Mobile homes: business and regulatory impact assessment

Purpose and Intended Effect

Background

The Mobile Homes Act 1983^[1] (“1983 Act”) (and related regulations) controls the “consumer” rights of mobile home-owners. It sets out terms which must appear in the “written statement” (the occupancy agreement between site owner and mobile home-owner). These include the arrangements for changing (usually an annual increase in or “uprating” of) the pitch fee. The pitch fee is the amount which the resident is required by their agreement to pay to the site owner for use of the pitch, wider site maintenance and certain services.

At present, the presumption is that the pitch fee will increase or decrease by a percentage which is no more than any percentage change in the Retail Prices Index (“RPI”) since the last review date, unless this would be unreasonable because of costs incurred to make improvements to the site to the benefit of residents (assuming that the majority of residents have not objected to these), a decrease in amenity since the last review date or costs associated with legislation that has come in to force since the last review date. The site owner must issue a proposal for the new pitch fee 28 days in advance of the increase, setting out the services that are included. If the occupier does not agree the proposed fee, they can apply to the court to determine the new pitch fee. The pitch fee remains unchanged while this process is in progress. The proposal is to change the inflation index used in pitch fee reviews to the Consumer Prices Index (“CPI”), primarily because RPI is no longer judged to be a reliable measure of inflation. The Housing (Scotland) Bill (“the Bill”) will, if passed by parliament, make the following amendments to the 1983 Act:

• Change the basis of pitch fee uprating from the RPI to the CPI for existing and future contracts;
• Update the mechanism for making changes to the inflation index in future to be secondary legislation, to facilitate timely changes as required; and
• Provide protection for residents should a site owner seek to undertake activity to compensate for the loss of income as a result of the change to indexation.

The protections included are:

• Where a case goes to court, to require the court to exclude any part of a pitch fee that it considers to have been included in order to compensate for financial loss as a result of the change from RPI to CPI; and
• to clarify that costs re-charged in pitch fees as a result of legislation that has come into force since the last review date are limited to costs payable by the site owner in relation to the maintenance or management of that site, as is already the case in England.

The Bill also proposes amendments to section 5 of the 1983 Act to remove outdated references to gypsy and traveller sites that are no longer needed as a consequence of previous changes to the law in relation to these sites.

The cost-of-living crisis and a campaign by residents highlighted the impact of the gap between different inflation measures on pitch fee inflation and that the RPI is no longer judged to be a reliable measure of inflation. As a result, a commitment was made during the passage of the Cost of Living (Tenant Protection) (Scotland) Act 2022 (“2022 Act”)^[2] to consult on changing the basis of pitch fee uprating from the RPI to the CPI. The proposed changes will affect residents living on sites licensed as permanent residential sites and Gypsy/Travellers on public Gypsy/Traveller sites.

Implied terms for agreements in England were changed by the Mobile Homes (Pitch Fees) Act 2023,^[3] which came into force in July 2023. It changes the pitch fee review index from RPI to CPI. In Wales, the basis of uprating was changed from RPI to CPI in 2015.^[4]

Research by Consumer Focus^[5] in 2013, Stories to be Told, identified 92 park home sites in Scotland housing an estimated 3,314 mobile homes. The majority of sites comprised fewer than 50 residential homes. The majority of Scottish local authorities (22 out of 32) confirmed that they had at least one park home site in their area. However, sites tend to be concentrated in Perth and Kinross, Dumfries and Galloway, Fife, Angus, Argyll and Bute, and Aberdeen. More recently, the Scottish Confederation of Park Home Residents Associations estimated in 2022 that there are around 6,000 residential pitches with around 9,000 residents in Scotland.^[6] Research for the Scottish Government in 2019^[7] identified a total of 54 Gypsy/Traveller sites across Scotland, comprising 29 public and 25 private sites with 397 and 216 pitches respectively.

Objective

The policy objective is to ensure that the protections relating to pitch fee uprating for residents of mobile homes remain fair, appropriate and in line with the development of statistical measures of inflation by changing the presumed basis of pitch fee uprating under the 1983 Act from the RPI to the CPI. This contributes to the national outcome that we live in communities that are inclusive, empowered, resilient and safe.

Rationale for Government intervention

The RPI lost its status as a National Statistic in 2013. While it is still reported, the Office for National Statistics (“ONS”) now discourages the use of the RPI and considers it to be a poor measure of general inflation. At times it greatly overestimates or underestimates changes in prices and how price changes are experienced due to methodological issues.^[8] HM Treasury and the UK Statistics Authority have announced that, as from February 2030, the ONS will bring the methods and data of the Consumer Prices Index including Housing Costs (“CPIH”) into the RPI, effectively discontinuing the production of the RPI as a separate index.^[9]

Table 1 and Graphs 1 and 2 illustrate the difference between RPI and CPI over the long term. The recent increase in the gap between the two measures is apparent. The first row of Table 1 shows that RPI has been a little under one percentage point higher on average than CPI over the long term. The second row and the graphs shows that the RPI has also tended to be more volatile (the standard deviation is a measure of spread which measures how much the series has fluctuated around its average, so a higher figure means more variation).