Seòmar agus comataidhean

As I said in response to your first question, everybody—landlord organisations, tenant organisations, housing academics and the Government—recognises that there is significant need for additional data and for depth, detail and granularity of data in the private rented sector. That is a long-term piece of work, and the Government will bring further work for the attention of the committee and Parliament to improve the collection of data in the private rented sector. For the time being, we have noted that the information that we have, limited though it is, from the landlord registration scheme does not show a drop-off in the number of properties that are available.

Good morning, convener, and thank you. I am happy to be here today to present the draft Cost of Living (Tenant Protection) (Scotland) Act 2022 (Incidental Provision) Regulations 2023.

As we have discussed with the committee previously, you will be aware that the emergency Cost of Living (Tenant Protection) (Scotland) Act 2022, which was passed last year, had three key aims: first, to protect tenants, stabilising their housing costs by freezing rents; secondly, to reduce the impact of eviction and homelessness, through a moratorium on evictions; and thirdly, to reduce unlawful evictions and avoid tenants being evicted from the rented sector by landlords who want to raise rents between tenancies during the operation of the temporary measures.

Last month, the committee considered and voted for regulations to extend some of those provisions beyond 31 March to the end of September this year. I was pleased that the Parliament also voted to approve the regulations, thereby ensuring that important protections for tenants continue, given the challenging and uncertain economic times.

Although it is crucial that some emergency provisions continue for the time being, the emergency 2022 act is, of course, temporary, and it is equally important that we plan for the time when the protections come to an end.

During the passage of the Cost of Living (Tenant Protection) (Scotland) Bill, we acknowledged that termination of the rent cap might lead to a large number of private landlords seeking to increase their rent all at once, which could cause significant and unmanageable rent increases for tenants. In those circumstances, the existing rent adjudication process will need to be temporarily modified, to provide a suitable adjudication mechanism that is fit for purpose.

For that reason, the emergency 2022 act contains a regulation-making power to temporarily reform the existing rent adjudication process, which was brought in by the Private Housing Tenancies (Scotland) Act 2016. The proposed approach would support our transition out of the emergency measures and help to mitigate unintended consequences that might arise from our bringing the temporary rent cap to an end.

Schedule 3 to the emergency 2022 act provides ministers with the power in that regard. The short affirmative instrument that the committee is considering today makes a minor technical amendment to schedule 3, to put it beyond doubt that the powers that are conferred on the Scottish ministers function as intended. It does that by renaming a title and heading, renumbering a section and correcting a reference. That will ensure clarity if and when the Scottish ministers choose to exercise the powers conferred on them in schedule 3. Instruments that are made under that power will be subject to the affirmative procedure and subject to scrutiny and approval by this committee and the Parliament.

The severity of the costs crisis and the urgent need to respond quickly meant that the 2022 act had to be drafted and delivered at pace, to ensure that tenants could be offered additional protection as quickly as possible. The short technical instrument that the committee is considering today clarifies a small part of the drafting, to ensure that the important rent adjudication provisions will work as they are intended to do when the time is right to bring the emergency provisions to an end.

I thank the committee for its scrutiny of the draft regulations. I am happy to answer any questions that you have.

The Scottish Government has a responsibility to ensure that temporary emergency measures are necessary and proportionate and that they are appropriate and fit with our housing objectives, and we have a responsibility to take that approach to our new housing bill so that it is consistent with what we seek to achieve in housing.

As a starting point, we recognise that the right to adequate housing is a human right. That has not been delivered by everyone, and we have a situation in which the level of regulation on a number of standards is significantly different between the private and social rented sectors. We are seeking to reduce the gap in outcomes between those types of tenures. Our experience is that, in the long term, increasing the quality of the regulation of the private rented sector is compatible with growth and viability in that sector.

Although I have noticed that some people have sought to blame the emergency measures for decisions that have been made on the new supply of rented accommodation, the measures have no impact on initial rent setting; they impact only in-tenancy annual rent increases. I recognise that some people will argue against any form of protection for tenants or regulation in the market. I do not think that that extreme position would be appropriate, but we will seek to continue to ensure that the measures that we take strike the appropriate balance between providing safeguards for landlords, which are included in the emergency 2022 act, and continuing to expand protection for tenants.

In our view, the provisions will clearly, almost by definition, have prevented some rented sector households from falling into homelessness by, as I said, giving them extra time to find alternative accommodation or seek housing advice and support from specialist agencies.

For private rented sector tenants, the measures continue to provide protection by making it easier and more meaningful, as I said, to challenge unlawful eviction. Unlawful eviction is a type of experience that people can go through that is more likely to lead to homelessness. In fact, I count myself among their number. I narrowly avoided homelessness when I was evicted from a flat by a dodgy landlord long before some of the current protections were in place, so I take very seriously the impact on people’s lives when they encounter those behaviours or practices.

The longer-term work on homelessness prevention duties is, I think, long awaited by the sector. We have engaged extensively with stakeholders to make sure that the measures that we bring forward will help to strengthen the protection against homelessness and to reduce it. I am not sure whether Adam Krawczyk has any current data that he wants to throw into the conversation on current patterns.

The impact has been a subject of concern from the social rented sector, but we have been pleased with our ability to reach agreement with the sector. The average approach—the approach of not setting a cap and not even seeking a voluntary, uniform cap for the social rented sector, but of offering an average instead—allows for some flexibility.

Some social landlords will have an urgent need to invest in quality and maintenance as well as other aspects of their investment programme. Some will have managed more successfully than others to keep rents low and under control during the pandemic. They will not all have followed exactly the same path, because they are independent bodies. Given the different circumstances that different social landlords are in, it was appropriate that we allow some degree of flexibility.

Social landlords exist for a social purpose and they are not there to extract the maximum rent that they can extract from the properties that they have on offer; they take that social purpose very seriously. None of them would seek to impose unaffordable rent increases or ones that could reasonably be avoided. In fact, we are seeing early indications that the rents that are being set are significantly below average. I have seen figures from some local authorities that have set their rent increases for the coming year at 2, 3 or 4 per cent—significantly below the average that we have been seeking. We anticipate that that will continue to be the case, and the Scottish Housing Regulator will continue to give us information on that.

Obviously, we are in regular dialogue with them. I have to say, though, that I have seen some media reports that have not quite captured the full detail of this. If there is an announcement about what is going to happen to the cap, not every media report will properly capture the difference between the impact on the social rented sector and the impact on the private rented sector. That is why we need to continue to work directly with social landlords, for example, who have that on-going responsibility for consultation and tenant engagement, as well as with private landlord representative bodies and organisations that speak directly to and advocate on behalf of tenants.

It also worth reflecting on the fact that there is a role for organisations that engage with tenants in the social rented sector but which are not social housing providers, such as the Tenants Information Service, and the work of local authorities such as Glasgow’s tenant-led housing panel—is it a panel? [Interruption.] I have been told that it is a commission—I will actually be seeing some of them later this week. They, too, continue to have a role not just in letting us know about additional channels of communication that we should be using but in speaking directly to tenants. Indeed, they have been very active in doing so.

Previously, when we have debated not so much this legislation but the new deal for tenants, it has been clear that ideology comes into the debate a little bit. There are some who are of the view that a more deregulated, more free-market approach to housing will increase supply and that any impact on prices will be detrimental to that. Actually, if we look at some European countries that have had systems of rent controls in place for a long time, we see a larger private rented sector as a proportion of the housing stock than we see in Scotland.

That is not the universal experience, and it is well understood that rent controls can achieve their objectives well or poorly. We continue to engage with all stakeholders to ensure that we design a system that is right for Scotland and that will be able to achieve protection in terms of affordability but which will also be consistent with what Scotland needs in terms of good-quality housing supply and investment in all the hugely important priorities around the transition to net zero.

There is a connection between rental income and investment in either sector. That relationship between rental income and investment is not the same in the social rented sector—which, as I said earlier, is a non-profit-making sector—as it is in the private rented sector. There are examples of build to rent, but a great deal of private rented accommodation is not actually provided by landlords—it is not necessarily built by them but is acquired by them as existing property.

Therefore, there are huge differences between the sectors, and we are keen to continue to do the work that we have been taking forward since the publication of the new deal for tenants and which will continue to be in development until the bill is introduced later this year. I look forward to further extensive dialogue with the committee at that point.

That is a very good question. We acknowledge that, given the nature of mid-market rent, there are differences not only in rent levels, but in what is included in the rent. For example, there are issues in relation to service charges.

Although we took the view in relation to the emergency legislation that mid-market rent properties tend to be private residential tenancies and would be treated as such in the act, we recognise that there are longer-term issues to work through before we introduce the new bill and get to a national system of rent controls. We are keen to engage with the social rented sector to understand people’s concerns about that and identify the appropriate way to address them.

We debated that issue and I reflected on it during our debates on the bill. We weighed up various factors while trying to reach an approach on rent arrears. In my opinion, tenants in very severe rent arrears need support so that they do not become stuck where they are, building up ever more rent arrears. They need support through the tenant grant fund and from other forms of financial support and they need to be able to work constructively with their landlords to resolve the reasons why they are in rent arrears, so that they can work out the best way forward.

We think that the approach that we took in setting that level of severe rent arrears gives appropriate protection without leaving people stuck where they are and building up ever more unaffordable rent arrears. If arrears reach a level of severity that is significantly beyond what we have currently set out, they will be extremely destructive and disruptive to a person’s circumstances. Whether they stay where they are or move to another property, those debts will become a burden that we believe is unreasonable. The type of protection that people who are facing those arrears need is not simply for us to say that they should stay where they are and see the arrears grow ever higher.

Again, as we debated during the passage of the Cost of Living (Tenant Protection) (Scotland) Bill, we recognise that the two dominant parts of the rented sector—the social rented sector and the private rented sector—operate differently. In particular, the social rented sector has a long tradition, and requirement, for consultation and engagement with tenants in relation to rent setting. We wanted to respect that necessary and valuable engagement and consultation.

We know that rental income does not necessarily provide for profit—social landlords are not profit-making bodies—but it provides for investment in new build, for retrofitting for energy efficiency and net zero, for maintenance and upgrades of properties and for a wide range of services that social landlords provide in the community. The social rented sector plans such investments over a long time. Given that several members echoed concerns from across the sector during the passage of the bill, more people recognised that some short-term protection was necessary but that, if the zero per cent cap continued for an extended period, it would not only reduce rental income in the year of the cap’s operation but have a compound impact on the financial planning of social landlords over a much longer period, and there would be a detrimental impact on tenants because of the reduced investment.

Such factors do not apply to the private rented sector in the same way. That sector tends to be profit making and tends to have a lower level of energy efficiency than the social rented sector, because some properties have not been upgraded in the way that will be required in the future under the new-build heat standard and the heat and buildings regulations on retrofitting. In the absence of some of the factors that apply in the social rented sector, we felt that the legislation was appropriate.

The difference in approach was also necessary because, in the absence of large organisations representing private landlords—we have a diverse and fragmented private rented sector—there was no opportunity to negotiate a voluntary agreement with private landlords that would have achieved the same effect as the agreement that I am pleased to say that we reached with the social rented sector.

The difference in approach is a mixture of a recognition of the different factors and characteristics of the two parts of the rented sector and the differences in opportunity to achieve a voluntary agreement in the nature of how rent is set. All those factors led us to recognise that a different approach had to be taken. However, I emphasise, again, the broad level of parity that we are talking about. As private rented sector rents are significantly higher than social rented sector rents, we believe that there will be, roughly speaking, parity in monetary terms between the rental increase that will be allowable for that most common type of property—two-bedroom properties—in the private rented sector.