The Private Housing Rent Control (Exempt Property) (Scotland) Regulations 2026 - business and regulatory impact assessment

Executive summary

Issue and why it needs to be addressed

The Scottish Government's engagement with stakeholders in relation to the rent control measures in the legislation has brought forward concerns, from investors and from some providers of affordable accommodation, about the possible impacts of this type of rent control on investment in Build-to-Rent (BtR) and Mid-Market Rent (MMR) accommodation, which could, in turn, impact potential opportunities to increase the supply of properties in the Private Rented Sector (PRS).

Intended outcomes

The intended outcome of the proposed approach is to remove the reported barriers to investment and support the supply of new BtR and MMR properties, increasing the availability of rented homes.

Options

The options considered in this assessment are:

1) to take no action, resulting in rent control applying to all properties within a rent control area; or.

2) to bring forward regulations setting out criteria for exemptions from rent control measures for MMR and BtR properties. This is the preferred option.

Sectors affected

The Scottish Government considers that the sectors or groups affected by the proposed measures would include:

• Landlords, including housing association and local authority subsidiaries who let property in the PRS
• Investors and developers
• Tenants

Engagement completed, ongoing and planned

Development of the rent control measures brought forward in the Act was supported by the New Deal for Tenants consultation and widespread engagement across the private rented sector, which continued throughout the parliamentary process.

Engagement which has fed into the development of these proposals includes full public consultation carried out in April to July 2025, which included some targeted engagement with tenants in order to ensure that tenant voices could be considered. We have also undertaken engagement with landlords, investors, developers and their representative organisations, the Housing Investment Taskforce, the Scottish Federation of Housing Associations, members of the PRS Stakeholder Group, the Scottish Courts and Tribunals Service, the First-tier Tribunal for Scotland (Housing and Property Chamber), Rent Service Scotland (“RSS”) and the Regulatory Review Group (‘RRG’).

Engagement across the sector will continue as the details of other aspects of the rent control regime are developed going forwards.

Anticipated impacts (intended and unintended, positive and negative) and mitigating actions

Anticipated impacts and potential mitigations set out in this assessment include the following:

Landlords of properties in a rent control area, which are exempted under the proposed criteria, may experience administrative impacts, as we anticipate that there will be an administrative process to confirmed that a property is exempt.

Landlords of properties in a rent control area that are not exempt will be subject to the rent cap set out in legislation. Some landlords in this situation may consider that they are at a disadvantage compared to suppliers of exempt properties. As part of our ongoing stakeholder engagement, including our consultation in Spring 2025, the Scottish Government has sought to gather information on cases where landlords might be disproportionately affected by the rent control measures in the legislation, in order to consider mitigations for these cases in future regulations.

Tenants in BtR properties in rent control areas that are exempt from rent controls may see higher rent increases than tenants in properties where the rent increases are capped. However, these tenants will have access to the existing rent adjudication process, which will allow them to challenge a rent increase which they consider to be unreasonable in relation to market rents for comparable properties in the area, which will continue to give them protection against unreasonably high rent increases. Property advertisements in a rent control area will be required to make clear when a property is exempt from rent control, so prospective tenants will be able to make informed decisions about the property when making a decision on entering a tenancy.

Tenants in MMR properties in rent control areas which are exempt from rent controls, could also see higher rent increases than tenants in properties where the rent increases remain capped. However, a property would only meet the criteria set out in the proposed regulations if there was a restriction on the level of rent increase which the provider is permitted to apply. This means that, overall, rents for these tenants would be likely to remain below market rents for the area.

The Scottish Government considers that these proposed regulations will remove a potential barrier to investment in MMR and BtR properties, supporting the supply of new properties and increasing the availability of rented homes in Scotland. This will reduce market rents compared to what they otherwise would have been, which will benefit tenants generally, whether or not they live in a BtR or MMR property.

Enforcement / compliance

Ensuring that tenants and prospective tenants have certainty about whether a property is exempt will be vital in ensuring that they have the information needed to make informed decisions about their tenancies.

It is anticipated that landlords will require to undertake an administrative process to confirm that a property is exempt. This will ensure that exemptions have been independently verified and give tenants and prospective tenants confidence in the system. The Act includes a power for the Scottish Ministers to set out such a process, and it is anticipated that regulations will be brought forward to support this ahead of any rent control areas being established.

Recommendations / implementation plans

Having carefully considered the issues, analysis of the consultation results, impact assessments and stakeholder engagement across the sector, Scottish Ministers have determined that it is appropriate to bring forward regulations setting out exemptions from rent control measures for MMR and BtR properties.

The proposed regulations setting out the criteria for exemption for BtR and MMR have been brought forward at the earliest opportunity to give clarity to the sector, in support of removing a potential barrier to investment in MMR and BtR properties, supporting the supply of new properties and increasing the availability of rented homes in Scotland.

Evaluation and monitoring of implementation / review of BRIA

The legislation creates a duty on Scottish Ministers to carry out a review of the operation and effectiveness of the rent control measures in the Act and prepare a report on that review. The review must be carried out as soon as reasonably practicable after the end of the period of 5 years beginning with the day of Royal Assent^[3].

Further regulations relating to rent control will be required to implement rent control, including to set out a route for exempt properties to be verified and circumstances where it may be appropriate for a rent increase above the rent cap to be permitted. These will be accompanied by further assessment of potential impacts, allowing for progressive refinement of the assessment of the overall impacts of rent control.

Over time, the anticipated requirement for providers to verify that properties meet the exemption criteria will build up our understanding of the types and extent of properties across Scotland which are exempt, allowing the impacts of these regulations to be monitored more closely.

Over the longer term, the Scottish Government also anticipates working with stakeholders to develop a coordinated programme of monitoring and evaluation of the measures in the Act, including rent control.