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I am aware of some discussion earlier this morning about various estimates. Our view is that the impact on new-build developments will be in the region of £8,400. The calculation compared current heat pump prices with the installation of a gas boiler, and I would point out that the figure is about 3 per cent of the average purchase price of a new-build residential property.

I would also emphasise that it is based on current prices. Having visited, engaged and worked with energy companies and heat pump developers in Scotland and the UK over the past year or two, I am convinced that they are innovating and investing in research and development and that they are determined to bring—and are confident about bringing—not just more affordable but more efficient heat pumps on to the market. We will see continued innovation in that area that will reduce the cost of installation. There will probably be other ways of reducing that cost, too, as we get better at installing for energy performance and with higher fabric efficiency. As I have said, the current cost estimate is around 3 per cent of the average purchase price of a new build, and my view is that that will come down as innovation continues in that area.

I would just contrast that with the alternative. Allowing the construction of homes with conventional fossil-fuel heating systems to continue might save the developer—say, a social housing provider—a few thousand pounds on the price of a home, but it will also leave them with a higher bill to pay in the long run because those fossil-fuel systems will have to come out. Building more retrofit jobs waiting to happen will increase costs. We absolutely need investors, whether institutional investors that work with housing associations or those that sit behind the commercial housing developers, to be willing to see investment in net zero as a really good place to put their money into. We need them to be confident—and a great many are—that net zero is the way forward and a better bet in investment terms than building more retrofit jobs waiting to happen.

I think that Antonia Georgieva wants to come in as well.

We work very closely with a great many housing providers, including in the social housing sector, and we continually keep under review the amount of support that we are able to provide to them.

I think that Antonia wants to add something.

Other parallel funding streams are available. For example, Scotland’s heat network fund and heat network support unit allow those social housing providers that want to be involved in the development of heat networks to bring their projects to the point of being ready for—and accessing—investment from the Scottish Government, which is another way in which they will be able to help existing as well as new properties meet the standards that are coming in.

Yes, of course.

That question is closely connected to Willie Coffey’s points about running costs. We want everyone to live in a home that is not only of a high standard and warm but which is affordable to keep warm. That has posed the most extraordinary challenges, given the energy prices over the last period, and nobody will underestimate the impact on people’s quality of life, health and economic wellbeing. However, if we take an approach to new-build housing that achieves what we are seeking to achieve with regard to the existing energy standards; the future development of a Passivhaus standard, which I talked about in response to the convener’s earlier question; and zero-emissions heating—all of those elements together—I believe that we can produce homes that are more affordable to live in than those that we have built in the past.

Those homes will also be less vulnerable to the economic shocks that will come with future energy crises. Let us not kid ourselves that the energy crisis that the world has been living through over the past few years is the last one. Fossil fuels are price volatile, as they have always been, and keeping people connected to a dependence on fossil fuels means keeping them vulnerable to that volatility.

As I said in response to Willie Coffey, fuel poverty issues are not going to be addressed by this Government alone; they will also have to be addressed by decoupling the prices of gas and electricity. That is a necessary part of the journey. It will happen—I just wish that the UK Government would pick up the pace on delivering that and work with us on designing how it will be delivered.

As for fuel poverty, the only solutions are absolutely those that move us away from price-volatile fossil fuels and which give people highly energy-efficient homes to live in. That will be easier with new-build housing, and the new-build heat standard will help achieve that for the new homes that we are building. Many social housing providers, as well as commercial housing providers, are already doing that to a very high standard, and they are innovating with great ambition and creativity.

I think that one of your witnesses said that the retrofit agenda will be a “nightmare”. I hope that it will not be, because I am working on that, too. It is a huge challenge, but it is a bigger challenge on the retrofit side than it will be on the new-build side.

Tangentially, in answer to your point about transport, that is one of the reasons why we were keen to develop the free bus travel for young people policy. I have spoken to young people who did not take up college courses, because their bus costs would have been £10, £20 or £30 a week, which was just not viable. I am therefore very pleased to hear support for the Government in that area.

Antonia, do you want to respond to some of the other questions?

I just thank the committee once again for its scrutiny and for giving me the time to explore the issues with you.

Again, I would draw a distinction between anecdotal evidence that is being put about and what we are seeing on the ground. It was only ever possible for the Cost of Living (Tenant Protection) (Scotland) Act 2022 to have a direct impact on rental incomes for a period of 18 months. Now that we are at the point of proposing the extension for the final six months, the effect of a decision today cannot possibly impact on the rental income of properties that are subject to investors’ decisions at the moment. Investors’ decisions at the moment would be about the supply of homes that are available to generate rental income in the future, after the temporary provisions in this legislation have ceased.

Some of the wider concerns of institutional investors are around the Scottish Government’s longer-term proposals for rebalancing the private rental sector and, in particular, for a new national system of rent controls. We are keen to continue to work closely with the sector, which includes engagement that I and Paul McLennan as Minister for Housing have with investors as well as developers as we work through the process to determine the shape of the housing bill that will be introduced next year to give effect to that commitment to a national system of rent controls.

The impact that we are seeing on rental prices reinforces the need to commit to that work. We need to ensure that affordability is part of our understanding of what adequate housing is and that all people have a human right to adequate housing. We will continue to develop that work in a way that is well informed by the perspectives of tenants, landlords, the people who work with them and investors. Across Europe, the situation that Scotland and the rest of the UK have been in in recent years and decades is unusual. It is a particularly unregulated market in private housing terms.

Investors—particularly the bigger institutional investors—make decisions across a wide range of countries and they are well used to making decisions about more regulated and less regulated markets with regard to rental property. Evidence from across Europe is very clear: a well-designed rent control system is entirely compatible with a vibrant housing market and investment in homes made for private rent. We believe that that can be achieved in Scotland as well and that it will be consistent with supplying the quality homes that Scotland needs and achieving affordability, which has been lacking in too many cases.

I do not agree with that characterisation of what the legislation has done.

Pam Gosal is right that rent increases between tenancies are not covered by the legislation. As it is emergency legislation, it was not ever going to be possible, through it, to fundamentally restructure the way that private residential tenancies—PRTs—work. There was recognition that the 2002 act was only ever going to provide protection within tenancies in relation to the annual in-tenancy increases that are allowed under the PRT.

As a result of the legislation being in force in Scotland, the difference is that we are seeing only inter-tenancy increases and tenants are—excepting the exceptional 6 per cent cases—being protected with a 3 per cent rent increase cap within tenancies. Down south, people are being subjected to both. We know that increases in market rents—rents that are being advertised—are significant; for example, the increase is 12 per cent in Glasgow and 10 per cent in Aberdeen. We also know that similar figures are being seen in parts of England; for example, we see increases of 10.4 per cent in Cardiff, 10.7 per cent in Southampton and 13 per cent in Manchester.

The inter-tenancy increases are happening for a wide range of reasons. I am sure that they are a necessity in some cases, but some landlords are pursuing whatever they can get away with. That last point is by no means a characterisation of the whole private rented sector. There are landlords out there who are committed to trying to provide housing that is as affordable as possible for their tenants, but there are also landlords who will go to the maximum that they think the market will bear.

In Scotland, sitting tenants have protection from annual in-tenancy rent increases, rather than their being subjected to both in-tenancy and intra-tenancy rent increases. The level of protection that exists for tenants is higher in Scotland as a result of the legislation.

Yes. That is why we are keen to ensure that we are hearing from the widest possible range of voices, as we come to a decision. I hope that broad support exists for the principle that such a mechanism is necessary to prevent a cliff edge—I do not recall there being serious opposition when the legislation was passed in Parliament—but Ivan McKee is quite right to say that it needs to be designed in a way that is consistent with both our protection for tenants and the wider need for a housing market that meets people’s needs.