Rented sector reform: Housing (Scotland) Bill: business and regulatory impact assessment

Consultation

Within government

There has been engagement within Scottish Government Directorates including Better Homes, More Homes, Communities Analysis, Higher Education and Science, and Economy and Justice. In addition, we have worked with the Scottish Courts and Tribunals Service (“SCTS”), the First-tier Tribunal for Scotland (Housing and Property Chamber) (“the Tribunal”), and the Rent Service Scotland (“RSS”) to understand their views on the practical application and implementation of the measures. These discussions have informed the drafting of the Bill.

Public consultation

A full public consultation on A New Deal for Tenants: Draft Rented Sector strategy^[29] was carried out in early 2022 to seek views on a range of proposals to reform and strengthen the rented sector. The consultation closed in April 2022 with 8,434 responses available for analysis in total. Organisations accounted for 170 responses, individual members of the public accounted for 756 responses, and 7,508 respondents made a campaign-type submission. An independent analysis of the consultation responses was published in August 2022.^[30] Analysis of the responses has informed the development of measures being progressed through the Bill.

Since then, ongoing engagement with a broad range of stakeholders has taken place to inform development of the measures proposed in the Bill, through a series of meetings with tenants, landlords and letting agent representative groups, housing rights organisations, housing investors, the SCTS and the three approved tenancy deposit schemes. In addition, a PRS Stakeholder Working Group was established to provide a formal mechanism for engaging directly with stakeholder representatives from across the sector as part of developing the measures being taken forward in the Bill. An overview of membership of the group and meeting minutes are published on the Scottish Government website.^[31] A local authority working group was also established, to allow local authorities to feed into work to develop the approach to rent control.

In September 2023, the Scottish Government issued a targeted engagement questionnaire to support direct engagement with tenants and landlords in both the private and social rented sectors through an online survey. This set out some of the current proposals for rented sector reform and sought the views of tenants and landlords on certain aspects of those proposals. The questionnaire closed on 27 October 2023 with 6,645 responses received. The questionnaire comprised closed questions, so this was supplemented with an offer of online discussions on the topics of the questionnaire in order to elicit fuller qualitative understanding of stakeholder positions. Two online discussions were subsequently held. The independent analysis of the questionnaire and discussion groups has been published on the Scottish Government website.^[32] Over the course of the engagement questionnaire, 123 emails were also received from the public as well as stakeholder organisations related to the rented sector aspects of the Bill. A separate analysis^[33] of the email responses is also available. Consideration of this targeted engagement supported finalisation of provisions in the Bill.

Consultation with Business

A number of businesses responded to the above public consultations. In addition, targeted engagement has also taken place with a range of key business stakeholders including social and private landlord representative bodies, letting agent representatives, housing investors including build to rent providers, UK Finance and the three approved tenancy deposit schemes.

In addition, the Scottish Government worked with the following key stakeholder representative groups to seek direct feedback from businesses on the business and regulatory impact of the proposals on their interests through requesting responses to a Business and Regulatory Impact Assessment (“BRIA”) impact cost template:

• Scottish Association of Landlords and Council of Letting Agents
• Propertymark
• Scottish Land and Estates
• Scottish Federation of Housing Associations
• Scottish Property Federation

This generated 40 responses from a range of individual businesses. These responses have been used to inform this assessment. Of the 40 responses received, 24 were from landlords, four who were both a landlord and a letting agent, five were letting agents, six were Build to Rent (“BTR”) Landlord investors and one a membership organisation. Respondents ranged from individual landlords with one property to large landlords with 3,200+ properties.

Of the landlords who responded and gave an indication of the number of properties in their portfolio, a number were small businesses. Twelve said that they had fewer than 10 properties, six had between 10 and 20 properties (inclusive), four had between 21 and 100 and three had between 101 - 500. There were three landlords who said they had over 501 properties, all of whom were also BTR investors. Of respondents who were letting agents (either solely or as well as being landlords), portfolios of properties managed ranged from just under 50 properties to over 3,000. At least two landlord respondents indicated that they were providers of mid-market rent properties, and several BTR investors also mentioned numbers of properties currently under construction, in planning or under discussion. Overall, of those who provided a response on the size of their portfolio, those who responded owned or managed approximately 14,721 private rented properties (including some in planning and under development) between them across a range of areas across Scotland.

A summary of responses in relation to each of the measures included in the BRIA cost template is set out in Annex A.

Discussions with landlord groups

Officials also attended discussions with landlord groups. Matters raised highlighted a number of concerns including that:

• rent controls may impact supply;
• landlords who did not regularly raise rents to market level may be disadvantaged;
• landlords may raise rents more frequently within tenancies due to apprehension that rent controls may be applied in future;
• changes to the rent adjudication process may result in every proposed rent increase being submitted to Rent Service Scotland for review;
• greater rights to keep pets and make changes to the let property would result in additional damages and costs to private landlords; and
• reform of how joint tenancies can be ended could result in unintended consequences.

A number of the matters raised by landlords in discussion were also raised in the BRIA cost templates.

Property Investors

Officials and Ministers have also met with investors and investor representatives to discuss the emerging rent control proposals. Investors raised the following concerns:

• a concern that rent controls may impact supply and investment, particularly if applied between tenancies
• the potential for challenges concerning the interaction of new energy efficiency standards and rent controls
• a preference for an index-based approach to rent controls, linked to inflation that allows for a minimum level of rental growth per annum
• investors value certainty and clarity and need certainty over their long-term investments
• a concern that rent controls may make Scotland look less attractive to investors in comparison to other locations
• a concern that possible unintended consequences of the legislation could result in market stagnation or in cities competing against each other to make themselves more attractive to investment
• a concern that rent controls could affect the value of rented property and impact profitability of investment, resulting in less affordable housing being delivered
• a suggestion that excluding energy efficient properties from rent controls could incentivise existing owners to make improvements and for developers to build better.

Sectors and groups affected

The groups and sectors affected by the various provisions in the Bill would include, but are not restricted to:

• Tenants in the private and social rented sectors
• Students living in the mainstream private rented sector
• Private and social landlords
• Residential investors (including build to rent provision)
• 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 specific groups which would be affected by individual provisions are set out further below where each individual provision is discussed.