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As the committee is already aware, the bill sets out that any designation of a rent control area will apply for a period of five years, and section 11 of the bill requires ministers to keep rent control areas under review to ensure that they remain necessary and proportionate.

We realise that it will be crucial for Scottish ministers and the Scottish Parliament more widely to keep under review the impact of the bill on the private rented sector, which is particularly important when it comes to the impact of the rent control measures that we have introduced.

Although I have some concerns about the specific details and the amendments that have been lodged, I would be willing, ahead of stage 3, to look at how we can put a requirement to report on the impact of the rent control measures on a legislative footing.

Graham Simpson’s amendment 70 would create a duty on Scottish ministers to review the operation of the rent control measures of the bill every five years, particularly in relation to the impact on the rental market and housing affordability, to publish a report on the review and to lay that report before Parliament.

I agree with the principle of monitoring the impact of part 1 of the bill, and Graham Simpson’s proposal to do so on a five-yearly basis is broadly in line with the local authority assessment process and is therefore a sensible one. However, I have some concerns about the specific drafting of his amendments in this group, due to the inflexible nature of the statutory duties that they set out.

In particular, I have very real concerns about Mr Simpson’s amendments 71, 72 and 76, which are consequential to amendment 70 and would confer a very broad power—some would say a sweeping power—on Scottish ministers to modify any act in relation to the outcome of the review. I do not consider that such broad powers are proportionate. The rent control measures that are set out in the bill have been designed to include the flexibility to modify various aspects of the regime where that is necessary and proportionate. Such broad powers as those proposed would create uncertainty and would have a negative impact on future investment, which we all agree is so vital.

I do want to work with Graham Simpson on this issue, however. My offer is to work with him on a stage 3 amendment that would incorporate his proposal in amendment 70 for a five-yearly reporting requirement. I cannot support the associated wide-ranging powers to modify legislation that he has proposed, but I hope that he would be willing to take up my offer to work with him, and that we can find something more proportionate. On that basis, I would Graham Simpson not to press his amendments.

Amendment 226, in the name of Rachael Hamilton, would require the Scottish ministers to conduct an impact assessment of the provisions of the eventual act on rural and island communities no later than 12 months after royal assent. Although I am supportive of Rachael Hamilton’s focus on rural areas, I believe that the measures in the bill will support all areas of Scotland. We have already published a suite of documents to support the introduction of the bill that set out our assessment of the impacts of the proposed measures, and it would seem to be relevant to the intent behind the amendment.

I recognise the benefit of monitoring the impact of the measures in the bill once they are implemented, particularly on rural landlords, but an assessment that requires to be carried out while the measures are still in the process of being implemented—as would be the case under the terms of amendment 226—would be administratively burdensome. I would be more supportive of reporting on the impacts on the rural sector as part of our overall assessment of the rent controls under the bill on a five-yearly basis. I therefore aim to ensure that the amendment that I hope to agree with Mr Simpson ahead of stage 3 will also address the underlying principle that Rachael Hamilton has quite rightly addressed today. On that basis, I cannot support Rachael Hamilton’s amendment 226, and I urge members not to support it if it is moved.

Amendments 29 to 31, along with amendments 34 to 46, in the name of Willie Rennie, would collectively remove the restrictions on rent increases between tenancies and the means by which a tenant could enforce those restrictions.

The overarching purpose of the rent control measures is to protect the social and economic interests of tenants by stabilising rents in areas where market rents have been increasing particularly steeply. Allowing unrestricted rent increases between tenancies would undermine that purpose and would reduce the protection that rent controls can offer for tenants.

Allowing unrestricted rent increases between tenancies could also lead to a two-tier market, with a difference between tenants who move tenancies and those who stay in tenancies for longer periods of time. Tenants might remain in a tenancy for longer than they would otherwise have done, even when that tenancy does not meet their needs, because their existing rent is more affordable than open market rents for new tenancies in the same area. There is a risk that that could reduce people’s ability to access suitable rented homes and could reduce the ability of tenants to move if their circumstances change. It could also make it harder for prospective tenants to obtain a lease for a rental property in a rent control area.

I understand Willie Rennie’s concerns and recognise that some landlords are concerned about restrictions between tenancies, particularly in circumstances in which the landlord has not increased the rent during a tenancy, has made significant improvements to the let property or is facing increased costs in offering the property for let. That is why the bill already includes provisions for ministers to make regulations allowing for properties to be excluded from rent control or for rents to be increased above the cap. I hope that the fact that our consultation on the potential use of those provisions has been published reassures Mr Rennie and landlords that we are considering the most appropriate way to approach the issues. However, removing the restrictions on pre-tenancy rent increases is not an approach that I can support.

Mr Rennie’s amendments 32 and 33 would change the terms under which a property that is let under a tenancy is to be considered the same as a property that was let under a previous tenancy. Those amendments would provide that the question of whether a property is the same must include consideration of the extent to which the property has been decorated or renovated since the end of the previous tenancy. That could allow a landlord to raise the rent between tenancies without restriction if they have undertaken very minor redecoration or renovation to the property between tenancies, which would not be in keeping with the aim of rent control.

As I have said, the bill already includes provisions for ministers to set out circumstances in which rents may be increased above the cap. An area that is being consulted on is the use of those powers when a landlord has made significant improvements to the let property, either during an existing tenancy or between tenants.

I appreciate the challenge that Meghan Gallacher raises. She mentioned the on-going discussion and consultation on EPC standards, which is an important piece of work. I also recognise the challenge around some of those issues, particularly in rural and island areas.

Amendment 451, in the name of Maggie Chapman, would require the rent officer or the First-tier Tribunal, when making a determination of an open market rent as part of a rent adjudication, to have regard to information that is collected under amendments 449 and 450, which were debated previously. Amendment 449 would enable information to be requested from a landlord or tenant by a local authority for the purposes of providing data to support the determination of an open market rent under the Private Housing Tenancies (Scotland) Act 2016. Amendment 450 is an alternative to amendment 449, which would oblige the local authority to exercise the power.

It is not clear that that information is needed by rent officers or the First-tier Tribunal, as they already make determinations of open market rent without access to it. It is also not clear from the amendments how such a process could operate or how often information would need to be collected for that purpose. It would not only place an additional burden on local authorities, but place them in the awkward position of supporting rent officers and the FTT in the adjudication of rent, which is a role that they do not currently fulfil. I cannot therefore support amendment 451.

For those reasons, I ask Rachael Hamilton not to press amendment 214, and Mark Griffin and Maggie Chapman not to move their amendments in the group. If they are pressed and moved, I ask members of the committee to oppose them.

I accept that there is a point to be made. That is similar to some of the discussions that we have had in previous groups on exemptions or reasons to increase rents above the cap. That is exactly why this area is in the consultation. I appreciate that landlords are concerned that they might, for example, be put off investing money to make major improvements to properties if those improvements were not to be recognised. I take that issue very seriously. I am keen to see what happens in the consultation—I am sure that that point will come through, based on the discussions that I have already had with landlords’ representatives.

However, I am clear that the circumstances in which it would be appropriate for there to be increases above the cap should be set out through regulations and that that process should be supported by our on-going consultation. Therefore, I cannot support Willie Rennie’s amendments 29 to 46.

Rachael Hamilton’s amendments 216 and 217, and the consequential amendment 227, would enable the Scottish ministers to prescribe circumstances in which the restrictions on the setting of the initial rent in a previously let property in a rent control area could be removed. The bill will already provide powers for the Scottish ministers to create exemptions from the rent control or to set circumstances in which the rent cap can be exceeded. Those powers will address the issue that Ms Hamilton’s amendments seek to cover. Therefore, I cannot support those amendments.

Due to the on-going consultation and the regulations that the Government has committed to make in short order, I urge Willie Rennie not to press amendment 29 or to move his other amendments, and I ask Rachael Hamilton not to move her amendments. If that is not the case, I urge members not to support them.

Amendments 29 to 31, along with amendments 34 to 46, in the name of Willie Rennie, would collectively remove the restrictions on rent increases between tenancies and the means by which a tenant could enforce those restrictions.

The overarching purpose of the rent control measures is to protect the social and economic interests of tenants by stabilising rents in areas where market rents have been increasing particularly steeply. Allowing unrestricted rent increases between tenancies would undermine that purpose and would reduce the protection that rent controls can offer for tenants.

Allowing unrestricted rent increases between tenancies could also lead to a two-tier market, with a difference between tenants who move tenancies and those who stay in tenancies for longer periods of time. Tenants might remain in a tenancy for longer than they would otherwise have done, even when that tenancy does not meet their needs, because their existing rent is more affordable than open market rents for new tenancies in the same area. There is a risk that that could reduce people’s ability to access suitable rented homes and could reduce the ability of tenants to move if their circumstances change. It could also make it harder for prospective tenants to obtain a lease for a rental property in a rent control area.

I understand Willie Rennie’s concerns and recognise that some landlords are concerned about restrictions between tenancies, particularly in circumstances in which the landlord has not increased the rent during a tenancy, has made significant improvements to the let property or is facing increased costs in offering the property for let. That is why the bill already includes provisions for ministers to make regulations allowing for properties to be excluded from rent control or for rents to be increased above the cap. I hope that the fact that our consultation on the potential use of those provisions has been published reassures Mr Rennie and landlords that we are considering the most appropriate way to approach the issues. However, removing the restrictions on pre-tenancy rent increases is not an approach that I can support.

Mr Rennie’s amendments 32 and 33 would change the terms under which a property that is let under a tenancy is to be considered the same as a property that was let under a previous tenancy. Those amendments would provide that the question of whether a property is the same must include consideration of the extent to which the property has been decorated or renovated since the end of the previous tenancy. That could allow a landlord to raise the rent between tenancies without restriction if they have undertaken very minor redecoration or renovation to the property between tenancies, which would not be in keeping with the aim of rent control.

As I have said, the bill already includes provisions for ministers to set out circumstances in which rents may be increased above the cap. An area that is being consulted on is the use of those powers when a landlord has made significant improvements to the let property, either during an existing tenancy or between tenants.

If Rachael Hamilton is keen to press amendment 214, I ask that we pause and use the opportunity between stages 2 and 3 to discuss with the Scottish Association of Landlords the additional administrative burden on landlords. It is the burden on landlords that I am particularly concerned about. I see Rachael Hamilton’s point about what the amendment is trying to achieve, but I am concerned about the administrative burden on each individual landlord.

Amendment 214, in the name of Rachael Hamilton, requires that rent increase notices for private residential tenancies for properties that are outwith a rent control area should set out the reasons for a proposed rent increase. I am not convinced that that would be a clear benefit for tenants, and I am very concerned about the increased administrative burden on all landlords. Therefore, I cannot support amendment 214 and I urge Rachael Hamilton not to press it.

Amendments 501 and 500, in the name of Mark Griffin, would create exceptions to the requirement that private rents should not be raised in the first 12 months of a tenancy outwith a rent control area or for an exempt property in a rent control area. The bill contains a power that allows for exemptions to be set out in regulations, which we have discussed in earlier groups, and those will be part of the live consultation for those who will be impacted.

Although I understand Mark Griffin’s intentions with respect to social housing providers, an approach that sets out any exception to the requirement that rent is not increased during the first 12 months of a tenancy should be set out in regulations. I appreciate that the issue is a concern of the Scottish Federation of Housing Associations in particular, and I reassure Mark Griffin that we will engage with it and other interested parties on that as we move forward with implementation. The development of the regulations that I mentioned will allow us the opportunity to engage with everyone, including the SFHA, to ensure that any exceptions are reasonable and that we strike the right balance. I am afraid that amendments 501 and 500 do not allow for that, so I cannot support them and I urge Mr Griffin not to move them.

Amendment 229, in the name of Maggie Chapman, would apply certain restrictions on between-tenancy rent increases to properties outwith a rent control area or exempt properties in a rent control area. The amendment would prevent landlords in those properties from setting an increased rent between tenancies if the rent for the property had increased in the previous tenancy within the past 12 months. I consider that restricting rent increases between tenancies is appropriate in areas where rent control has been deemed necessary. However, I do not consider that that would be a proportionate approach in places where rent controls have not been deemed necessary. Therefore, I cannot support the amendment, and I urge Ms Chapman not to move it.

Amendments 258 and 266, also in the name of Maggie Chapman, would mean that rent for private residential tenancies for properties that are outwith rent control areas and exempt properties in rent control areas could not be increased unless the property met minimum standards that were specified by Scottish ministers in regulations. Although I agree with Ms Chapman about the importance of all properties in the private rented sector complying with required standards, there are already standards and enforcement measures in place in relation to rented properties. Creating something additional to the existing repairing standard is unnecessary and would risk causing confusion for landlords and tenants. However, there is a discussion to be had on quality and repair in a later group, and I look forward to discussing those amendments.

I absolutely see where the member is coming from. That said—and I fear that I might be repeating this quite often this morning—regardless of whether I think that it is the right or the wrong thing to do, the place for it to happen is not within the bill. The consultation will allow those exact points to be brought up and discussed so that we can then move forward with regulations. Members might well hear me say that quite a lot with regard to different amendments in a number of groups this morning, but that is exactly why we are having the consultation and asking those open questions. It will allow those matters to be brought forward. I hope that Mr Johnson will forgive me for not being pulled on that particular point, but I think that what he has raised is a matter for the consultation.

Amendments 65 to 68 and 80, in the name of Graham Simpson, would allow for rents to be raised above the level of the rent cap, where the landlord has incurred significant costs relating to the maintenance, repair or regulatory compliance of the property. The rent officer would be tasked with determining the appropriate rent where the costs are deemed to be necessary and significant, but the amendment does not set out what maintenance, repairs or regulatory compliance would be covered or the basis on which that determination should be made. Again, I very much recognise the concerns expressed by landlords on the potential impact of rent controls on maintenance costs and their ability to invest in improving and sustaining quality properties. It is important that those issues are considered further, which is why they are covered in the aforementioned consultation.

Therefore, I cannot support the amendments, and I encourage Ben Macpherson, Graham Simpson and Daniel Johnson not to move them. If they do so, I urge committee members not to support them, for the reasons that I have set out. It remains my position that the circumstances in which it would be appropriate to allow for rents to increase above the cap should be set out in regulations that are informed by the consultation, but I hope that I have managed to offer some reassurance to Mr Macpherson, Mr Simpson and Mr Johnson that I very much recognise and acknowledge the issues that they have highlighted in their amendments and that we are actively considering how to address them through the consultation. I would, of course, be happy to engage with members following the consultation’s outcome.

Amendment 147, in the name of Edward Mountain, and amendment 412, in the name of Katy Clark, seek to amend the bill to require that the rent cap be calculated with reference to the quality, state of repair and energy efficiency of a property. I have responded to calls from the sector to provide greater certainty on how rent controls will be implemented by bringing forward a suite of amendments that provide a formula on the face of the bill for a fixed rent cap and which, if approved, would render amendments 147 and 412 obsolete. I consider that setting out the rent cap in primary legislation is needed to offer more clarity to tenants and landlords, and to those who invest in and develop rented homes. For those reasons, I cannot support the members’ amendments, and I urge them not to move amendments 147 and 412.

Amendments 207 and 215, in the name of Rachael Hamilton, seek to make changes to the definition of the term “rent payable”, specifically to exclude utilities. Amendment 207 would make that change for the purposes of the application of the rent cap, which could allow landlords in a rent control area to increase charges for utilities without any regulation. The amendment of the rent cap to a fixed formula would impact on the amendment itself, making it redundant.

Amendment 215 would make the change for the purpose of the provisions in the bill that regulate rent increases in rent control areas, but that would conflict with the existing definition of rent in the Private Housing (Tenancies) (Scotland) Act 2016. That would lead to different definitions of rent, depending on whether a property was or was not in a rent control area, and therefore would cause confusion.

I acknowledge the concerns that have been raised by landlords, particularly in rural areas, about the potential impacts of rent controls where tenants pay the landlord directly for certain utilities or services. As has been set out, the bill already includes regulation-making powers that allow for circumstances in which landlords could raise rent above the cap. Our current consultation on the use of those powers acknowledges that rural landlords might face higher utility costs and asks for views on how such costs could be treated. Again, I am happy to engage with Rachael Hamilton and other members following the outcome of the consultation; I hope that that will reassure her, and I urge her not to move her amendments.

The amendments in Paul McLennan’s name in this group—that is, amendments 281 to 301, 327, 332 to 353, 393, 398, 401, 402 and 406—deliver on our commitment to provide clarity on how rent control will be implemented by setting out how rents will be capped in areas where the provisions apply. I am clear that it must be done in a balanced way that recognises the interests of landlords and tenants, and in a way that continues to support investment in private rented housing. That will ensure that the system of rent control that is introduced continues to support the supply of rented housing, in recognition of the fact that the rented sector is a critical and important part of Scotland’s overall housing system. The amendments have been lodged in direct response to calls for more clarity on the impact of areas designated for rent control.

Amendments 289A, 290A and 293A, in the name of Maggie Chapman, would enable a rent control area to be increased in size via regulations that vary the original designation. I consider that, where the rent control area is to be increased in size, that should be considered as creating a new rent control area and should be subject to the full process for designating such an area. For that reason, I cannot support the amendments.

Amendments 332A to 332H, also in the name of Maggie Chapman, seek to amend amendment 332 in Paul McLennan’s name. Amendment 332A would amend the permitted rate to be the lower of CPI inflation plus 1 percentage point, or annual percentage changes or expected changes in income. Amendment 332B provides that an alternative lower percentage could be set by the Scottish ministers in specified circumstances under new powers confirmed by amendment 332H, while amendment 332F provides a definition of the term “specified circumstances”. Amendment 410 provides for the new power inserted by amendment 332A to be subject to the affirmative procedure. Amendment 332C sets out the definition of the terms used in 332A, while amendments 332D and 332E seek to amend the definition of “the latest index” in amendment 332 so that it covers the latest index “or figure” published before the tenancy starts or the rent increase notice is served.

For the reasons that the Minister for Housing has already set out in the Government’s response to the committee’s stage 1 report, we recognise that there are benefits in ensuring that increases in rent control areas are linked to increases in household incomes. However, wages are only one component of household income, which might also be affected by hours worked or by other sources of income, such as self-employment, benefits and assets. In addition, average wage inflation might not reflect the differing trends that are experienced specifically by tenants across the workforce. The costs to landlords of offering a property for rent are also a crucial consideration, and measures of wage growth are unlikely to fully reflect them.

It is also vital that the rent cap can be clearly communicated. The CPI is a well-known metric, and adding in various measures of wage growth would complicate the rent cap formula without their being directly connected to changes in household incomes. I therefore consider the consumer prices index to be the most appropriate basis for the rent cap.

I will try to go through the main points that have been raised. I thank all members for the discussion, particularly on the Government amendments.

I will deal with the aspects that Meghan Gallacher raised about concerns over the removal of consultation. If the rent cap is included in the bill, as we intend it to be, there will be no need to consult on it, because it will have already been included in the bill.

Amendment 327 is technical.

Turning to issues raised by Katy Clark and others, I absolutely appreciate that there is a need to tackle the disrepair that exists in the private rented sector. As members will know, we will come on to discuss other groups of amendments that also deal with the issue of disrepair and the general standard of the private rented sector, where that is poor. I think that there are other ways of dealing with the challenge that Katy Clark has rightly put forward, and I am happy to continue to discuss the overall issue with her—and, indeed, with the other members who have raised it with me both today and previously—both in the run-up to stage 3 and in relation to the other groups that we will come on to.

Much of what Rachael Hamilton has discussed today is referred to in the current live consultation, so I very much recognise where she is coming from. The Minister for Housing has also agreed to engage with Scottish Land & Estates over the summer on the same aspects, so I am taking the issue that she has raised very seriously.

On the substantive issues that Maggie Chapman has raised about the rent cap formula, although I think that she and I are in exactly the same place in wanting to protect the most vulnerable tenants, this is one of those areas where I fundamentally disagree with her. I believe that we cannot protect the most vulnerable by creating a system that puts off investment and therefore the delivery of more homes—there is a balance to be struck between what we do to protect tenants and ensuring that we encourage investment and the building of more homes.

I hope that I can reassure her that repairing standard compliance would not be included in those circumstances in which rent could be increased above the cap, as set out in the consultation. Others might have different views on that, and I appreciate that the consultation is on-going, but, as I am sure will come through in that consultation, there is a discussion to be had about landlords making improvements to meet the sector’s minimum standards and those who might be investing heavily in modernisation or different types of work. As I have said, I am sure that those nuances will come through in the consultation.

As for having discussions on the formula that has been set out, I am happy to get back to and discuss the matter with Maggie Chapman before stage 3. However, according to the material that I have today and which I can highlight in these closing remarks, although CPI and wage growth can fluctuate relative to each other over time, the post-war experience has been that wages tend to grow faster than inflation in the long run. The 6 per cent cap also protects against situations, such as the recent cost of living crisis, in which a spike in inflation causes real wages to fall sharply. I go back to my point that the area needs to be clearly understood. I think that, at this point in time, this will just have to be one of those areas on which Ms Chapman and I will continue to disagree.

Amendments 148, 149, 158 to 160 and 185 in the name of Maggie Chapman would collectively enable the Scottish ministers to designate the whole of Scotland as a national rent control area in certain circumstances.

Introducing rent controls interferes with the property rights of landlords and any interference must be proportionate. A national rent cap might be difficult to justify due to the varying social and economic circumstances across the country. The way that the amendments are drafted means that the safeguards for normal rent control areas would not apply. Without those safeguards, it might not be possible to impose a national rent cap that is proportionate.

The measures in the bill will create the framework to deliver a nationally consistent approach to the consideration of the need for rent control, while maintaining the link to local circumstances. That is an appropriate, robust way to deliver rent control in Scotland. Although I acknowledge that there could be circumstances in which the Scottish ministers might wish to consider wider temporary rent control measures, their powers under Maggie Chapman’s proposed amendments would be far too broad.

Our vision for a long-term system of rent controls that delivers a nationally consistent approach with flexibility for local circumstances is key. Should action on rents be required where there has been significant change in rent levels or in the rate of rent increases in the period between the five-yearly cycle of local authority assessments, there are already powers in the bill for local authorities to carry out an additional interim assessment of rent conditions in their area or for the Scottish ministers to direct a local authority to undertake such an assessment.

Were such extreme circumstances to arise in the future to necessitate a blanket national rent cap that would apply regardless of local circumstances, that would be a significant intervention, and it would not be appropriate for that to happen only through regulations. Such action should be subject to the full parliamentary scrutiny that is afforded to primary legislation, as was the case with the emergency legislation that was introduced by the Government in response to the Covid-19 pandemic.

I therefore cannot support amendments 148, 149, 158 to 160 and 185. I urge Maggie Chapman not to press amendment 148 and not to move those other amendments.

Amendments 186, 196 and 199, in the name of Maggie Chapman, would, essentially, reintroduce the temporary modifications to rent adjudication that were set out in the Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024, which expired at the end of March.

Although I recognise the good intent behind the amendments, and the desire to protect tenants from unreasonable in-tenancy rent increases, I cannot support them.

The temporary modifications were developed specifically to support the transition away from the emergency rent cap, which was introduced under the Cost of Living (Tenant Protection) (Scotland) Act 2022. Those temporary changes were part of that transition and were aimed at preventing a return to market rents in a single step where a tenant sought a review. They were not designed—indeed, they would not have been able—to operate until rent control becomes operational.