The Local Government, Housing & Planning Committee has completed its stage 2 consideration of the Housing (Scotland) Bill – and, for landlords, there’s finally some relief over rents.
The Bill has rumbled its way through to stage 3 after 10 committee sessions and more than 24 hours of discussions. Almost 600 amendments were proposed during stage 2, the second highest number of amendments ever proposed for a piece of legislation laid before the Scottish Parliament.
Topics under scrutiny ranged from tackling poor quality housing to whether or not landlords should be permitted to require UK-based guarantors for overseas tenants.
But perhaps the most controversial amendment was concerned with rent controls.
Rents safeguard offers landlords some protection
The Bill creates a power to introduce rent control areas (RCAs) in Scotland. A rent control area is a designated locale where government regulations limit how much landlords can push up rent, either by setting a maximum increase or capping the rent at a fixed level.
These controls aim to protect tenants from ballooning rent increases, potentially making housing more affordable, especially for lower-income residents. Areas will be designated as RCAs by Scottish Ministers based on reports from local authorities on rental conditions.
The obvious fear for landlords and property investors was that rents within RCAs could be frozen or allowed to fall in real terms.
But now the Government has agreed to allow rents in RCAs to rise in line with inflation plus one per cent, up to a maximum of six per cent.
That provides certainty and protection for landlords and is welcomed by Clan Gordon.
Landlords deserve security as much as tenants do
Clan Gordon founder director Jonathan Gordon said: “Before rent controls were introduced following Covid, it was standard practice from letting agents and landlords in Edinburgh not to regularly raise rent during a tenancy.
“The temporary legislation restricting rent increases may have stopped some landlords from increasing rent excessively, but overall in the market we believe it changed the mindset of landlords to automatically look for annual increases on rent.
“We and others have repeatedly called for the government to collect better data regarding rent in Edinburgh and Scotland before introducing legislation that might both lead landlords to leave the sector and encourage those remaining to increase rent annually.”
Clan Gordon Managing Director Ed Paine added: “While we cautiously welcome this amendment to allow rent to rise in line with inflation plus one per cent, we now wait for the next stage of the legislation. We hope the government will continue to listen to industry experts, especially in relation to restricting rent changes between tenancies and any changes to rules regarding joint tenancies.
“While we welcome this clearer framework around rent increases, we hope future stages of the Bill will continue to reflect the lived realities of landlords and tenants. The supply issue remains critical across both lettings and sales, and it’s vital that the government now works alongside housing experts to unlock delivery of more affordable homes. Strategic planning and collaboration are key to solving the long-term challenges.”
What’s next for the Bill?
The Bill will soon progress to stage 3 during which MSPs can again propose amendments. They are discussed and voted on by the whole Parliament and that’s the final opportunity to make any changes.
If the Bill passes stage three then it is submitted for Royal Assent, where the King officially agrees to the Bill becoming a legally binding Act.
While it is possible for some measures in a Bill to come into force as soon as it receives Royal Assent, in the case of the Housing (Scotland) Bill we need regulations on exactly how RCAs will operate and importantly which properties will be exempt and in which circumstances an above-cap rent increase will be allowed within an RCA.
This means that it is still likely to be another year or two – and possibly longer – before they come into force.
The Government is currently conducting a public consultation on how powers within the Housing (Scotland) Bill could be used – it can be read and responded to here. The deadline for responding is Friday July 18.
The Scottish Association of Landlords is now focusing on ensuring landlords who have kept their rent below market value can reset the rent to market value between tenancies in RCAs.
For a more detailed write up on the progress of the Bill and next steps, click here.
If you’d like to discuss a rent review with your property, please do not hesitate to get in touch with our team who will be more than happy to advise.