Scottish Housing Market Review Q1 2024

4. Private Rental Sector

4.1. Private Housing Rental Prices

The latest Scottish Government private rental statistics, which were published in November 2023 and cover the year to September 2023, show that the average 2-bedroom rents (the most common size) increased in all 18 Broad Rental Market Areas of Scotland compared with the previous year. The increases ranged from 1.5% in Dumfries and Galloway up to 22.3% in Greater Glasgow. Increases in 11 of these areas were above the average 12-month UK CPI inflation rate for the corresponding period of 9.0%.

Note that these statistics are based predominantly on advertised rents, and so reflect rents that landlords are charging when their properties become available for rent at the point of tenant turnover or when properties are new to the rental market. The statistics present a similar picture to letting agent rental reports that have been presented in previous editions of the Scottish Housing Market Review.

Since these statistics are based predominantly on advertised rents, they do not reflect the Cost of Living (Tenants Protection) (Scotland) Act 2022 rent cap restrictions from September 2022 to March 2024, which applied to existing tenants. Given the rate of growth in new let rents, it is likely that it in the absence of a rent cap some existing tenants would also have experienced large increases in rents, depending on the rent-setting approach of individual landlords.

Source: Scottish Government

4.2. Cost of Living Act, Rent Adjudication & Housing Bill

The Cost of Living (Tenant Protection) (Scotland) Act 2022 was temporary legislation that was introduced to give tenants increased protection from rent increases and evictions during the cost-of-living crisis. The legislation enforced a temporary in-tenancy rent cap, a temporary moratorium on the enforcement of evictions (except in a number of specified circumstances) and increased the level of damages for unlawful evictions to a maximum of 36 months’ worth of rent. The legislation was passed by the Scottish Parliament in early October 2022 with an initial expiry date of 31 March 2023. The measures were extended for two further six-month periods, but came to an end on 31 March 2024.

Following the expiry of the measures, from 1 April 2024 the rent adjudication process has been modified for a period of one year in order to smooth the transition out of the rent cap and offer protection to tenants from steep rent increases which could be experienced if there is a sudden move to open market rent levels.

Under the modified rent adjudication process, any change in rent is limited to the lowest of the following three figures:

• the open market rate
• the rent requested by the landlord
• a comparator based on the difference between the market rate and current rent (the “taper”), which only has an impact when the open market rent exceeds the current rent by more than 6%.

The modified rent adjudication process can be summarised as follows:

• If the gap between open market rent and the current rent is 6% or less, then the rent can be increased up to the level of open market rent.
• If the gap between open market rent and the current rent is above 6%, the rent can be increased by 6% plus an additional 0.3% points for each percentage point that the gap between open market rent and current rent exceeds 6%.
• If the gap between open market rent and current rent is 24% or larger, the rent increase is capped at 12%.
• The above cases are also subject to the requirement that Rent Service Scotland and the First-tier Tribunal cannot set a higher rent than that requested by the landlord.

An illustrative rent increase calculator is available to help landlords and tenants understand what level the rent may be set at if a rent adjudication application is made.

Proposals in the Housing (Scotland) Bill, introduced to the Scottish Parliament on 26 March 2024, which relate to the private rented sector include long-term rent controls for private tenancies, new rights to keep pets and decorate rented homes, and stronger protection against eviction.