, by applying it to relevant bodies, early identification of risk and mitigating actions will be possible. The legislation will also require any referrals made by relevant bodies to local authorities to be taken as an application for assistance, which will give the referring body the reassurance that action will be taken following their intervention. For households, it is more likely that vulnerability to homelessness will be identified earlier, support provided and homelessness averted, which decreases possible trauma, indignity and improves quality of life.

These new homelessness preventions duties will result in costs for local authorities, the Scottish Administration^[27] and social landlords. It is anticipated that the most significant costs resulting from the homelessness prevention measures will accrue to local authorities, with increases in case volumes requiring more staff (estimated at £1.6 million per year in Year 1, Year 2 and Year 3), and possible upgrades to IT systems (estimated at £200,000 in Year 1 and Year 2).

Mobile Homes

The provisions on mobile homes are expected to directly positively affect residents of residential mobile home sites who have or will have pitch agreements under the 1983 Act, including some Gypsy/Travellers. As RPI is typically above CPI, pitch fees are unlikely to increase as fast as they would have done without the change. Conversely, the provisions are likely to have a negative affect on future income of site owners and operators. Illustrative figures for foregone pitch fee income are included in The Mobile Homes Pitch Fee Uprating: Final Business and Regulatory Impact Assessment (“Mobile Homes BRIA”).^[28] They show a potential impact of £21 per pitch (or £88,504 across all pitches in Scotland) in the first year of the change, rising to £65 (or £278,957 in total) by the third year due to compounding. .

The impact on local authorities is expected to be small. This is because of the small number of Gypsy/Traveller pitches currently operational (less than 400 across Scotland in approximately 20 local authorities) and because local authorities may already generally use CPI as a measure.

The Mobile Homes BRIA sets out the benefits and costs of the options considered. It concludes that the CPI as the most appropriate current measure for uprating pitch fees.