Private Rented Sector Stakeholder Engagement Group minutes: December 2024

Attendees and apologies

• Minister for Housing, Paul McLennan MSP
• Anna Gardiner (SLE),
• Ashley Campbell (CIH)
• Caroline Elgar (SAL)
• David Melhuish (SPF)
• Emma Saunders (Living Rent)
• Gordon Maloney (Living Rent)
• Rhuaraidh Fleming (Crisis Scotland)
• Ronnell Reffell (UK Finance)
• Timothy Douglas (Propertymark)
• Scottish Government Officials

Apologies

• Aoife Deery (CAS)
• Callum Chomczuk (CIH)

Items and actions

Welcome

The Chair welcomed attendees to the twelfth meeting of the PRS Stakeholder Engagement Group.

Actions and minutes from previous meeting

Minutes from the previous meeting were issued prior to this meeting and were agreed.

Housing (Scotland) Bill: discussion with Minister for Housing

Update on the Bill

The Chair updated Group members on recent developments with the Housing (Scotland) Bill (‘the Bill’).

On 31 October, the Minster for Housing made a statement setting out that the Scottish Government (‘SG’) would propose an amendment to the Bill at Stage 2, to set out the form of the rent cap to be applied in rent control areas on the face of the legislation.

The Minister also announced that SG will carry out a consultation in Spring 2025 on possible circumstances when the powers for Scottish Ministers to make regulations that allow for certain types of property to be exempted from rent control or for rents to be increased above the level of the rent cap in some circumstances might be used.

It is intended that a discussion of this upcoming consultation will be included in a future meeting of the Group.

On 28 November 2024, the Bill completed Stage 1 of the Parliamentary process, and the Scottish Parliament agreed the principles of the Bill.

The Local Government, Housing and Planning Committee have indicated that they intend to take further evidence ahead of Stage 2 on the Scottish Government's proposed changes to the rent control provisions in the Bill.

The timescales for the Bill process are set by the Scottish Parliament, but SG understands that this is likely to be in January, with Stage 2 consideration likely to begin in February. 

The Chair invited questions from members:

Will the proposed amendment on the form of the rent cap override the measure set out in the Bill as introduced, which would allow a cap to be a specified percentage, an amount falling within a specified range, an amount calculated with reference to one or more specified factors, or other specified criteria (including a formula).

• The intention is that the cap set out in the legislation would apply wherever a rent control area is in force.

Discussion with the Minister for Housing

The Chair welcomed the Minister for Housing, who joined the meeting for this agenda item, and invited him to open the discussion.

The Minister asked members for their thoughts on the Bill, and in particular the areas in which they would like to see amendments:

Propertymark

The application of rent control between tenancies remains a concern for Propertymark members, particularly around the issue of recovering costs for upgrades including improvements to energy efficiency.

Propertymark were also disappointed in the announcement in the Scottish Budget that the rate of Additional Dwelling Supplement (‘ADS’) is being increased from 6% to 8%.

They questioned why rents are so high in Scotland if this is not due to an increase in landlord costs.

• The Minister has had discussions with stakeholders regarding concerns about landlords who charge below market rent and also around investment in properties.
• He is keen to see stakeholders’ views on what an amendment around this could look like and how it would work in practice.
• The Scottish Government will consider amendments which are brought forward by stakeholders.
• The Minister acknowledged the need for a thriving PRS, and is keen to consider how to encourage landlords to stay in the sector. He noted that this could also include other aspects such as encouraging a closer relationship between landlords and local authorities.
• Regarding the ADS increase, the Minister is happy to look at any data stakeholders may have on potential impacts of this, and to discuss further with the relevant portfolio Ministers.
• The Minister considers that supply and demand influence rent levels, and that it is important to increase supply. He noted that rents can be different in different areas of Scotland, and that consideration of the data is important.   

Living Rent

Living Rent consider the application of the rent cap between tenancies to be vital to making rent controls work, and they welcome the retention of this in the Bill. They noted that this was not included in the emergency Cost of Living Rent cap, which did not protect tenants from rent increases between tenancies, and which may have provided incentives for landlords to seek to evict tenants in order to increase rents.

Whilst understanding the logic of a Consumer Prices Index (‘CPI’)-based rent cap, they are concerned that this may bake in above-inflation rent increases for tenants.

Living Rent had wanted to explore whether disrepair could have been taken into account under the rent control measures in the Bill as introduced, and are keen to see whether there are opportunities to incentivise improving standards.

• The Minister acknowledged the importance of the application of rent controls between tenancies, and of avoiding the creation of a two-tier system in the PRS.
• He also noted that landlords may experience many different circumstances, and the importance of striking a balance in the Bill. The upcoming consultation will seek further information on particular circumstances which will need to be taken into account.
• The Minister is committed to continuing discussions with stakeholders throughout these considerations.

Scottish Property Federation

SPF asked for more information on the ongoing timeline for work on potential amendments and further consultation, and when stakeholders will get sight of the proposed rent cap amendment.

They echoed the concerns expressed by Propertymark regarding the application of rent control between tenancies.

They asked whether a Spring consultation would be completed ahead of stage 3 of the Bill process and whether a statement from Ministers on the outcomes of the consultation could be expected ahead of stage 3.

• The Minister has been working with the Housing Investment Taskforce, with local authorities, with institutional investors and with other stakeholders across the board to consider the issues around rent control as well as funding for local authorities and social housing providers.
• Recommendations from the Housing Investment Taskforce are due to be published in the first quarter of 2025.
• The recent Scottish Budget increased the budget for delivering affordable homes by more than £200 million compared to this year’s published budget.
• The intention is that the consultation will be published alongside the Parliamentary process, not after stage 3.
• The Minister acknowledged the importance of considering investment, and acknowledged that investors are keen to see what is in the consultation. He noted that, whilst rent controls have not worked in every context in Europe, experiences in some countries have shown that it is possible to have rent controls whilst supporting investment.
• Officials indicated that, as the Local Government, Housing and Planning Committee have requested that the Minister give more information on the proposed rent cap in the new year, the Scottish Government will share this with the Committee once the amendment has finished the drafting process, and will share information on this with the Group as soon as possible afterwards.

Scottish Land and Estates

SLE were concerned that the Bill did not deal with the cause of high rents. They feel that the measures in the Bill need to be balanced with measures to prevent the PRS from contracting.

They echoed the concern expressed about the increase to ADS, and consider that this could have been used to incentivise investment in the sector.

SLE expressed a concern that, if rural properties are not exempt from the rent cap, many rural landlords may need to apply to the Tribunal with respect to a rent increase above the cap in cases where this may be appropriate, which SLE are concerned could cause delays which could impact both the landlord and any incoming tenant.

They consider that exemptions need to be sophisticated, and that the Bill needs to be rural-proofed.

• The Minister acknowledged the concerns expressed, and the importance of considering what is needed in terms of supply and demand in the sector.
• He is keen to continue to discuss with particular situations and circumstances which will need to be taken account of, in particular in relation to low rents and to improvements being made to properties.
• He noted that many countries in Europe have rent controls, and that Scotland is not an outlier in this, whilst noting that the details of rent control measures are important in making any rent controls work.
• He is determined to establish a balanced rent control system which protects tenants but also encourages investment and grows the sector.
• He welcomes thoughts from stakeholders on potential amendments.

Chartered Institute of Housing

CIH stated that the problem with the existing Rent Pressure Zone measures in the Private Housing (Tenancies) (Scotland) Act 2016 is a lack of data, and that the Bill does not address this, although it includes powers for local authorities to collect data from landlords.

They expressed a concern that there would be a lack of robust data to support the operation of the rent control measures in the Bill.

• The Scottish Government is in discussion with local authorities, and is also considering the matter of data, acknowledging that the collection of data is complex.
• Officials set out that further work will be carried out with local authorities, to ensure that any decisions on rent control are based on robust data.
• It is also intended that there will be further discussions with the Group regarding data and data collection.

Living Rent

Living Rent expressed a concern about accounts from tenants in Germany regarding the operation of rent control exemptions for refurbishment of properties, and rent increases which have been taken forward as a result of this. They are concerned that this could lead to tenants in Scotland not supporting property improvements intended to combat climate change.

They are concerned that some landlords in Scotland are already failing to meet the repairing standard, and that these landlords could benefit from any rent cap exemptions for property improvements despite not meeting current requirements.

Living Rent also stated that tenants need to be able to check data on rents, to allow rent control to operate with more self-regulation, relieving potential pressure on the Tribunal.

• Property improvements and energy efficiency measures will be considered in more detail. The Minister also noted the importance of the potential impacts of energy efficiency measures on reducing poverty.

Scottish Land and Estates

SLE expressed a view that, as rents are not defined by regional boundaries, a national system of rent collection would be more consistent than local collection.

They also raised the importance of enforcement of the repairing standard.

• The Minister acknowledged the importance of getting as many landlords meeting standards as possible, noting that professional landlords share this view. 

The Minister would be keen to meet with the Group again, as well as to continue discussions with individual member organisations. He thanked Group members for the discussion.

Future meetings of the Stakeholder Group

This meeting was the final scheduled meeting of the Stakeholder Engagement Group. It was proposed that the Group continues to meet in the coming months, and Group members agreed this proposal.

Officials will circulate further meeting dates in the new year to enable further discussions.

Any Other Business

The Chair invited members to raise any other business or comments.

• Is there going to be an announcement of what is happening next with regard to the temporary measures in place during the transition out of the Cost of Living (Tenant Protection) (Scotland) Act 2022?

There is no update on this at present, but officials will share information with members as soon as it is possible to do so.

Officials are happy to meet with members to discuss the Bill further, particularly with respect to potential amendments sought by members.  

Actions

• SG to circulate a further tranche of meeting dates for the new year.
• Members to contact SG if they wish to further discuss the Bill or any aspects of the draft legislation which they consider should be amended.