Housing (Scotland) Bill - use of powers: consultation analysis - final report

Chapter 1: properties exempt from rent control area restrictions

The key purpose of rent control is to stabilise housing costs for tenants in areas where rents have been increasing particularly steeply, helping to make rents more affordable and ensuring that people are not priced out of housing due to rent increases. It is also crucial to balance the property rights of landlords and to recognise the important role that the supply of new rented housing plays in ensuring that rents are affordable. The Scottish Government is keen to build a system of rent control that offers these vital protections to tenants and also values investment in delivering new homes specifically for the rented market. The consultation sought views on some specific types of property which could be exempted from rent controls to ensure the continued flow of investment.

Properties let below market rent – mid-market rent properties

Mid-Market Rent (MMR) homes are aimed at assisting people on low to moderate incomes to access affordable rented accommodation. Tenants generally pay a lower rate than renting privately, but more than for local social housing. Since the introduction of the Private Housing (Tenancies) (Scotland) Act 2016, most MMR properties are let on Private Residential Tenancies (PRTs), meaning that the rent control measures in the Bill would be applicable to those MMR properties.

For MMR homes delivered using Scottish Government support and which count towards the Scottish Government’s affordable homes target, there are already restrictions on the tenants the properties can be let to and the rent that can be charged. The consultation paper noted that stakeholders have raised concerns that the potential for imposing further restrictions on rent levels where a rent control area is in force could be harmful to investment in this sector and the growth of this type of housing delivery. It suggested that it could be appropriate to exempt this type of property from rent controls in order to maintain and expand the supply of this type of affordable housing provision.

Question 1: Should mid-market rent properties be exempted from the application of rent controls under the Bill?

A total of 4,651 respondents (or 97% of all respondents) answered the closed element of Question 1. Responses by respondent type are set out in Table 2 below.

Table 2: Question 1

Respondent type	Yes	No	Total
Advice organisation and third sector	6	5	11
Developer or investor	14	1	15
Local authority	13	0	13
Private landlord, letting agent or their representative bodies	26	8	34
Professional or representative body	5	0	5
Public body	2	1	3
Social landlord or their representative bodies	12	0	12
Tenant, community group or union	0	6	6
Total organisations	78	21	99
% of organisations	79%	21%	100%
Individuals	182	222	404
% of individuals	45%	55%	100%
All non-campaign respondents	260	243	503
% of all non-campaign respondents	52%	48%	100%
Campaign respondents	0	4148	4148
% of campaign respondents	0%	100%	100%
All respondents	260	4391	4651
% of all respondents	6%	94%	100%

A substantial majority of respondents – 94% of those answering the question and including ‘Campaign’ respondents – did not think MMR properties should be exempted from the application of rent controls under the Bill.

However, non-campaign respondents were more evenly divided, with a small majority – 52% of those answering the question – thinking MMR properties should be exempt. This was higher amongst organisations than individuals, at 79% and 45% of those answering respectively.

All ‘Social landlord or their representative bodies’ and ‘Local authority’ respondents thought MMR properties should be exempted. However, all ‘Tenant, community group or union’ respondents did not think they should.

Please explain your answer

Around 390 respondents explained their answer to Question 1. Campaign respondents also provided comments.

Reasons for not agreeing with MMR exemption

In addition to comments relating specifically to MMR, there were general objections to any form of rent control and, in contrast, objections to any form of exemption. These general issues are discussed in the ‘Overarching themes relating to rent controls’ chapter above. The analysis of Questions 1 to 4 focuses specifically on MMR properties.

‘Campaign’ respondents were amongst those commenting that, while MMR properties should be affordable to people on low incomes, this is increasingly not the case; they suggested that MMR developments should be rent controlled to ensure that they provide affordable housing. It was suggested that people may already struggle to afford the current level of MMR rents, and that exempting these properties may lead to affordability issues for existing tenants and make the sector unaffordable for others.

It was also noted that the proposed Consumer Price Index (CPI)+1% formula already enables MMR landlords to make “above inflation profits”. Another frequently raised concern was that there is no accountability mechanism for MMR landlords as, although often subsidiaries of a Registered Social Landlord (RSL), they do not fall directly under the auspices of the Scottish Housing Regulator (SHR).^[9]

An associated concern was that, as MMR rents are below market level, exempting MMR properties from rent control would leave MMR tenants without a mechanism to challenge rent increases.

Views from the consultation sessions

Tenant participants thought that, as the aim of the Bill is to protect tenants and ensure they can live in safe, affordable homes that are of a high standard, the rent cap should always remain in place.

Reasons for agreeing with exempting MMR properties

‘Developer or investor’ and ‘Social landlord or their representative bodies’ respondents were amongst those highlighting the role of MMR in providing options and choices for those who cannot afford to rent privately in the open market or buy their own home. Respondents gave examples of those benefiting from MMR, including people relocating for work or leaving education and key workers such as teachers, care workers and NHS staff.

There was specific reference to rural areas where housing supply is limited, and it was noted that MMR homes can support local employment and sustainable communities, including by providing an option for younger people who wish to stay in communities where social housing options may be very limited or non-existent.

It was also noted that, while MMR cannot be viewed as a substitute for new social housing development, it can be delivered with lower levels of subsidy than traditional social housing and makes a valuable contribution to the Scottish Government’s Affordable Housing Supply Programme. Nevertheless, ‘Social landlord or their representative bodies’ and ‘Developer or investor’ respondents were amongst those concerned that introducing an additional layer of rent control legislation may impact the financial viability of MMR schemes, resulting in uncertainty and creating a challenging environment for investment. This could then feed into reduced new supply, with the potential for an inflationary impact on rental prices. ‘Local authority’ and ‘Social landlord or their representative bodies’ respondents commented that any measures that limit the supply of MMR would increase pressure on social housing and the private rented sector, whilst also limiting customer choice.

With specific reference to rent levels and affordability within the MMR sector, it was noted that MMR properties are already subject to affordability criteria and contractual rent limits, with the Local Housing Allowance (LHA) and Broad Rental Market Area (BRMA) levels acting as a form of rent control on MMR tenancies. It was also reported that some RSL subsidiaries are already charging at below the LHA rate, meaning that MMR rents are already below rent cap levels.

Additionally, it was noted that while MMR tenants do not have the same protections as social housing tenants, having a PRT rather than a Scottish Secure Tenancy, they are often living in homes managed by social landlords or their subsidiaries, and may have access to the same tenancy sustainment and support services as social tenants.

Other issues raised included that:

• The Housing Investment Taskforce report includes a recommendation to exempt MMR properties from rent control provisions
• The Building Safety Levy Bill also exempts social and affordable housing, including MMR, in the primary legislation
• any changes to planned future investment could also restrict the ability of MMR providers to maintain and improve existing stock

Defining mid-market rent

The consultation paper set out that there is currently no clear definition of MMR, but that it generally means Scottish Government financially supported MMR (e.g. by grant or loan guarantee).

It went on to suggest that a definition for MMR could incorporate some or all of the following criteria:

i properties provided at mid-market levels, which have binding restrictions on rent levels

ii including those provided by:

• subsidiaries of registered social landlords
• local authority arms-length external organisations
• other organisations in receipt of Scottish Government financial support to deliver MMR

The consultation paper also noted that exemptions could be applicable while properties meet the specified criteria.

Question 2: We have set out some possible criteria which could be incorporated into a definition of MMR for the purpose of a possible exemption. Do you agree with these criteria?

A total of 4,651 respondents (or 97% of all respondents) answered the closed element of Question 2. Responses by respondent type are set out in Table 3 below.

Table 3: Question 2

Respondent type	Yes	No	Total
Advice organisation and third sector	7	1	8
Developer or investor	3	11	14
Local authority	11	3	14
Private landlord, letting agent or their representative bodies	10	23	33
Professional or representative body	0	3	3
Public body	1	2	3
Social landlord or their representative bodies	10	1	11
Tenant, community group or union	2	1	3
Total organisations	44	45	89
% of organisations	49%	51%	100%
Individuals	141	237	378
% of individuals	37%	63%	100%
All non-campaign respondents	185	282	467
% of all non-campaign respondents	40%	60%	100%
Campaign respondents	4148	0	4148
% of campaign respondents	100%	0%	100%
All respondents	4333	282	4615
% of all respondents	94%	6%	100%

A substantial majority of respondents – 94% of those answering the question and including ‘Campaign’ respondents – agreed with the possible criteria which could be incorporated into a definition of MMR for the purpose of a possible exemption.

However, a majority of non-campaign respondents – 60% of those answering the question – disagreed. Organisations were relatively evenly divided (51% disagreed and 49% agreed) while individuals were more likely to disagree than agree, at 63% and 37% respectively.

Most ‘Social landlord or their representative bodies’ and ‘Local authority’ respondents agreed, while ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents tended to disagree with the proposed criteria.

Please explain your answer

Around 300 non-campaign respondents explained their answer to Question 2. ‘Campaign’ respondents also made a comment.

Support for the MMR criteria

Points made by respondents who both supported applying an exemption (at Question 1) as well as the possible criteria set out in the consultation paper included that it will be important that not all criteria need to be met for the exemption to apply.

In terms of the types of properties that would be defined as MMR, a ‘Local authority’ respondent commented that it will be important to take account of community groups, particularly in rural and remote areas, that are delivering local housing solutions and will, in effect, become private landlords.

‘Local authority’ and ‘Social landlord or their representative bodies’ respondents were amongst those commenting on the profile of tenants for MMR homes, with suggestions including that the definition should reference the target market of key workers. There was also reference to the eligibility criteria addressing eligibility and affordability to ensure that properties are let to those unlikely to obtain social housing and who would struggle to afford full market rents.

‘Local authority’ respondents were amongst those suggesting that exemptions for MMR should be reviewed periodically to ensure that the definition is still appropriate and working in the best interests of tenants, particularly in relation to affordability.

Suggested changes to the MMR definition or criteria

The most frequently made comment, including by ‘Campaign’ respondents, was that while the criteria are good, there needs to be a stricter definition of rent levels; these respondents went on to suggest that ‘binding restrictions on rent levels’ should mean that MMR rents are equal to or lower than LHA. A ‘Tenant, community group or union’ respondent called for MMR to be defined precisely, with a link to the policy objectives of delivering affordable homes for people on low to moderate incomes.

In contrast, there were concerns, including from ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents, that the definition of MMR in the consultation paper is too narrow and lacks flexibility. For example, a ‘Professional or representative body’ was amongst those observing that the focus on subsidiaries of RSLs, arms-length companies related to local authorities and those receiving Scottish Government subsidy excludes others providing rental accommodation at or below LHA rates. In particular, it was seen as overlooking the increasingly important role of private capital and institutional investment in delivering affordable housing.

Suggested changes included that the definition should be expanded to allow for new models and delivery vehicles rather than be limited by provider, investor or funding source. A ‘Professional or representative body’ respondent commented that a more inclusive definition would reflect the evolving landscape of affordable housing delivery, particularly in rural areas, where there is growing potential for private capital to contribute to the delivery of MMR homes.

Exemptions for MMR properties

The consultation paper explains that, where MMR is delivered with Scottish Government support, providers accept grant/contractual conditions that the starting rent level for each home (including any service charge) should generally be no more than the relevant LHA rate /30^th percentile market rents for the property size in question. It goes on to note that rents must not at any time exceed the mid-point of market rent levels for the property sizes in question in the relevant BRMA (as assessed by the Scottish Government). Alternatively, where agreed in writing, rents must not exceed the midpoint of market rent levels for the property size in question in a particular local market area, where this is demonstrated and accepted as being materially different from the relevant BRMA.

Question 3: If there is an exemption for mid-market rent properties, should this include specific requirements on the level of rent charged, such as a link to Local Housing Allowance rates or to a specified percentile of market rates?

A total of 4,605 respondents (or 96% of all respondents) answered the closed element of Question 3. Responses by respondent type are set out in Table 4 below.

Table 4: Question 3

Respondent type	Yes	No	Total
Advice organisation and third sector	6	3	9
Developer or investor	4	11	15
Local authority	12	1	13
Private landlord, letting agent or their representative bodies	12	19	31
Professional or representative body	0	3	3
Public body	2	0	2
Social landlord or their representative bodies	4	5	9
Tenant, community group or union	4	0	4
Total organisations	44	42	86
% of organisations	51%	49%	100%
Individuals	189	182	371
% of individuals	51%	49%	100%
All non-campaign respondents	233	224	457
% of all non-campaign respondents	51%	49%	100%
Campaign respondents	4148	0	4148
% of campaign respondents	100%	0%	100%
All respondents	4381	224	4605
% of all respondents	95%	5%	100%

A substantial majority of respondents – 95% of those answering the question and including ‘Campaign’ respondents – thought that an exemption for MMR properties should include specific requirements on the level of rent charged.

However, non-campaign respondents were relatively evenly divided on the issue, with 51% thinking there should be a specific requirement and 49% that there should not. Organisations and individuals also divided along the same lines.

‘Social landlord or their representative bodies’ respondents were also relatively evenly divided. While the substantial majority of ‘Local authority’ respondents supported the inclusion of specific requirements, ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents tended to not be supportive.

Please explain your answer

Around 200 non-campaign respondents explained their answer to Question 3. ‘Campaign’ respondents also made a comment.

‘Developer or investor’, ‘Private landlord, letting agent or their representative bodies’, and ‘Local authority’ respondents were amongst those supporting linking MMR rents to benchmarks to ensure that the exemption is targeted, with clear and measurable affordability criteria. However, there was also a view that, although it is reasonable to include specific requirements on rent levels, these should be flexible enough to reflect local market conditions and delivery models.

Points made by those who did not think a specific requirement on the level of rent charged is needed included that they are already in place for Scottish Government-supported MMR.

Other respondents, including ‘Private landlord, letting agent or their representative bodies’, ‘Professional or representative body’ and ‘Social landlord or their representative bodies’ respondents, did not support any specific requirements being placed on the rent charged by exempt providers because requirements are already in place for Scottish Government-supported MMR. There were also concerns, including from ‘Private landlord, letting agent or their representative bodies’ respondents, that additional criteria or benchmarks may add duplication and could act as a disincentive to the creation of new MMR tenancies in Scotland.

Many of the further comments focused on whether or not a link to LHA rates or to a specified percentile of market rates would offer the best way forward.

Linking to LHA rates

‘Local authority’, ‘Social landlord or their representative bodies’ and ‘Campaign’ respondents were among those who thought that exempted MMR properties should be defined as properties where rents are no higher than LHA levels, and that increases should only be permitted where the proposed new rents are equal to or below LHA. LHA was seen as a transparent, well-understood benchmark that reflects local housing costs, can be easily monitored and ensures that MMR rents are aligned with their original policy intent and purpose.

Others including ‘Local authority’, ‘Social landlord or their representative bodies’ and ‘Developer or investor’ respondents, raised concerns about a focus on LHA, including that it could risk making some MMR developments unviable; it was reported that some rents have been above the LHA and that introducing a link would require them to be lowered. An associated suggestion was that there should be a degree of flexibility, with higher than LHA rates allowed where this can be justified, for example by a market assessment of the Private Rented Sector (PRS) demonstrating that a higher rate than LHA would still be discounted relative to the market rate.

A final concern, raised by a ‘Local authority’, was that using the LHA as a benchmark would create uncertainty as it is unclear how LHA may be uprated in future.

Linking to percentile of market rates

‘Developer or investor’, ‘Private landlord, letting agent or their representative bodies’ and ‘Social landlord or their representative bodies’ were among those making the case for a link to a percentile of market rates.

Reasons why it was seen as a better option included that, unlike the LHA rate which potentially covers a very wide range of properties, it would ensure that homes are affordable relative to comparable properties in the area. However, a ‘Public body’ respondent noted that the approach would require access to relevant rental data; they suggested that the Scottish Government or local authorities could provide this as part of wider data collection on the rent control regime.

With regard to the specified percentile, suggestions ranged from the 30-40^th percentile to between 70 and 85% of local market rates, with room for variation depending on location, property type and whether the scheme is publicly or privately funded.

An ‘Advice or third sector’ respondent raised concerns that a link to a percentile of market rates could have a negative impact on the affordability of MMR properties, including because market rates are already unaffordable to many households. A suggested variation to address these affordability concerns was that the social rented sector rather than PRS rents could be used as the reference point.

Views from the consultation sessions

Tenant participants considered that to keep MMR relatively affordable, rents should be set at levels closer to those in the social rented sector rather than the PRS.

Other options or implementation suggestions

Alternative suggestions to either a link to LHA rates or to a specified percentile of market rates included allowing rents between the LHA rate and, depending upon the market, 90% of local market rates, again with variation based on location, property type and whether the scheme is publicly or privately funded.

Setting rents based on average local incomes and property values was also proposed. It was suggested that this would ensure rents are positioned in the space between affordable social rents and higher priced private rents, and would also account for differences in rents between areas, something which the broader LHA rate will not.

In terms of the application of any requirements, some ‘Local authority’ respondents called for regular reviews of rent levels to ensure that they reflect the current situation within each area and to assess whether benchmarks remain suitable and effective in maintaining affordability over time. It was suggested that, where local rents differ significantly from the LHA, local authorities or providers should be given the opportunity to evidence this and set different rates where needed.

‘Campaign’ respondents were among those highlighting the need for a mechanism for tenants to contest a rent increase, with a clear pathway to seek justice if their landlord does not abide by the law and/or if their tenure is no longer affordable.

Question 4: Should MMR properties only be exempted from rent control areas for the duration of time that they meet the specified criteria?

A total of 4,597 respondents (or 96% of all respondents) answered the closed element of Question 4. Responses by respondent type are set out in Table 5 below.

Table 5: Question 4

Respondent type	Yes	No	Total
Advice organisation and third sector	8	1	9
Developer or investor	13	2	15
Local authority	13	0	13
Private landlord, letting agent or their representative bodies	20	13	33
Professional or representative body	2	0	2
Public body	2	0	2
Social landlord or their representative bodies	5	7	12
Tenant, community group or union	4	0	4
Total organisations	67	23	90
% of organisations	74%	26%	100%
Individuals	188	171	359
% of individuals	52%	48%	100%
All non-campaign respondents	255	194	449
% of all non-campaign respondents	57%	43%	100%
Campaign respondents	4148	0	4148
% of campaign respondents	100%	0%	100%
All respondents	4403	194	4597
% of all respondents	96%	4%	100%

A substantial majority of respondents – 96% of those answering the question and including ‘Campaign’ respondents – thought MMR properties should only be exempted from rent control areas for the duration of time that they meet the specified criteria.

A majority of non-campaign respondents – 57% of those answering the question – also thought so. However, organisations were more likely to support the proposition than individuals, at 74% and 52% respectively.

‘Social landlord or their representative bodies’ respondents were the only group in which the majority did not agree that MMR properties should only be exempted for the duration of time that they meet the specified criteria.

Please explain your answer

Around 270 non-campaign respondents explained their answer to Question 4. Campaign respondents also made a comment.

‘Private landlord, letting agent or their representative bodies’ and ‘Developer or investor’ respondents were among those reiterating points about the need for criteria to allow flexibility and innovation, that the current criteria could exclude private investment models that can deliver mid-market rent without subsidy, and that the criteria should be expanded to include for-profit private sector models that deliver MMR.

Support for exemption from rent control for duration of time meeting criteria

General comments from across a range of respondent groups included that it is crucial to ensure that MMR properties remain affordable to low- and middle-income households, and that ensuring criteria are met prevents landlords from benefiting from an exemption if they no longer operate within the agreed parameters. ‘Tenant, community group or union’ respondents were among those suggesting that this would protect tenants, maintain fairness in private renting, encourage compliance and support transparency and accountability.

‘Local authority’ respondents commented that the approach would ensure that the exemptions remain relevant and appropriate, and help prevent MMR properties becoming unaffordable, which could increase the pressure on the social housing sector and decrease housing options for middle-income households.

Respondents who agreed that MMR exempt status should be withdrawn if certain conditions were not met, and that those properties should no longer be exempted from rent control, gave examples of criteria which should be complied with. These included meeting:

• affordability criteria such as binding rent restrictions linked to LHA or local market rates
• use/tenure specific requirements
• funding requirements

Although supporting the overall principle, a ‘Developer or investor’ suggested that the MMR criteria should be broadened to future-proof the definition, for example covering homes that may be let at qualifying rents beyond the term of any agreement with government, so that these would still fall within the exemption. Other ‘Developer or investor’ respondents proposed that, if a home moves out of MMR but meets BtR standards, the exemption should still apply.

Concerns about time limited exemptions

‘Social landlord or their representative bodies’ respondents were amongst those raising concerns about the possibility of MMR exemptions being time limited, including that they would undermine investor and lender confidence and place strain on RSL 30-year financial business planning. A specific concern was that exemptions that do not align to the full life of business plans would make MMR properties unviable for RSLs.

Other reasons for not supporting the proposal included that MMR rents will never increase above the median point of BRMA, so any arbitrary time limits on exemptions would render them ineffective and undermine the intent of exemptions.

A ‘Social landlord or their representative bodies’ respondent observed that RSL subsidiaries comply with strict governance and reporting requirements through their association with their main RSL arm, which is regulated by the SHR.^[10] They reported that these governance structures give protection against any concerns about profit-making and suggested there is sufficient protection against any ‘drift’ in RSL subsidiary MMR provision or compliance.

Question 5: Are there any other types of housing provision which should also be considered as part of an exemption for MMR property? In this question we ask you to consider only housing provision let below market rents, with binding restrictions on the level of rent that can be charged, or with restrictions on the types of tenants than can be granted a tenancy.

Around 310 respondents answered Question 5. A number of those responding to this question, including ‘Campaign’ and ‘Individual’ respondents, either thought no other types of housing should be exempt or had no suggestions about possible exemptions. Others, including ‘Individuals’ and ‘Private landlord, letting agent or their representative bodies’ respondents, suggested that all properties should be exempt.

In addition to giving examples of provision that they felt should be considered for exemption, respondents highlighted the need for clear affordability criteria and restrictions on tenant type. Examples given of occupancy restrictions included key workers (such as nurses and teachers), students, supported housing tenants and veterans.

The other types of housing provision suggested for exemption are summarised below.

‘Private landlord, letting agent or their representatives’ and ‘Developer or investor’ respondents provided several suggestions for exemptions. These included BtR developments participating in local affordable housing initiatives that include rent caps or restrict tenancy types, particularly where they are supported by public subsidies or planning agreements. Intermediate Market Rent homes delivered under Section 75 agreements or nomination arrangements with binding rent controls and clear eligibility criteria, providing affordable homes in high-demand areas where social housing alone cannot meet need were also seen as an option.

Other suggestions included:

• any property rented below market rate, including tenancies to long-term tenants which have been let at and remained under market rent (as there is a risk of sale on change of tenancy if the rent cannot be increased)
• any form of voluntarily discounted rent (discounted at similar or higher levels than MMR) or any property below a fixed percentile of the market rate
• any tenancy let under the Agricultural Holdings Act
• tenancies that incorporate provision of electricity, water, heat or other any services
• private sector landlords delivering MMR at LHA levels without subsidy
• key worker housing

‘Social landlord or their representative bodies’, ‘Advice organisation and third sector’ and ‘Local authority’ respondents tended to highlight specialist housing, including supported accommodation for vulnerable groups, where rent controls could undermine financial viability and delivery of essential support services. Examples given included housing for older people, individuals with disabilities, people with mental health conditions, households experiencing homelessness or who have previously been homeless, victims of domestic abuse, ex-offenders and housing for veterans.

Rural and community housing provision (including that delivered by trusts or small charities) was also referenced, and it was suggested that these sub-sectors face uniquely high costs with supply already at risk in some areas. Charitable and community-led housing provided by cooperatives, community land trusts or charitable organisations, was another suggestion. It was noted that these providers will often reinvest surpluses into maintaining affordability, thereby serving a specific community or social need.

Other suggestions included:

• tied accommodation, if offered at MMR levels
• student accommodation provided by universities or non-profit organisations, provided there is no motive to profit from the accommodation
• shared equity schemes and other sub-market rent models as these have binding affordability conditions applied and should not be subject to any further rent restrictions

‘Professional or representative body’ and ‘Developer or investor’ respondents suggested models designed to support tenants in a similar way to MMR and to encourage more delivery targeted at the affordable market. Examples given included homes offered at discounted rents for specific tenant groups, or private schemes such as “rent to buy” with set eligibility rules, or homes built/developed under previous grant schemes such as Rural Empty Property Grant or Rural Homes for Rent.

Purpose-built rental housing – build to rent

The consultation paper set out that BtR is a type of housing that offers purpose-built accommodation for rent. It also reported that engagement with stakeholders has suggested that BtR providers tend to be long-term focused, often pension fund sponsored corporate landlords with a “for-rent only” strategy, which could guarantee both long-term supply of BtR properties as well as the absence of a risk of terminations for personal use. The consultation sought views on whether it would be appropriate to exempt BtR properties from rent control to support the provision of new-build rental property and the impact that this may have on the sector.

Question 6: Should build to rent properties be exempted from the application of rent controls under the Bill?

A total of 4,600 respondents (or 96% of all respondents) answered the closed element of Question 6. Responses by respondent type are set out in Table 6 below.

Table 6: Question 6

Respondent type	Yes	No	Total
Advice organisation and third sector	3	6	9
Developer or investor	16	1	17
Local authority	6	8	14
Private landlord, letting agent or their representative bodies	21	11	32
Professional or representative body	3	0	3
Public body	0	1	1
Social landlord or their representative bodies	4	0	4
Tenant, community group or union	0	8	8
Total organisations	53	35	88
% of organisations	60%	40%	100%
Individuals	82	282	364
% of individuals	23%	77%	100%
All non-campaign respondents	135	317	452
% of all non-campaign respondents	30%	70%	100%
Campaign respondents	0	4148	4148
% of campaign respondents	0%	100%	100%
All respondents	135	4465	4600
% of all respondents	3%	97%	100%

A substantial majority of respondents – 97% of those answering the question and including ‘Campaign’ respondents – did not think that BtR properties should be exempted from the application of rent controls under the Bill.

Among non-campaign responses, a smaller majority – 70% of those answering the question – did not think BtR should be exempt, rising to 77% of individual respondents. In contrast, a majority of organisations, 60% of those answering the question, did think BtR properties should be exempted from the application of rent controls.

‘Developer or investor’, ‘Social landlord or their representative bodies’ and ‘Professional or representative body’ respondents were almost entirely in favour of an exemption, while ‘Tenant, community group or union’ respondents were all opposed. Although a majority of ‘Private landlord, letting agent or their representative bodies’ respondents agreed, a substantial minority disagreed.

Please explain your answer

Around 370 non-campaign respondents explained their answer to Question 6, and ‘Campaign’ respondents also commented. This included respondents who argued against the introduction of any rent control measures or, alternatively, that no exemptions should apply. These broader arguments have been covered in the ‘Overarching themes relating to rent controls’ chapter (above). The focus of the analysis presented at Questions 6 to 10 is on the BtR sector.

Reasons for opposing an exemption for BtR properties

A frequently made point, including by ‘Campaign’ and ‘Tenant, community group or union’ respondents, was that rent controls should be applied consistently across all types of privately rented property, including BtR. Points made in relation to BtR specifically included that some tenants might not know they are renting in a BtR property and, by extension, that they would not be protected by any local rent cap that might apply.

‘Local authority’ respondents were among those raising concerns in relation to the affordability of rental properties in the BtR sector, with reports that rents are already high, and that BtR rents above average can impact BRMA and LHA levels.

There was also a view that an exemption could encourage developers to prioritise the luxury end of the market, especially in urban areas, at a time when many BtR properties are already unaffordable for people on low incomes, including older people. It was argued that rents in the BtR sector should be brought down rather than introducing measures that could have the opposite effect.

The potential impact of any exemption for BtR on students living in Purpose Built Student Accommodation (PBSA) was also highlighted. The growth of PBSA in Glasgow was noted in particular, with an associated concern that because of limited availability of other accommodation, students may have no choice but to rent in PBSA where rents are already higher than those elsewhere in the PRS – a trend which may increase if PBSA is exempt from rent control.

There was also a view that, as the interests of BtR providers have informed the current approach of setting maximum rent rises in rent control areas as CPI+1% up to a maximum of 6%, there is no justification for exempting the sector from rent control, and it was argued that the agreed formula enables BtR landlords to make “above inflation profits”.

A different perspective, expressed particularly by ‘Private landlord, letting agent or their representative bodies’ and ‘Individual’ respondents, was that granting an exemption for (predominantly) large professional BtR landlords operating in one part of the private rented sector will create a two-tier system that unfairly disadvantages the (often) small private landlords whose properties would be subject to rent controls. This was also expressed as giving new build BtR an unfair advantage over existing rental stock and was linked to an argument that an exemption for BtR could encourage private landlords to divest existing stock and invest in new BtR properties. Suggestions to address the perceived advantage that an exemption would give BtR providers included:

• removing the 8% Additional Dwelling Supplement under Land and Buildings Transaction Tax for purchasing of property to rent by registered private landlords
• allowing non BtR (and MMR) landlords to raise rent to market value between tenancies when the current rent is more than 10% below market value

Reasons for agreeing with an exemption for BtR properties

The most frequent reason given for supporting an exemption for BtR properties was the need to encourage (or to avoid further discouraging) BtR development in Scotland. There were calls for primary legislation to send a clear signal that BtR will be exempted from rent control, even if the detail will be provided in secondary legislation.

Arguments in support of an exemption were made primarily by ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents, although there was also support from some ‘Local authority’, ‘Professional or representative body’, ‘Social landlord or their representative bodies’ and ‘Individual’ respondents. Reasons given included that the BtR sector has the potential to deliver new homes at scale to help address unmet demand for housing. It was also suggested that BtR developments typically provide high quality, professionally managed homes on longer tenancies, often with on-site services that benefit tenants, and that the model provides choice for tenants and depends on resident satisfaction, rather than short-term profit.

It was noted that, being capital intensive, BtR developments are often financed by large institutional investors (such as pension funds) seeking predictable, long-term returns, and it was reported that the prospect of rent control in the BtR sector has caused loss of confidence on the part of such investors, with existing developments cancelled or put on hold and a lack of new funding for large scale BtR projects. Respondents gave examples of stalled developments in Glasgow and Edinburgh and of sites where projects are being switched to PBSA, and it was argued that, without an exemption for BtR property in Scotland, institutional investors will go elsewhere in the UK or Europe where they can make higher returns with lower risk.

The duty on institutional investors to manage pension and insurance funds in the best interests of beneficiaries (including earning secure, inflation-linked returns on invested capital) was emphasised, including a view that the proposed limit on rent increases in a rent control area (to CPI+1% or 6%) will threaten the profitability of BtR schemes during periods when CPI exceeds 6%, as happened during much of 2022 and 2023. Other factors highlighted as impacting the viability of BtR development in Scotland included the emphasis that planning policy places on delivering family-sized homes in BtR developments: it was reported that as Houses in Multiple Occupation (HMO) licensing rules prevent 3 bed properties being used by more than two unrelated adults, these units are often under-occupied, undermining financial viability.

Loss of the economic benefits and jobs associated with BtR developments were cited as additional reasons for the Scottish Government to exempt this sector from rent control, as was the recommendation for an exemption in the Housing Investment Taskforce report.

Specific concerns were raised around the viability of BtR in rural areas where, it was reported, potential returns on investment are lower, but development can be important to sustain communities and reverse depopulation. Single family rental BtR models were highlighted as having the potential to bring new housing supply to rural and suburban rental markets where options are limited. One ‘Local authority’ respondent from a predominantly rural area noted that they regard encouraging investment opportunities in BtR as a key priority.

Potential conditions on exemption

‘Local authority’ and ‘Advice organisation and third sector’ respondents were among those who noted additional conditions that they would like to see imposed, primarily in relation to affordability. These included limits with respect to rent levels, for example with exemptions offered only to BtR properties which are offered at MMR levels or exemptions only available if a proportion of units are let at affordable levels. A specific suggestion was that local authorities should be able to ensure that BtR developments provide an affordable housing contribution through their planning authority’s Affordable Housing Policy.

Other proposed limits included that exemptions should be time-limited, conditional on tenant safeguards and covered by a compliance framework to prevent misuse – for example by planning consent being specifically for BtR, and further planning consent being required for subsequent change of use.

Defining BtR

The consultation paper set out that BtR is not currently legally defined or categorised under planning legislation. It went on to suggest that BtR could be defined to incorporate some of the following criteria:

• new homes built at scale and offered exclusively for rent (apartments and/or houses)
• new homes provided at scale through conversion of non-residential properties
• on a single site or related sites
• in single ownership
• with management services provided by a single legal entity via a management regime and a single site wide building insurance structure

Question 7: We have set out some criteria which could be incorporated into a definition of BtR for the purpose of a possible exemption. Do you agree with these criteria?

A total of 4,554 respondents (or 95% of all respondents) answered the closed element of Question 7. Responses by respondent type are set out in Table 7 below.

Table 7: Question 7

Respondent type	Yes	No	Total
Advice organisation and third sector	4	3	7
Developer or investor	6	10	16
Local authority	8	4	12
Private landlord, letting agent or their representative bodies	11	20	31
Professional or representative body	1	2	3
Public body	0	0	0
Social landlord or their representative bodies	3	0	3
Tenant, community group or union	1	5	6
Total organisations	34	44	78
% of organisations	44%	56%	100%
Individuals	110	218	328
% of individuals	34%	66%	100%
All non-campaign respondents	144	262	406
% of all non-campaign respondents	35%	65%	100%
Campaign respondents	0	4148	4148
% of campaign respondents	0%	100%	100%
All respondents	144	4410	4554
% of all respondents	3%	97%	100%

A substantial majority of respondents – 97% of those answering the question, including ‘Campaign’ respondents – did not agree with the criteria set out for possible incorporation into a definition of BtR for the purpose of a possible exemption.

Among non-campaign respondents, this fell to 65% of those answering the question, with 66% of individuals and 56% of organisations not agreeing with the criteria.

A majority of ‘Local authority’, ‘Social landlord or their representative bodies’ and ‘Advice organisation and third sector’ respondents agreed. ‘Tenant, community group or union’ respondents were particularly likely to disagree.

Please explain your answer

Around 320 non-campaign respondents explained their answer to Question 7, and Campaign respondents also commented.

Concerns about the criteria as set out

While in some cases broadly agreeing with the proposed criteria, ‘Developer or investor’, ‘Private landlord, letting agent or their representative bodies’ and ‘Individual’ respondents were among those arguing that they are too narrow, need to be more flexible to reflect how BtR is delivered in practice, and need to allow the model to evolve. The associated concern was that, as currently set out, the criteria could discourage investment, particularly in innovative schemes including those encompassing retrofit and adaptive reuse, or schemes that meet the spirit of BtR but not all technical requirements.

There was also a suggestion that the proposed criteria needs further clarification, and an expectation that a definition of BtR for the purposes of an exemption would be subject to future consultation.

Support for the criteria as set out

General comments from those who agreed with the criteria included that they seem reasonable and appropriate to reflect the characteristics of BtR, or to distinguish BtR from the wider PRS. There was also a suggestion that additional criteria would not be conducive to the delivery of BtR.

However, there were also a number of suggestions for alternative or additional criteria. These are covered at Question 8, with the analysis below focusing on the criteria proposed in the consultation paper.

View on the specific criteria

i) New homes built at scale and offered exclusively for rent (apartments and/or houses

What would be considered ‘new’ was thought to require clarification with a ‘Local authority’ respondent querying whether projects completed prior to the publication of the relevant regulations would be eligible for any exemption.

Many respondents, including ‘Tenant, community group or union’, ‘Individual’ and ‘Campaign’ respondents, argued that if an exemption is granted it should be limited to a period of two years after completion. A very different view, expressed by ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents, was that all existing BtR property should be exempt or that a cut-off date no earlier than 2010 would take account of the introduction of the BtR sector in the UK.

What is covered by ‘built at scale’ was also thought to need clarification, with particular concern around the application of this requirement in a rural context, where the scale of development is likely to be small relative to urban areas but where even a relatively small number of properties can have significant positive impacts for local communities. It was suggested that the definition should take account of the likely scale of BtR development in rural areas and should clearly extend to developments of single family rental houses as well as flats. There were suggestions both that a minimum scale might be set at 10 units or more or at 50+ units to allow for smaller rural schemes, or that any rural property built exclusively to be let under a relevant tenancy should be included.

Other queries on scale related to the status of private, non-institutional BtR properties, for example whether a small number of units with genuinely affordable rents created by a third sector organisation would be covered.

With respect to being ‘offered exclusively for rent’ it was suggested that a requirement for a single tenure runs counter to the aim of mixed and balanced communities and that projects could offer multi-tenure accommodation on the same site.

ii) New homes provided at scale through conversion of non-residential properties

The importance of including schemes that involve the conversion of existing buildings for residential purposes was emphasised. Flexibility with respect to scale was also suggested in this context, both in view of the environmental benefits of using brownfield sites and the impact that a relatively small number of additional rental properties have on the centre of a small town.

iii) On a single site or related sites

Potential difficulties in defining ‘a single site or related sites’ were also suggested, including that provision on related sites could mean that some parts of a BtR development are within a rent control area while others are not. There was a view that this requires careful consideration as, particularly for single family rental homes, the number of units on individual sites may be small but can be viable because of geographical proximity to other sites in the same ownership or as part of a wider business plan.

iv) In single ownership

Points in relation to the requirement for single ownership included that joint venture development is common in the BtR market with a request for clarity on whether a housebuilder involved in ventures with different partners would count involvement in each joint venture as single ownership.

There was also a concern that a landlord could be restricted if wishing to sell an interest in a BtR property.

‘Developer and investor’ respondents were among those who suggested the requirement should be for homes to be held in either single ownership or a co-ordinated ownership.

v) With management services provided by a single legal entity via a management regime and a single site wide building insurance structure

While a ‘Local authority’ respondent expected that a requirement for a property factor or management company might be included under Landlord Registration regulations, others saw this criterion as potentially confusing, unnecessary or lacking flexibility – the latter potentially important in relation to delivery in a rural context. While site-wide insurance was described as overly prescriptive, there was also a view that site-wide building insurance structure and centralised governance is a characteristic of BtR schemes.

Question 8: Are there any other criteria that should be considered as part of a definition of BtR for the purpose of a possible exemption?

Around 320 non-campaign respondents answered Question 8, and Campaign respondents also made a comment.

Additional criteria proposed

i) Affordability

Reflecting comments at earlier questions, ‘Local authority’ and ‘Individual’ respondents in particular highlighted concerns around affordability and protecting tenants from excessive rent increases. Suggestions included criteria relating to: an intention to offer properties initially to the open market as ‘affordable housing’; providing a proportion of rents at LHA or lower; or encouraging alignment of rent to MMR levels. A limit on the number of rent increases in exempt properties and the right for tenants to contest increases through Rent Service Scotland, using other rents in the area not just those from a BtR landlord, were also proposed.

A ‘Local authority’ respondent suggested that the cost of the development should be considered when determining the baseline rent level, to ensure that developers and investors are supported while also reflecting affordability for residents.

ii) Long-term investment

‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents were amongst those suggesting that the criteria should include intent for long-term investment, which was seen as important in distinguishing BtR from short-term rental models.

iii) Long term tenancies

While some ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents saw long-term investment and ownership as providing stability for residents, others, including a ‘Tenant, community group or union’ respondent, suggested that availability of long-term tenancies should be a criterion in the definition of BtR.

iv) Professional management and service standards

Professional management and service standards were also suggested as criteria by ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents, who saw high-quality, consistent property management and a customer-focused service ethos as a defining feature of BtR. Availability of on-site facilities and amenities was also suggested as a criterion by a ‘Private landlord, letting agent or their representative bodies’ respondent.

A ‘Tenant, community group or union’ respondent suggested that high standards of tenant service should be accompanied by ongoing monitoring through a formal registration or oversight mechanism. Connected to a requirement for monitoring and enforcement to ensure compliance with the terms of an exemption, a ‘Local authority’ respondent proposed giving local authorities oversight of BtR developments to assess whether they meet the needs of the local population in the context of housing need and demand.

v) Origin of stock

Some ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents also thought it important that the criteria allow for schemes that were originally intended for sale or not explicitly foreseen as BtR but are subsequently funded/acquired and operated as BtR and meet core ownership, scale and management criteria. Developments delivered through planning agreements or in partnership with public sector bodies, where the operational model aligns with BtR principles, were also referenced.

For some, the suggested flexibility on origin of stock should go further, for example with the definition capturing: all homes presented in a compliant condition to the rental market with professional management in place; all forms of housing developed exclusively for private rental; or any property purpose-built for rent (secured in planning).

Other suggestions included conversion/upgrading of derelict residential properties for rent and specifically property that has been vacant for a decade and renovation/improvement of any existing property.

vi) Property type and scale

Reflecting comments on scale at the previous question, ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents were among those arguing that the criteria should clearly include both multi-family and single-family housing. In some cases, this was particularly connected to the delivery of smaller or medium sized BtR schemes in suburban and rural areas or to portfolios of dispersed single-family homes managed to BtR standards.

vii) Other

Other issues raised for consideration as potential criteria in the definition of BtR included meeting local strategic priorities (for example, bringing empty properties back into use for private rent or supporting investment that safeguards local built heritage) and meeting energy efficiency standards. A commitment to maintain rental supply to ensure continued investment in the sector was also proposed.

There were also suggestions in respect of student accommodation, and specifically PBSA, both that it should be defined as BtR and exempt from rent control and that it should not. This is discussed further at Question 10.

Exemptions for BtR properties

Exemptions for BtR properties could end when the properties no longer meet these specified criteria.

Question 9: Should BtR properties only be exempted from rent controls for the timeframe that they meet the specified criteria?

A total of 4,534 respondents (or 95% of all respondents) answered the closed element of Question 9. Responses by respondent type are set out in Table 8 below.

Table 8: Question 9

Respondent type	Yes	No	Total
Advice organisation and third sector	5	1	6
Developer or investor	12	3	15
Local authority	11	0	11
Private landlord, letting agent or their representative bodies	20	9	29
Professional or representative body	2	0	2
Public body	1	0	1
Social landlord or their representative bodies	3	0	3
Tenant, community group or union	5	2	7
Total organisations	59	15	74
% of organisations	80%	20%	100%
Individuals	116	196	312
% of individuals	37%	63%	100%
All non-campaign respondents	175	211	386
% of all non-campaign respondents	45%	55%	100%
Campaign respondents	4148	0	4148
% of campaign respondents	100%	0%	100%
All respondents	4323	211	4534
% of all respondents	95%	5%	100%

A substantial majority of respondents – 95% of those who answered the question, including ‘Campaign’ respondents – thought that BtR properties should only be exempted from rent controls for the timeframe that they meet the specified criteria.

Among non-campaign respondents, a small majority – 55% of those answering the question – did not think that the exemption should be limited in this way, with Individuals and organisations taking differing positions. While 80% of organisations thought the exemption should be limited to the timeframe that the specified criteria are met, only 37% of individuals took this view.

Across all organisation types, a majority of those answering supported the timeframe being limited.

Please explain your answer

Around 260 non-campaign respondents explained their answer to Question 9. ‘Campaign’ respondents also made a comment.

As at earlier questions, concerns were raised about rent controls overall, and about any special treatment for BtR landlords relative to those operating in the rest of the sector, whilst others favoured rent control applying to all property types. These respondents sometimes noted that, if there is an exemption, it should be limited to the timeframe when the criteria are met.

Reasons for supporting an exemption from rent controls only for the timeframe that properties meet the specified criteria

The proposed requirement for meeting the specified criteria was seen as ensuring that any properties being given an exemption are delivering the intended benefits in increasing the supply of property for rent. ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents were among those citing the importance of protecting the integrity of the exemption, such that it applies only to developments that deliver policy benefits in terms of long-term ownership, professional management and enhanced service standards. It was also argued that such features of a development are more important than its history or origin.

Benefits were also predicted with respect to:

• providing clarity for BtR investors who are committed to maintaining the required standards and an incentive for developers and landlords to uphold the quality of accommodation
• maintaining common standards in all BtR homes
• upholding fairness in the rental market by ensuring that developments benefiting from exemptions are genuinely operating under the BtR model
• safeguarding the interests of tenants
• avoiding fragmentation of ownership or management

Conditional criteria were also seen as providing a mechanism for enforcement, with suggested circumstances where the exemption should be withdrawn including:

• change in tenure
• fragmentation of ownership/management
• failing to provide professional management
• falling below a minimum scale threshold

Reasons for opposing exemption from rent controls only for the timeframe that properties meet the specified criteria

Reasons for opposing a limited exemption included views that:

• this might reduce appetite for investment and that homes for long-term rent should be supported by an appropriate policy environment
• there should be an exemption as long as rent control is in place rather than in relation to the specified criteria

Question 10: Are there any other types of new rental housing provision which should be considered as part of this category of exemption?

Around 280 non-campaign respondents answered Question 10. Campaign respondents also made a comment.

‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents who did suggest additional types of housing that should be included sometimes argued that an exemption should be available to other types of provision that shares the central characteristics of BtR, and where there would be a similar concern around viability if blanket rent control measures were to be applied. Specific suggestions, made predominantly by these respondent groups and Individual respondents, included:

• co-living or managed shared living – developments that typically combine private apartments with shared kitchens, lounges and other amenity spaces, managed by a single, professional operator
• later living or senior living – self-contained homes, often with on-site support services, communal facilities and a strong emphasis on accessibility, wellbeing and social connection
• assisted living – potentially offering care services to support residents with increasing needs to avoid early entry into residential care
• the rental element of shared ownership properties
• RSL PRT acquisitions
• new rental homes acquired by institutional investors under single ownership providing management services across a portfolio of rental homes, in multiple locations or conversions of existing residential property into the ownership and management of a BtR provider
• single family rental
• the rural residential sector, with calls to support delivery of new rental homes in rural communities irrespective of scale

The status of PBSA was also raised. It was argued that this provides a form of accommodation distinct from the wider PRS, being delivered at scale and operated by professional providers or university partnerships, with fixed leases structured around the academic calendar. A particular concern was that amendments passed at the meeting of the Local Government, Housing and Planning Committee on 6 May have brought PBSA into the scope of rent control^[11] when, in the view of some respondents, it should not be.

Other suggestions for new rental housing provision which should be considered as part of a BtR exemption focused on commitments to affordability, length of tenancies, transparency or specific tenant eligibility criteria. ‘Local authority’, ‘Tenant, community group or union’ and ‘Individual’ respondents in particular suggested exemptions including for:

• any affordable housing provision, particularly if supported by public funding or planning obligations
• affordable PRS properties – privately delivered homes (not owned by RSLs or local authorities but often delivered via Section 75 agreements or with some public subsidy) that are let at a discount to market rents
• RSL and third sector landlords
• public-private ventures designed for long-term rental
• community-led housing or housing cooperatives, where tenants have a collective ownership or governance stake in the property
• specialist supported housing for people with additional needs
• employer-provided housing and key worker housing
• student-to-residential conversions

Other circumstances where exemptions would be appropriate

The powers set out in section 13 of the Bill, as introduced, allow Scottish Ministers to define what is an exempt property with reference to the landlord or tenant of the property, or the type of property. The consultation paper notes that two areas where such powers could be used are exempting MMR and BtR properties from rent controls. However, it is recognised that there are a wide variety of different types of property in the PRS which could be impacted by rent controls in different ways. The consultation sought views on any other types of property that should be considered for exemption from rent control where a rent control area is in force.

Question 11: Excluding mid-market rent and build to rent/purpose built private rented accommodation, are there other categories of housing provision that should be exempted from rent controls?

A total of 4,607 respondents (or 96% of all respondents) answered the closed element of Question 11. Responses by respondent type are set out in Table 9 below.

Table 9: Question 11

Respondent type	Yes	No	Total
Advice organisation and third sector	5	4	9
Developer or investor	10	3	13
Local authority	7	7	14
Private landlord, letting agent or their representative bodies	30	6	36
Professional or representative body	3	0	3
Public body	1	0	1
Social landlord or their representative bodies	5	2	7
Tenant, community group or union	1	7	8
Total organisations	62	29	91
% of organisations	68%	32%	100%
Individuals	194	174	368
% of individuals	53%	47%	100%
All non-campaign respondents	256	203	459
% of all non-campaign respondents	56%	44%	100%
Campaign respondents	0	4148	4148
% of campaign respondents	0%	100%	100%
All respondents	256	4351	4607
% of all respondents	6%	94%	100%

A substantial majority of respondents – 94% of those who answered the question, including ‘Campaign’ respondents – did not think that there are other categories of housing provision that should be exempted from rent controls.

In contrast, among non-campaign respondents a small majority – 56% of those who answered the question – thought that there are other categories that should be exempted from rent control. Among individuals, 53% of those answering thought so, rising to 68% of the organisations that answered the question.

‘Tenant, community group or union’ respondents were the only type of organisation in which the majority did not think there are any other categories of housing provision that should be exempted from rent controls, although ‘Local authority’ respondents were evenly divided on the issue.

Please explain your answer

Around 380 non-campaign respondents explained their answer to Question 11, with comments frequently reiterating points and suggestions made at earlier questions.

Reasons there should not be further exemptions

In many cases, respondents (including ‘Campaign’ respondents) who did not think there should be further exemptions did not think there should be any exemptions at all, often seeing exemptions as creating uncertainty, instability and unequal rights among tenants. Others disagreed with the introduction of any rent control or argued that, if applied at all, it should be done consistently across the PRS.

A ‘Local authority’ respondent who felt that exemptions should be kept to a minimum suggested that further exemptions could both create inconsistency and increase opportunities for legal challenge.

Suggestions for further exemptions

Respondents who opposed the principle of rent control sometimes called for all rental property to be exempt. Otherwise, the most frequent suggestions for additional categories of housing provision that should be exempted from rent control were:

• properties that are or have been let at below market values
• properties that have been upgraded, including work required to improve energy efficiency or adaptations to meet the needs of a disabled tenant

With regard to properties that are or have been let at below market values, some respondents gave examples of circumstances where rent increases for sitting tenants might be minimised, leaving a property at well below market rent when a tenancy ends.

With reference to properties that have been upgraded, while some respondents highlighted refurbishment between tenancies, it was also noted that an exemption only in respect of work between tenancies could discourage improvements during a tenancy.

Fewer respondents argued in support of exemptions for:

• property owned by small-scale PRS landlords
• PBSA
• supported housing for vulnerable or priority groups, for example where rent can include care costs or other service provision
• properties associated with employment or provided for key workers
• properties in rural areas

As with earlier questions, some ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents argued for more consideration of rental housing in rural communities or for rural BtR development at any scale to be exempt from rent control. Viability challenges relating to low volumes, high costs and fragile delivery pipelines were noted.

Some issues relating to rural properties were also linked with employment and with properties let at below market rates, including in relation to tied accommodation and agricultural tenancies. A general point made was that the nature or length of the tenancies involved is likely to mean a property returning to the private residential market does so at a rental value well below the market rate. Specific property types and situations where it was suggested that an exemption should apply included:

• tied housing
• property resumed from tied housing
• accommodation returning to market after use by a retired employee
• any tenancy where a restriction on the occupation of the house has reduced the rental value, for example where a tenant has had a full repairing tenancy, and the repairing obligations are reverting to the landlord
• properties let for the first time after converting to a PRT after a long-term lease under a Short Assured Tenancy or a Protected/Regulated Tenancy where rents will typically be below current market levels
• any tenancy previously let under the Agricultural Holdings Act

In relation to tenancies previously let under the Agricultural Holdings Act, it was also argued that where the rent for such rural property covers the provision of services (heat, water, electricity or sewerage) this element should not be subject to rent control.

Other categories of provision where relatively small numbers of respondents proposed exemptions included traditional buildings or listed buildings which have higher repair and maintenance costs. A ‘Private landlord’ respondent noted their own responsibility for care of a number of historic residential properties that are often leased to staff who work in them, with rents going towards maintenance and upkeep. Other suggestions were:

• any previously derelict property brought back into use, including houses not lived in for more than 10 years
• conversions of existing residential property into the ownership and management of a BtR provider
• RSL PRT acquisitions
• any new build projects supported by Scottish Government or local authority funding
• co-living, later living or assisted living developments
• the rental element of shared ownership
• short term rents, for example for seasonal workers or workers on national infrastructure projects
• furnished properties
• HMOs that are specifically reserved for students
• affordable housing with conditional exemption – for example linked to LHA affordability criteria and reviewed regularly
• community led housing / cooperative rental homes, which often have government funding

Consultation with community trusts and similar agencies on whether an exemption would be appropriate for remote rural housing was also suggested.

Demonstrating eligibility for an exemption

The consultation paper notes that to ensure that tenants can exercise their rights they need to have information. The Bill sets out requirements for information that prospective landlords in rent control areas must provide to tenants. The Bill also includes routes for tenants to verify whether a proposed rent increase is above the level of the rent cap or to apply for a determination of whether the rent set at the start of a new tenancy was set in accordance with the statutory requirements. However, should a certain category of property in a rent control area be exempted from rent control (for example MMR or BtR properties), these requirements would not apply.

Question 12: What information would you consider would be acceptable to demonstrate that a property is eligible for the types of exemptions referred to in the previous sections in this chapter?

Around 375 non-campaign respondents answered Question 12, and ‘Campaign’ respondents also made a comment.

General issues raised

While some comments referred to eligibility for exemption as either MMR or BtR (as set out below), others were not specific about the grounds on which an exemption was sought, although in some cases these apparently concerned potential further exemptions the respondent had proposed at Question 11.

General points on the nature of the process included that:

• requirements should be as simple as possible for both landlords and regulating authorities
• there should be a requirement to submit documentation to evidence eligibility
• self-declaration on the Landlord Register could be accompanied by a requirement to submit evidence only if subject to inspection
• both the type of exemption and evidence that it is met should be recorded on the Landlord Register

Demonstrating BtR status

With respect to BtR status, ‘Developer or investor’ respondents in particular argued that, rather than a formal approval process, operators should be able to self-certify against clearly defined criteria, providing supporting documentation for retrospective validation if necessary. Justification for such an approach included the need to provide potential investors with certainty that a development will be eligible for BtR status at an early stage and, specifically, prior to a planning application. Providing this certainty and avoiding both administrative burdens and procedural barriers that could derail or delay a development were seen as essential. Specifically, it was argued that there should be no requirement to seek approval or confirmation prior to operation.

Suggestions with respect to suitable evidence of BtR status included:

• description of the development – for example in planning or design statements outlining the rental model
• investment and funding documentation showing reliance on rental income rather than sales
• planning consent documents confirming BtR as the intended use, including references to long-term rental tenure and unified ownership
• an operating statement on how the building will be run and details of the professional management that will deliver and maintain the rental model

A self-declaration of eligibility, subject to annual renewal, was also suggested.

If further evidence were to be required, it was noted that information – for example relating to tenancy types, rent levels and occupancy – could be collected across developments using a system similar to the SmartSurvey Data Collection system used for MMR. This was seen as providing a light touch compliance mechanism that could allow local authorities to monitor trends and anomalies.

One ‘Professional or representative body respondent’ was clear that, in addition to new build BtR, similar principles should apply to large-scale conversions, and homes originally intended for sale but subsequently acquired under a single ownership and made available for rent, and to both single family rental properties and flats. Another noted that demonstrating eligibility for homes acquired by a BtR provider could be more difficult to evidence, but also that the question is difficult to answer until the defining criteria of BtR are established.

For ‘Local authority’ respondents, evidence of BtR status could include:

• relevant planning applications and building warrants that specify rental use only
• long term tenancy and site management agreements
• correspondence relating to any government support for the project

Some ‘Local authority’ respondents expected that a landlord would need to submit evidence to demonstrate that they meet qualifying criteria to a body that oversees the process or determines exemptions. Suggestions with respect to a body confirming compliance included both the local authority and, specifically for BtR, the Housing and Property Chamber of the First Tier Tribunal (FTT).

Other points specific to BtR were limited. A ‘Private landlord, letting agent or their representative bodies’ respondent suggested that compliance with criteria for BtR (and indeed MMR) developments should be monitored, with enforceable penalties in respect of properties that are at fault. A ‘Tenant, community group or union’ argued that any exemption for BtR should be limited to two years, and that the operator should use the certificate of completion to demonstrate the eligible period.

Demonstrating MMR status

‘Tenant, community group or union’ respondents were among those commenting that, if exemptions are granted for MMR properties, then providing a consistent definition of MMR will be important. They also argued that MMR landlords should apply to the FTT for exemption. In contrast, some ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents suggested that the same principles of self-certification against defined criteria and types of evidence that they outlined in relation to BtR should also apply to MMR, albeit with additional evidence required.

‘Social landlord or their representative bodies’ respondents were among those who noted that, if exemption criteria are linked to organisational structure definitions, RSL subsidiary landlords have an SHR registered parent body and could provide their registration number and proof of this status to tenants to demonstrate eligibility.^[12] Other MMR landlords would also have a landlord registration number to which the exempt status could be linked.

Other suggestions with respect to information acceptable to demonstrate MMR status included:

• agreements with local authorities or RSLs
• social care commissioning documentation
• audits and published annual reports
• participation in public funding programmes, grant agreements or contracts with statutory bodies and correspondence relating to any government support for the project
• Section 75 agreements or planning conditions confirming rent restrictions
• allocation or eligibility policies demonstrating affordability, particularly linked to LHA
• criteria attached to funding stating that rent must be linked to methods that ensure rent levels remain affordable
• copies of tenancy agreements reflecting protected terms
• evidence the rent is between social and open market levels in the area

Other types of rental housing provision

With respect to demonstrating eligibility for exemption of other rental models, suggestions – made predominantly by ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents – included:

• tenancy structures that mirror academic terms, affiliation with educational institutions and block management for PBSA
• licensing structures, service-level agreements or housing support arrangements for supported or specialist housing
• confirmation of funding or delivery via community-led partnerships, rural housing initiatives or similar vehicles for rural or community-led schemes

A ‘Private landlord, letting agent or their representative bodies’ respondent thought that planning criteria around occupation would provide evidence in relation to later living development, while criteria for BtR would apply to co-living.

‘Private landlord, letting agent or their representative bodies’ and ‘Individual’ respondents in particular made suggestions with respect to evidence to support potential exemptions in relation to properties let at below market values and properties that have been upgraded. Suggested evidence for the former included: up-to-date tenancy agreements; current rent; rent levels over a defined period of months or years; and the relative cost of similar properties in the same area – for example from a surveyor’s reports or property listing. With respect to improvements to a property, evidence might include documentation to illustrate: a requirement to improve energy efficiency; a tenant’s disability requiring an adaptation; planning/ building control submissions; forecasted costs for work; invoices detailing the cost of work done; and before and after photographs of work carried out.

Question 13: What steps should a landlord need to take to confirm that their property is eligible for such an exemption?

Around 340 non-campaign respondents answered Question 13, as did Campaign respondents.

General points included both that any requirements should be simple and light-touch (including because of concerns around local authority resources) and that there should be a structured process.

Suggested steps for a landlord to take included:

• reviewing the relevant clauses in the legislation to establish that criteria for exemption are met, potentially using a self-assessment checklist
• keeping appropriate evidence/documentation

Thereafter, three different courses of action were anticipated, including submitting an application for exemption with supporting evidence. There were varying expectations that this would be to the local authority, the Landlord Register, Rent Service Scotland and the FTT.

A second suggestion was completing a self-certification or declaration, potentially on the Landlord Register, affirming that relevant criteria are met, but with no (or minimal) requirement for any documentation, or for re-certification unless circumstances change. It was suggested that compliance would need to be demonstrated if requested, or if subject to audit.

The third suggestion was that there should be no registration, certification or approval, with a requirement to demonstrate eligibility only on appeal, if a rent increase is challenged.

BtR properties

As with the previous question, ‘Developer or investor’ respondents were among those who suggested a process whereby exemption for BtR properties would be conferred by planning consent, based on the nature of the development, and its funding / professional management arrangements.

MMR properties

There were expectations, primarily from ‘Social landlord or their representative bodies’ respondents, that a confirmation process for RSL and RSL subsidiary landlords could be limited to providing their name and registration number, which might be added to a field on the Landlord Register. It was also suggested that a similar arrangement could apply if a landlord had charity/social enterprise status and appropriate social purpose controls.

In contrast, ‘Tenant, community group or union’ and ‘Individual’ respondents were amongst those arguing that MMR landlords should be required to apply to the FTT for exemption, and that any exemptions should be time limited. There were also references to the landlord being required to notify the authorities promptly if circumstances change.

Question 14: Should a landlord of an exempt property be required to communicate to tenants and prospective tenants about the exemption?

A total of 4,577 respondents (or 96% of all respondents) answered the closed element of Question 14. Responses by respondent type are set out in Table 10 below.

Table 10: Question 14

Respondent type	Yes	No	Total
Advice organisation and third sector	9	0	9
Developer or investor	13	1	14
Local authority	14	0	14
Private landlord, letting agent or their representative bodies	26	11	37
Professional or representative body	3	0	3
Public body	3	0	3
Social landlord or their representative bodies	10	1	11
Tenant, community group or union	6	0	6
Total organisations	84	13	97
% of organisations	87%	13%	100%
Individuals	229	103	332
% of individuals	69%	31%	100%
All non-campaign respondents	313	116	429
% of all non-campaign respondents	73%	27%	100%
Campaign respondents	4148	0	4148
% of campaign respondents	100%	0%	100%
All respondents	4461	116	4577
% of all respondents	97%	3%	100%

A substantial majority of respondents – 97% of those who answered the question, including ‘Campaign’ respondents – thought the landlord of an exempt property should be required to communicate to tenants and prospective tenants about the exemption.

Among non-campaign respondents, 73% of those answering agreed. The proportion of organisations that thought the landlord should be required to communicate with tenants and prospective tenants was higher than for individual respondents, at 87% and 69% respectively.

Among the organisations, ‘Private landlord, letting agent or their representative bodies’ were the only group where a significant number of respondents did not think the landlord should be required to communicate with tenants and prospective tenants about the exemption.

Please explain your answer

Around 305 non-campaign respondents explained their answer to Question 14, and ‘Campaign’ respondents also made a comment.

Reasons the landlord should be required to inform tenants/ prospective tenants

Transparency and fairness were the most frequently given reasons for requiring communicating with tenants and prospective tenants about an exemption. While some respondents saw the requirement as reasonable, others thought it obvious, with some surprised that the question would even be asked. Related views included that a tenant or prospective tenant needs, or has a right, to know if the property would not be covered by any local rent cap, allowing them to make an informed choice. It was also noted that MMR tenants are likely to consider the affordability of their rent very important and that the likely publicity if rent controls are implemented means it will be important for any tenants in exempt properties to know that their rent will not be capped. Potential benefits in avoiding misunderstandings, future disputes and referrals to the FTT were also suggested.

Reasons the landlord should not be required to inform tenants/ prospective tenants

Among respondents who argued against a requirement to inform tenants or prospective tenants, the additional regulatory burden placed on landlords was the most frequent reason. Related points included that tenants would be able to access the information on the Landlord Register if they chose to do so, and that the existence of an exemption might deter a prospective tenant when, in fact, it might have no practical impact on their experience or rent level.

Method of communication

With respect to how and when information about the exemption might be communicated, ‘Developer or investor’ and ‘Private landlord, letting agent or their representative bodies’ respondents were among those concerned that the requirement should not be burdensome for landlords. They suggested that a statement could be added to the tenancy agreement, although there was also a view that the PRT is already long and that many prospective tenants do not read it fully. A ‘Tenant, community group or union’ respondent suggested it would be helpful if relevant information was placed near to the beginning of the tenancy agreement – for example in section 5 of the Model Tenancy agreement.

Other suggestions with respect to how and when information should be communicated included that it should be:

• proactive and accessible
• in writing
• via email or a management app used by most MMR landlords
• included with the standard rent increase notice
• in advertising/marketing materials or at the viewing/application stage
• in pre-tenancy materials or before a rental agreement is signed

Views from the consultation sessions

Tenant participants considered that landlords should be required to inform prospective tenants about any exemption and also inform tenants of any potential increase several months before it is applied.

In terms of content, it was suggested that a standard template issued by the Scottish Government could ensure consistency of approach. Proposed elements for communication to tenants included:

• both the length and nature of the exemption
• how to check whether restrictions regarding MMR properties are respected in rent levels
• how to challenge an exemption or appeal against a rent increase

Other suggested requirements for landlords of exempt properties included restating the exemption well in advance of any rent increase and explaining the reasons for any rent increase. Free independent advice for both tenants and landlords was also proposed.

Question 15: What could the process be for tenants to verify that a property is exempt?

Around 350 non-campaign respondents answered Question 15, and ‘Campaign’ respondents also made a comment.

General points included that any process should be simple and transparent with specific suggestions including that a tenant could:

• receive a landlord declaration at start of tenancy
• check their tenancy agreement
• ask the landlord or letting agency to provide supporting documentation, such as an exemption certificate
• consult a central, publicly accessible online register of exempt properties or, more specifically, the Landlord Register

Less frequent suggestions included referring to the body that agreed the exemption. With respect to MMR exemptions, it was suggested that the Landlord Register could be adapted to provide an MMR section, or a separate register could be created listing relevant MMR properties or RSL subsidiary landlords and other exempt bodies. MMR operators’ websites could also publish details of the exemption.

Respondents also considered a potential process to deal with further queries or disputes, with suggestions that these could be handled by Rent Service Scotland, the relevant local authority or the FTT. Access to an independent review process to challenge incorrect exemptions was seen as important, and ‘Local authority’ respondents were among those who suggested that there should be a facility for tenants to report potential misuse of the system.

Views from the consultation sessions

Tenant participants suggested that landlords should keep a register of exempted properties on their website.