Minister for Housing: Statement on Housing (Scotland) Bill

Presiding Officer, I am pleased to make a statement to parliament on the rent control measures in the Housing (Scotland) Bill this afternoon.

In March this year the Bill was introduced to Parliament, bringing forward a package of reforms which help ensure people have a safe, secure, and affordable place to live.

The statement today is to provide an update to Parliament on this government’s intentions to bring forward an amendment to the rent control measures - as currently set out in the Bill - at Stage 2.  This  amendment will deliver on the  commitment to provide further certainty on how rent control will be implemented that was set out in the Programme for Government published in September.

The proposal that I will set out offers clarity on how rents will be capped in areas where rent control is applied. This government remains committed to delivering long term rent control – to stabilise rents where this is needed to protect the social and economic interests of tenants who rely on the private rented sector for a home.

And, of course, eradicating child poverty remains this government’s priority and I am sure that we can all agree that having a home can make a direct contribution to achieving this.  This is why we’re ensuring families can have secure and affordable homes that meet their needs as part of our approach to tackling the housing emergency.

This government has a strong record of acting to protect tenants – recognising that households in the rented sectors are more likely to be in relative poverty and to be financially vulnerable. Scotland has the strongest tenants’ rights in the world and this government acted to mitigate the impact of cost of living crisis for tenants in 2022, through our emergency Cost of Living (Tenant) Protection) Act, protecting tenants by stabilising their housing costs and preventing most evictions. Scottish tenants alone in the UK had that protection.

The introduction of a long term system of rent control for Scotland builds on this record – working towards a fair and well-regulated private rented sector that delivers for tenants and responsible landlords. It is another step in ensuring that we make further progress towards Scottish tenants being able to access a secure, affordable rented home.

However, it is clear that this must be done in a balanced way that provides appropriate protection for the property rights of landlords and in a way that continues to support investment in to private rented housing.  This will make sure that the system of rent control introduced continues to support the supply of rented housing –  recognising that the rented sector is a critical part of Scotland’s overall housing system. The amendment that will be brought forward by this government at Stage 2 has been developed in a way that recognises the need to strike the balance is a key driver in the approach to its implementation.

I have been grateful for the opportunity to give evidence to both the Local Government and Housing and the Social Security and Social Justice committees as part of that process over the last few months and to see and hear the evidence that has come forward as part of their considerations.

I have also continued to engage widely with stakeholders and have had the opportunity to hear in detail from tenants, from landlords, from investors, and from developers on the rent control measures in the Bill.

Through the work of the Housing Investment Taskforce, there has been opportunity to work directly with investors and developers to understand how we can bring forward a system of rent control that both works for tenants and supports continued investment in private rented housing.

And recognising the role of social landlords play through offering properties at mid-market rent levels to support those in low incomes, it has also been helpful to hear from the Scottish Federation of Housing Association members on how rent controls will affect those registered social landlords who offer mid-market provision.

It has been positive to see that across all stakeholders there is a consistent view that Scotland needs a thriving private rented sector - one that offers good quality, affordable housing options and values the benefit that investment in rented property delivers. It is also clear all those involved in the rented sector recognise the contribution that a good quality, affordable, and well-regulated housing system makes in helping to tackle poverty.

In these discussions, there have been ongoing calls for further certainty on how rent control will be implemented and how rents will be capped in areas where rent control applies. To respond to this the Programme for Government made a commitment to bring forward amendment to the Bill to clearly set out how rent increases will be capped in areas where rent controls apply.

Now, having considered how best to formulate the cap, the government will bring forward an amendment at Stage 2 that will explicitly set out that, where a rent control area is designated, the cap that would apply to rent increases, while rent control is in force, would be set at a level of CPI + 1%, up to a maximum increase of 6%.

This would mean that, where a rent control area is in place, in most cases rents would be able to increase by CPI + 1% of the existing rent. Where the relevant CPI figure exceeds 5% then the increase permitted would be capped at 6% of the existing rent. The rent cap will apply to rent increases both during the term of a tenancy and in between tenancies in the period where an area is designated for rent control.

Bringing forward this amendment responds directly to calls for greater certainty and will offer more clarity to tenants, landlords and those who invest in and develop rented homes.

And setting out the form of this cap in this way – with CPI as the basis - allows for a reflection of the costs of landlords to offering a property for rent whilst providing protection for tenants in terms of limiting more significant rent increases. This approach has been shaped by input from stakeholders on how to develop an approach to rent control that provides protection for tenants whilst continuing to support investment in new and improved private housing.

Now, turning to other measures in the Bill where further detail on how rent control will be implemented would be welcomed by stakeholders. The Bill contains powers for Scottish Ministers to make Regulations that allow for certain types of property to be exempted from rent control and for rents to be increased above the level of the rent cap in some circumstances.

The Bill currently sets out that any such exemptions or modifications on how the cap will apply shall be supported by consultation with tenants, landlords and others who may have an interest.

It is essential that the circumstances where such exemptions or modifications to how the cap is applied are subject to full and open consultation, allowing all of those affected to have their views considered. This will make sure that the impacts of any decisions on how these powers are used can be fully understood and the measures are developed in a way that is fair, robust against challenge and can clearly be set out in legislation.

In order to respond to the calls for further clarity in respect of these aspects of the rent control system at the earliest opportunity, the consultation that will support decisions on how these powers may be used will be brought forward in early Spring 2025.

The consultation will build on the work already carried out to support of the development of the rent control measures in the Bill, in particular the Landlord and Tenant Questionnaire that was issued in October 2023.

That questionnaire sought views on allowing increases above the rent cap where there have been improvements to the quality of fixtures and fittings or the energy efficiency of the rented property or where the landlord’s costs incurred in letting the property have increased.  

And reflecting on the important part that investment plays in growing the supply of housing, including in the  private rented sector, the questionnaire sought views on circumstances where exempting certain types of property from rent control could be considered. Specifically it highlighted rented property offered for social good with rents controlled below market level and purpose-built accommodation for rent, at scale.

The feedback from the questionnaire will feed into the development of the consultation and there will be continued engagement with stakeholders on the circumstances where it may be appropriate to exempt certain types of property or to apply a modified rent cap over the next few months. This engagement will inform what is brought forward in the consultation in early spring 2025.

Presiding Officer, in conclusion, this government remains committed to bring forward a system of rent control that works for Scotland – a system that supports stabilisation of rents for tenants, whilst ensuring there can be a balanced approach that provides appropriate protection for the property rights of landlords and supports investment in to the development of rented homes. 

The amendment that the government will bring forward at Stage 2 to set out the form of the rent cap will help support the delivery of these aims and I look forward to continuing to work with the Parliament as the Bill continues its progress. Thank you.