Housing (Scotland) Bill 2024

The Housing (Scotland) Bill (the “Bill”) was introduced to the Scottish Parliament on 26 March 2024 and has already garnered considerable amount of press coverage.

It follows on from the protection that tenants under a private residential tenancy (“PRT)” had by way of rent caps (3% or 6% in exceptional circumstances) and a moratorium on evictions under The Cost of Living (Tenant Protection) (Scotland) Act 2022 which ended on 1 April 2024 with no scope for extension. Since that date however, tenants facing substantial proposed rent increases from their landlord can apply to a rent officer or the First Tier Tribunal for a rent adjudication.

The Bill is designed to protect tenants further in the long-term. Patrick Harvie MSP, one of the supporters of the Bill, is quoted as saying:

“The Housing Bill sets out our next steps on the path towards a fairer, well-regulated private rented sector which is good for both tenants and landlords and encourages investment”.

The Policy Objectives document accompanying the Bill sets out objectives including “seeking to deliver a fair balance between protection for tenants and the rights of landlords” and “a package of reforms which will help ensure people have a safe, secure and affordable place to live… while contributing to the ambition to end homelessness in Scotland”.

The Bill was informed by three public consultations and is now to be scrutinised by the Scottish Parliament and its Committees, with the Bill currently sitting at Stage 1 of that process. Before the Bill was introduced to Parliament, the Local Government, Housing and Planning Committee established a Tenants Panel and a Landlords Panel, representing renters and landlords from across Scotland, to advise the Committee on the key issues within Scotland’s private rented sector. These panels will now comment on the Bill together with the responses to the public consultation. The consultation ends on 17 May 2024.

The Bill has seven main parts:

• Part 1 relates to rent paid by tenants under PRTs and introduces the idea of rent control areas;
• Part 2 deals with the law around eviction of tenants under a PRT;
• Part 3 covers tenants keeping pets and wanting to make changes to their rented properties;
• Part 4 makes changes to other matters affecting tenants, including deposits, letting agents’ registration, joint tenancies, dealing with domestic abuse issues and conversion of existing assured tenancies to PRTs;
• Part 5 relates to homelessness prevention with a new “ask and act” duty on social landlords and bodies such as Health Boards and Police to ask about a person’s housing situation and act to avoid them becoming homeless wherever possible;
• Part 6 deals with miscellaneous other housing matters, including mobile homes, fuel poverty and a new homes ombudsman; and
• Part 7 includes an interpretation clause and deals with legal procedural issues concerning the Bill becoming law.

The biggest part of the Bill (consisting of three chapters and 23 sections) and certainly the one causing most controversy so far is Part 1 and specifically the provisions introducing the concept of new rent control areas, will be the focus of this article.

Part 1 of the Bill imposes an obligation on each local authority in Scotland to carry out an assessment of levels of rent payable under PRTs in their area and the rate of increase in rent payable under tenancies in their area by the end of each “reporting period”, and to prepare and submit a report to the Scottish Ministers in relation to that assessment.

The “reporting period” is defined as, in the case of the first report, 30 November 2026, and in the case of subsequent reports, a period of five years from the end of the reporting period for the previous report. The Bill provides that the Scottish Ministers may amend those timescales both in relation to the initial 2026 date and the subsequent five-yearly period.

The local authority’s report must include details of its assessment of rent conditions and state whether or not it recommends that it designates all or part of the area of the local authority as a rent control area and the reasons for such recommendations. The local authority can only recommend designation of an area as a rent control area if it believes that rents payable under PRTs in the area are increasing and controls are needed “to protect the social and economic interests of tenants in the area”.

In addition to this five-yearly process of review, the Bill provides for potential interim assessments and reports being carried out by the local authority on an annual basis where the authority considers that, since its most recent report, there has been a significant change in the level of rents under PRTs in the area or the rate of increase in rents under these tenancies. Note that the Bill states that the local authority may carry out these interim assessments, but it is not a positive obligation. Similarly the Scottish Ministers may direct local authorities to carry out such interim assessments and submit reports to the Ministers.

To carry out the assessments required under the Bill, a local authority can require information from landlords within their area. If a landlord fails to provide information required within 28 days of request, the local authority can give notice to the landlord of its intention to apply to the First Tier Tribunal for an order allowing a penalty payment to be made against the landlord of up to £1000 and if it considers appropriate the First Tier Tribunal may also order the landlord to provide any information already requested by the local authority that has not been provided by the landlord. The local authority can only make such an application to the First Tier Tribunal for such order within 12 months from the date the landlord received the original request from the local authority for information. Similarly, if the local authority considers that information provided by a landlord is false then again they can apply to the First Tier Tribunal for an order providing for a penalty against the landlord of up to £1000.

The Ministers, after considering any report issued by a local authority, must prepare and publish a report themselves stating whether or not they propose to designate any part of the local authority area as a rent control area and the reasons for their decision. They can only designate part of the local authority area as a rent control area if they are satisfied that restricting the rate of increase in rent payable under PRTs in the area to be designated is “necessary and proportionate for the purpose of protecting social and economic interest of tenants in the area” and is “a necessary and proportionate control of landlords use of their property in the area”.

Any regulations designating an area as a rent control area must provide that the rent payable under a PRT of a property in that area may not be increased by more than an amount specified in regulations to follow, which may include a specified percentage, an amount falling within a specified range or an amount calculated with reference to a number of specified factors or criteria (including a formula). The Bill does provide that rent rises would be capped both during and in between tenancies and that rent could not be increased more than once in every 12 month period with no rent increase being permitted during the first year of any lease.

The regulations imposing any rent control area will cease to have effect on the expiry of a period of five years from the date on which they come into force unless they are revoked before the expiry of that period.

Before the Ministers can propose a rent control area to Parliament for approval the Ministers must consult with the local authority where the proposed rent control area is situated and “persons who appear to them to represent the interests of tenants and landlords under tenancies of properties in the proposed rent control area” and must allow a period of no less than eight weeks for any representations to be made in response to such consultation. When proposing the rent control area to Parliament the Ministers must also provide a report setting out reasons why they consider regulations should be made, including reasons for specification of the area to be designated as a rent control area and the reason for the form and level of the rent control measures to be introduced for the area, and also describing the consultation that they have carried out, any representations received in response to the consultation and changes from their original proposals.

The Bill also provides that the Scottish Ministers will define by future regulations what is to be an “exempt property” for the purposes of any rent control areas.

The Scottish Ministers under the Bill have a duty to keep the operation of any regulations imposing a rent control area under review. Where they consider that a rent control measure within any rent control area is no longer “necessary or proportionate” the Ministers must as soon as possible vary or revoke the regulations as they consider appropriate. Similarly, the Bill gives Scottish Ministers the ability to propose amendments to any rent control measures that apply to an existing rent control area, but before they can do so the Ministers must consult with the local authority where the existing rent control area is situated and persons who appear to them to represent the interests of tenants and landlords under relevant tenancies and properties in the existing rent control area and allow a period of no less than eight weeks for representations to be made in response to that consultation. Again, when proposing any amendment to rent controls the Ministers must also provide Parliament with a report setting out their reasons why the amendment is appropriate describing the consultation that they have carried out, any representations received in response to the consultation and changes from any original proposed amendments.

It will be interesting to see the results of the current consultation process and how the Bill progresses through Committee stages and then in any debates before Parliament.

Not surprisingly, the new Bill has a number of critics, particularly from those in the private sector who don’t believe that it will help solve Scotland’s current housing pressures but will instead only make things worse. Those against the Bill point to increased cost and resource pressures on the local authorities who will have to deal with the requirements in the Bill to complete assessments, at the very least, on a five yearly basis, and potentially annually. They also point to the fact that these rent control areas proposed under the Bill are nothing new. Rent pressure zones (“RPZs”), provided for in terms of the Private Housing (Tenancies) (Scotland) Act 2016, allow local authorities to collect data on rent rises – but currently there are no RPZs in Scotland.

Critics argue that the best way to deal with Scotland’s current housing crisis is to invest in building new affordable housing, rather than trying to control the existing supply in the rented sector. The Scottish Property Federation has been quoted as stating the Bill will be a “disappointment for those seeking to build new rental homes” and that “investors in the new modern build to rent sector – which brings high standards of property management and offers greater flexibility to tenants, in line with many of the Government’s objectives – will remain uncertain of what the future rent control system will look like until potentially late in 2026; investors will also be greatly concerned to see rent controls extended to properties that go back onto the market after a sitting tenant has left. This could make it harder for property owners to fund major improvements including energy efficient measures to their properties between tenancies”.