This blog looks at the Scottish Government’s planned extension of the rent cap and evictions pause to the end of March 2024.
In October 2022, the Scottish Parliament passed emergency legislation, the Cost of Living (Tenant Protection) (Scotland) Act 2022 (‘the Act’) with the aim of protecting tenants through the cost-of-living crisis.
The Act introduced a cap on rent increases and a pause on the enforcement of some eviction orders.
The Act initially applied to 31 March 2023 but allowed its extension for two further six-month periods.
On 1 June 2023, the Scottish Government announced plans for a further final extension until the end of the March 2024. The Local Government, Housing and Planning Committee considered the draft regulations extending the measures at its meeting of 12 September 2023 and the parliament approved the regulations on 20 September 2023.
What does the Cost of Living (Tenant Protection) (Scotland) Act 2022 do?
The following summarises the current legal position which will continue to the end of March 2024:
- In-tenancy rent increases are capped at 3% (prior to April 2023 the rent cap was 0%). The rent cap does not apply to new tenancies. In line with existing legislation, private landlords need to give their tenants notice before they increase the rent. For a private residential tenancy, rents can only be increase once in every 12 months.
- Private landlords can also apply to Rent Service Scotland for a higher rent increase, of up to 6%, to help cover certain cost increases incurred in the preceding six months.
- The rent cap for college and university halls of residence and Purpose Built Student Accommodation is suspended.
- There is a temporary pause of up to six months on the enforcement of some eviction orders (some evictions can still go ahead).
- There are increased damages for unlawful evictions to a maximum of 36 months’ worth of rent.
Social rented tenancies were originally included in the rent cap. However, following a voluntary agreement with social landlords to implement below inflation rent increases for 2023-24, the rent cap for social housing was removed in February 2023.
Why does the Scottish Government want to extend the Act to 31 March 2024
On 1 June 2023, the Scottish Government also published a statement of reasons setting out the evidence why it believes it is necessary and proportionate to extend the measures.
In preparing its statement, the Scottish Government took into account:
- the evolving economic context and the likely impact on households resident in the private rented sector
- information from stakeholders regarding the impact and effect of the measures on landlords and tenants to date (38 stakeholders responded to its call for views)
- information from other sources to seek to identify any unintended or unanticipated impacts that may have arisen as a result of the measures.
Evidence showing the impact of the ongoing cost crisis is cited the report. It notes that renters, in particular, have lower household incomes, higher levels of poverty and are more vulnerable to economic shocks.
The Scottish Government also justifies the proportionality of the measures. For example, in relation to the rent cap, it argues that the powers to amend the cap, and the ability of landlords to seek a higher rent increase, enables Ministers to respond to any changes in the economic environment.
The private sector rent cap is particularly controversial
Some groups are supportive of the rent cap. The statement of reasons notes:
Some responses from advice groups and tenant representative organisations reported that the provisions in the Act may have helped to prevent substantial rent increases, delayed or even avoided eviction during the cost of living crisis and continue to provide reassurance and protection to tenants. These organisations called for protections to remain in place to provide support to tenants in what they say remains an unprecedented economic position.”Scottish Government, Cost of Living (Tenant Protection) (Scotland) Act 2022 – proposed extension: statement of reasons
On the other hand, there’s concern about unintended consequences of the legislation including a reduction in the supply of private rented accommodation as some landlords leave, or plan to leave, the market and institutional investment in the ‘build to rent sector’ stalls.
There’s also a concern that as a direct result of the emergency measures, landlords’ behaviours are changing, including raising rents significantly between tenancies, or intending to do so in the future to offset rising property costs.
But there’s a lack of comprehensive data in this area. According to the statement of reasons:
…there remains limited supporting information that demonstrates the potential effects raised.
For example, there is no strong empirical evidence at present to substantiate the anecdotal claims from some consultation respondents that landlords are leaving the sector
Data from the Scottish Landlord Register does not show any significant change in the number of properties registered. However, the data has limitations. For example, registration lasts three years and there could be a time lag in de-registering properties which are no longer available for rent.Scottish Government, Cost of Living (Tenant Protection) (Scotland) Act 2022 – proposed extension: statement of reasons
A group of organisations, the Scottish Association of Landlords, Propertymark and Scottish Land and Estates submitted a petition to the Court of Session seeking a judicial review on the legislation, arguing that the legislation is disproportionate and unfair. A decision on the case is expected in the coming weeks.
What happens after the end of March 2024?
The rent cap, evictions pause and illegal damages provisions cannot be extended under current legislation after the end of March 2024.
In the longer term, the Scottish Government has committed to introduce a housing bill which will contain some form of rent control.
When the rent cap ends it might result in unintended consequences, such as a large number of landlords seeking to increase their rent at higher levels.
As a way of transitioning out of the rent cap and bridging any gap between the end of the emergency legislation and the longer term rent control measures, the Scottish Government has indicated that it will use the powers in the Act to amend the existing rent adjudication system.
As the Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights, told the Local Government, Housing and Planning Committee in February 2023:
“The principal bridging mechanism between the emergency legislation and our longer-term work is the power to alter the system of rent adjudication. If we were to move directly from the emergency measures by switching them off entirely at some point in the future and go back to open market comparisons for rent adjudication, there would be severe and unintended consequences. Therefore, in due course, we will announce proposals on how we intend to use those powers in the act.”Official Report, Local Government, Housing and Planning Committee in February 2023:
The rent adjudication powers in the Act can be extended, by regulations, up to 31 March 2025.
The Scottish Government hasn’t provided any more detail yet on how the adjudication powers may be used. Any use of this power would be subject to Scottish Government engagement with stakeholders and parliamentary approval.
SPICe briefing The Cost of Living (Tenant Protection)(Scotland) Act 2022 – rent increase cap and evictions pause provides more details about the Act.
Senior Researcher, SPICe