Chamber and committees

That question is hugely important, and Ivan McKee is right to point to that power in the legislation. It allows an adjustment to be made to the rent adjudication process, the idea of which is to prevent an immediate cliff edge when the temporary emergency legislation is switched off. We are still at the point of exploring the options to make the most effective use of that power. I am afraid that I am not able to publish detailed proposals on that, but we can expect them to come forward in time for expiry of the rent cap.

I turn to Yvette Sheppard. Are we able to say anything more at this point on the expected timescale? I know that dialogue has taken place on the subject with stakeholders, too.

I come back to the difference between the longer-term development of housing policy and legislation, the new housing bill and the homelessness prevention duties and the good level of dialogue that we are having with the sector in the broadest terms as we take forward that work and, in this instance, the specific tests that we have to go through that were required under the Cost of Living (Tenant Protection) (Scotland) Act 2022 to justify the necessity and proportionality of not only continuing but, in this case, extending the provisions. Under the legislation, we remain under the duty to keep that test of proportionality and necessity under on-going review and to expire provisions that we can no longer justify in those terms. The extension to next March at the latest does not remove the requirement on us to continue to carry out that on-going review.

I had a meeting with Graeme Dey the other week and we talked about the connections between the Scottish Government’s approach to what we are trying to achieve in energy terms, the impact on skills and the potential role that the college sector can play. There are a great many colleges around the country, and one of the first that I visited in this role was in Dumfries, in the south of Scotland. It was investing in additional capacity because it knew that that demand was coming and that those skills would be needed. I challenge the idea that it is only happening in the central belt or in big cities—it is happening around the country.

Inevitably, a great many of these decisions about the capacity for training and skills around the country will be determined by the industry’s demand for such skills. That is why, as I said earlier, the Government’s approach to regulating—which is to create demand in the first place—is absolutely central to giving industry the confidence to invest. If it knows what skills will be required and what demand will be generated, it will ensure that those skills are invested in and supplied and that we have that wider supply chain capacity. The one thing that we could do to imperil investment in skills or the wider supply chain is to say, “Actually, we’re going to take a step back and delay or water down the regulations.” The regulations are a necessary part of setting the conditions for the investment that we need.

It is nice to be back with the committee again. I am pleased to be here to present the Cost of Living (Tenant Protection) (Scotland) Act 2022 (Amendment of Expiry Date) Regulations 2023.

As colleagues know, the 2022 emergency act came into force on 28 October last year and, since then, has provided additional protection for tenants in what remain challenging economic times. The act originally ran to 31 March 2023 and has been extended once, until the end of this current month.

In June, I published a statement of reasons for the second proposed extension of the emergency act. As part of that report, and in line with the requirements of the act, I set out the intention for the measures in the act to be extended for a further, and final, six months to 31 March 2024.

The report provides updated data and economic analysis that shows that the challenging economic position has not yet fundamentally changed and that many households in the private rented sector in particular continue to struggle. For example, according to recent YouGov polling for the Scottish Government, in August 2023, levels of concern in relation to paying rent were twice as high in the private rented sector, at 27 per cent, compared to those in relation to paying rent or mortgages across all tenures as a whole, at 12 per cent. That has not improved since the polling in March 2023.

It was recently announced that the energy price cap will reduce, but it is reducing from a very high level, and the positive impact on fuel poverty rates is offset by the UK Government’s decision to withdraw the energy bills support scheme, under which £400 was paid to all households last winter.

Meanwhile, the freezing of local housing allowance rates by the UK Government for the third consecutive year is yet another reason why those in lower-income households in the private rented sector who access local housing allowance will find it more difficult to afford rental properties.

The picture has changed somewhat since a year ago, but circumstances remain very difficult for many tenants, and many households that are on low and modest incomes continue to feel the strain of cost of living pressures. For those reasons, the regulations seek to extend the application of part 1 of the Cost of Living (Tenant Protection) (Scotland) Act 2022 in its current form—including the rent cap measures for the private rented sector, the eviction moratorium provisions across all rented sectors that the act covers, and other important protections—until 31 March 2024 at the latest.

In reaching that position, I have reflected on the views that stakeholders and partners have expressed and I have sought to find the right balance, under the statutory duty, to ensure that the provisions do not remain in place for longer than is necessary in connection with the cost crisis. I also recognise the on-going impacts that the cost crisis is having on some private landlords. The private sector rent cap is set at 3 per cent, but there is a safeguard for landlords, who can alternatively opt to apply to rent service Scotland for a rent increase of up to 6 per cent if their defined, prescribed property costs have increased within a specified period. I know that some landlords are using that safeguard—1,031 of them had submitted such an application to rent service Scotland as of 1 September.

I turn to our proposed continuation of the eviction moratorium provisions. Tenants in the private and social rented sectors, and those who live in student accommodation, will continue to benefit from the additional time to find alternative accommodation that the six-month pause in the enforcement of eviction action provides. In addition, they are protected from private landlords seeking to end a tenancy in order to raise rents above the cap, and the provisions reduce unlawful evictions by increasing the level of damages that are payable.

As with the rent cap, the eviction moratorium provisions include a number of safeguards for landlords. Those recognise that there are circumstances when enforcement of an eviction order or decree should proceed to protect communities—for example, in instances of serious antisocial behaviour—and to strike an appropriate balance between the protection of tenants and the rights of landlords.

In summary, the latest evidence shows that the cost crisis is still very much with us. It is crucial that we continue the remaining protections in the 2022 act beyond 30 September. If the committee agrees to recommend approval, it will remain the case that, for this final period, I will continue to keep the measures under review, to consider their on-going necessity and proportionality and to advise the Parliament through regular reporting—the next report is due to be laid no later than 14 October.

I thank the committee for its continued interest in the issue and for its scrutiny of the regulations. I am happy to answer any questions that members have.

It is possible that that is an example of developers simply getting used to these technologies for the first time. I think that, as they become more familiar, basic design issues will become more familiar to developers, whether they are in the social housing sector or elsewhere.

I am not aware of having seen developments where heat pumps have been placed on balconies. I do not know whether any colleagues are able to comment on that. I have seen a number of developments where heat pumps have been retrofitted on the roofs of tower blocks, and new-build properties are now much more likely to have spaces for heat pumps, water storage and so on and to accommodate them within the design of the building from the outset. Those things are becoming pretty familiar and routine exercises for developers.

Yes. We have engaged with local authorities throughout the process, and they have had the opportunity to participate in both consultations.

I come back to the point that the new-build heat standard is just one element of a longer-term programme to decarbonise our buildings. All of that will mean changes to skill sets and capacity, whether in local authorities, developers or the wider supply chain, and doing that right through 2045 will mean that there will continue to be a need to invest not just in those skills but in new skills.

That is consistent with the fact that local authorities as well as the wider industry and stakeholders already need to continue to invest in bringing people on board over time, skilling them up, seeing through their careers and developing their skills and abilities. The long-term approach that we are taking to heat decarbonisation in general is entirely consistent with their ability to adapt.

There are several things to say on that. Most fundamentally, whatever energy system or heating system you install in a home, it has to be done to a high standard, or you will not get good operating efficiency from it. Secondly, the energy performance of the home needs to be really high to reduce demand. On the visits around the country that I have been doing, I have met constituents and other folk who live in new or retrofitted homes that have had investment in really high levels of energy efficiency, and they barely use their heating systems at all. They are the ones who are happiest about energy bills at the moment, because of the energy that they are not using.

We need good-quality installation and design. It will be important for developers to get that right as they shift away from installing gas and towards installing heat pumps. They need to ensure that they have the right kit with the right spec for the right size of home, that they are installing it properly and that they are doing that to a high standard. We need to reduce the energy consumption and the energy needs of the home through high levels of energy efficiency. Those are some of the things that we can do that are within our control right now.

One of the most fundamental things that is not within our control right now is the rebalancing of electricity and gas prices—an issue that has come up time and again. I know that the committee discussed it this morning, and the Scottish Government has raised it year after year. We have had a long-standing acknowledgement from the UK Government that it needs to do that, and several other countries have already done it. At the moment, the price that we pay for electricity is artificially linked to fossil fuel prices. That is problematic for consumers in Scotland and the price that they pay for energy; it is problematic for the transition away from fossil fuel consumption for heating that we need to see here and in the rest of the UK; and it is problematic for some energy companies and financial services companies. You were talking about green mortgages at the end of your discussion with the previous panel of witnesses, and those companies need to know that heat pumps will be a viable investment from their point of view. Running costs are every bit as critical to that as installation costs.

The rebalancing of energy prices is also important in Scotland’s context from a political point of view. We need people to recognise that the transition will be fair and just. Scotland is generating large amounts of cheap and clean renewable electricity—at least, it is cheap to generate—and we should be passing a good proportion of that economic benefit to bill payers. It requires the UK Government to finally get around to what it has committed to doing but has not yet delivered: the rebalancing of gas and electricity prices. That will be critical for running costs. However, even before that has happened, if you build homes to a high level of energy efficiency and you install a zero-emissions heating system such as a heat pump, the price will be comparable, and it can be lower in some circumstances. It is much easier with new build than with retrofit to achieve a really high level of performance.

Fundamentally, we need the UK Government to make good on its commitment to rebalance gas and electricity prices. We hope that it will be willing to listen to the Scottish Government’s point of view on how that should be done, which should be in a way that ensures that it supports the transition to zero-direct-emissions heating.

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.