Rented Sector Reform: Island Communities Impact Screening Assessment

Assessment

Our assessment of the impact of the rental sector measures within the Bill does not identify any unique impacts on island communities.

Demographic

The rented sector provisions within the Bill may have a positive impact on island demographics. Given the overarching aim is to improve affordability, improve the renting experience and enhance strengthen current legislation to make sure it works for both tenants and landlords - it may make it easier to sustain residency on an island.

Economic

Whilst in recent surveys^[46],[47] some landlords have indicated that they might (partially or wholly) disinvest from the sector in response to the cumulative effect of an increasing regulatory burden (and in particular, rent control), even if this were to be the case, it would also be true of communities in mainland Scotland, and we therefore do not consider that island communities specifically would be disproportionately affected by any potential negative outcomes of these measures.

Furthermore, while it is difficult to predict whether the number of private landlords and registered properties for rent will decrease as a direct result of the provisions within this Bill, it is worth noting that there has been considerable growth in the size of the private rented sector in Scotland during the last two decades, a period which has seen significant regulatory intervention in the sector (although most of this regulation has not been price related). According to the Scottish Household Survey (“SHS”), the numbers of PRS properties in Scotland increased from 120,000 in 1999 to a peak of 370,000 in 2016. While the number of properties registered on the Scottish Landlord Register (“SLR”) also shows long-term growth, from 156,000 when the register was established in 2007 to a peak of 362,000 in January 2017.

More recent estimates from the SHS suggest somewhat of a fall from the peak of 370,000, although the 2022 estimate of 320,000 may be slightly low due to some tenure bias in the survey. Data from the SLR also show some decrease from the peak of 362,000 to 340,000 in December 2020; however, the level of registrations remained stable around that level in December 2021 and December 2022. There are some limitations in the SLR data, such as the fact that registrations last for a period of three years and there could be a time lag in landlords de-registering properties no longer available for rent. Also, data for 2018 and 2019 was affected by changes in the underlying IT system and is not used in this summary.

The SLR shows that for the six island local authority communities combined there were 13,469 properties registered in 2007, peaking at 30,788 in 2017 and decreasing to 20,659 properties in 2022, with an increase in 2023 to 21,012. This trend is broadly seen across each of the six island local authority communities; however, between 2022 and 2023 there was a small decrease for two of the local authorities (Highland and North Ayrshire). In March 2024 the SLR shows that for the six island communities combined there are now 21,168 properties registered.

While the SHS and SLR data show the size of the sector is somewhat below its peak, it remains significantly larger than it was in the early 2000s. There are a number of factors other than regulation which affect the size of the PRS (for example, factors which affect access to home ownership such as the level of house prices, mortgage interest rates and loan to value ratios, will in turn affect demand for the PRS), but the data does suggest that a greater degree of regulation is compatible with a sizeable PRS.

Price regulation was introduced in Scotland the form of a rent cap in 2022 (initially set at zero and increasing to 3% in most cases from April 2023) as part of the Cost of Living (Tenant Protection) Act 2022. According to data from the landlord register (noting the limitations of the data set out above), there has been a small increase (2.1%), in the number of properties on the register from 339,632 in August 2022, immediately prior to the legislation, to 346,816 in March 2024 for Scotland as a whole. For the island local authorities, there has also been a small increase (1.0%), from 20,967 in August 2022 to 21,168 in March 2024.

All local authorities will be required to undertake mandatory assessments in their areas, on a cyclical basis, to help inform consideration as to whether there is a need for rent control and this will place additional burdens on local authority resources. However, this is to be balanced with potential positive impacts any such designation would bring to people who rent their home in a particular locality where rents have been rising, helping to stabilise those costs and prevent people from being forced away from a locality through being “priced out” of rented accommodation.

While data shows that the growth in rents across the Highlands and Islands Broad Rental Market Area has been lower than for Scotland as a whole, there may be areas within this large geographical area where this is not the case. The flexibilities contained within the proposed rent control framework, in particular that rent control areas can be set at a local level (including at geographies below local authority boundaries) allows any differences in rental market trends to be reflected in whether a rent control area is designated, and also the parameters such as the level of the rent cap if a rent control area is designated.

The increased protections against eviction – particularly the measures to delay eviction – could impact on employers who require a property for new employees moving to the area. However, safeguard measures have been built into the Bill as currently drafted in order to mitigate such impacts. Again, the recent landlord and tenant questionnaire analysis showed us that a majority (59% of those answering the question) either strongly agreed or agreed that, in the private sector, the Tribunal should be required to consider whether it is reasonable to delay the enforcement of an eviction at any time of year. This rose to 98% of private tenants.

The Scottish Government will continue to monitor the available evidence in this area, including the impact on rural and island communities.

Gaelic

There is likely to be no impact.

Social

We do not anticipate there will be a social impact on island communities different to that of the rest of Scotland. Proposed measures to improve affordability are likely to have a positive impact by stabilising housing costs for people and families who rely on the PRS for a home, which will be helpful in meeting the increased cost of living in island communities.

While the Bill is ambitious in responding to the need to improve housing outcomes in Scotland for people who mainly live in rented accommodation, it continues to safeguard the proportionate use of a landlord’s property for rental purposes, seeking to deliver a fair balance between protection for tenants and the rights of landlords. This is demonstrated in the safeguarding measures built into the proposed legislation, aimed at balancing those rights and continuing to encourage investment in the rental sector in Scotland.

If approved by Parliament, the Bill will require a wide range of secondary legislation to be taken forward to implement the measures. Relevant secondary legislation will have its own consultation and impact assessment requirements, including consideration of impacts on island communities.

Is a full Island Communities Impact Assessment required?

Housing pressures are being felt across the whole of Scotland and indeed the UK, therefore such issues are not solely unique to the islands. Whilst there may be certain housing supply pressures felt by island communities, for example relating to additional costs of offering property for rent e.g. for labour and materials to maintain a property, issues affecting supply can also be seen in city regions such as Edinburgh and Glasgow due to different factors.

We believe there is insufficient evidence to indicate that the proposed rental sector reform measures will result in tenants and landlords in island communities being directly disadvantaged compared to those on the Scottish Mainland and that tailored mitigations, outwith those already proposed in the Bill, are not required.

We did not identify any potential barriers or wider impacts in relation to each of the policies considered in this ICIA. There will be a need, across the whole of Scotland, to ensure landlords and tenants are aware of the new measures in order for them to be effective, and we are aware that not every island has reliable internet access for easy access to information about the new measures. However, this can be mitigated by a broad campaign of awareness-raising which includes other forms of media beyond online information which in turn will help to increase access to justice.

A full Islands Community Impact Assessment is not required

In preparing the ICIA, we have formed an opinion that our policies are not likely to have an effect on an island community which is significantly different from its effect on other communities (including other island communities). The reason for this is detailed below.

Based on the evidence available, the impact of the rented sector reforms and the changes to existing legislation are not expected to be significantly different for the island local authorities than for any other local authority in Scotland.

Approved by: Alice Hall
Deputy Director Better Homes