Chamber and committees

I have no relevant interests to declare.

Thank you. That was easy.

Thank you, convener, and good morning to committee colleagues. I am pleased to be at the meeting to present three sets of regulations that will support the expiry of part 1 of the Cost of Living (Tenant Protection) (Scotland) Act 2022 on 31 March 2024 and introduce some important measures that will continue to support tenants from 1 April 2024.

As colleagues know, the emergency act came into force on 28 October 2022. Since then, it has continued to provide extra protection for tenants during very challenging economic times, including through the provision of a cap on in-tenancy rent increases and a moratorium on the enforcement of evictions. However, the measures in part 1 of the act were able to provide only temporary support during the worst of the cost crisis, and the legislation as approved by the Parliament in October 2022 clearly sets out that it could not be extended beyond 31 March this year. In order to support part 1 of the emergency act coming to an end, we have laid the three instruments that the committee is considering.

The Cost of Living (Tenant Protection) (Scotland) Act 2022 (Saving Provisions) Regulations 2024 is a negative instrument that is intended to facilitate the transition away from the emergency measures by saving certain provisions as they relate to processes that commenced prior to 1 April 2024. For the rent cap, certain schedule 1 provisions would be saved for rent increase notices that have been served before 1 April, as well as any subsequent referrals, applications or appeals in relation to them. For the temporary eviction grounds, the regulations will mean that any eviction notice that has been served on the basis of those provisions prior to 1 April may proceed or be appealed. Similarly, provisions will be saved for any action for unlawful eviction that was raised before 1 April and any subsequent appeal. Those provisions will be familiar to members from other time-limited legislation that we have passed previously. In effect, they mean that any action that was started before the expiry date will not have to be restarted just because the source legislation has expired.

The draft Cost of Living (Tenant Protection) (Scotland) Act 2022 (Expiry of Section 10: Extension) Regulations 2024 is an affirmative instrument that is technical in nature and it links to the third set of regulations, which I will turn to shortly. The regulations will modify the emergency act in order to change the time when section 10 and, by consequence, schedule 3 of the act will expire. Instead of expiring at the end of 31 March 2024, as part 1 of the act will, section 10 and schedule 3 will expire a year later, at the end of 31 March 2025. In line with the act’s requirements, the Scottish Government has laid a statement of reasons to accompany the draft regulations.

The third set of regulations has probably engaged the most interest across rented sector stakeholders. The draft Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024 will change how rents in relation to private residential tenancies and statutory assured tenancies are determined on referral by a tenant to a rent officer or the First-tier Tribunal for Scotland. The process of adjudication has been in place since 2017. Although it was suspended during the period of the rent cap, it has now resumed in a modified form. The proposed changes to the adjudication process are intended to smooth the transition away from the rent cap and to protect tenants from steep rent increases, which some tenants would experience if, in a single step, there were to be a move back to open market rent from rent levels that have been suppressed during the period for which the emergency act has been in force.

The legislation requires us to ensure that we reflect the interests of all parties in the rented sector. We recognise that landlords may have experienced rising costs, including from the need to improve and repair properties, which are usually recouped through rent. At the same time, although there have been some signs of improvement in the economic conditions for households in recent months, they follow a period of significant pressure such that, on average, households continue to face economic and financial conditions that are significantly more challenging than they were prior to the cost of living crisis. In particular, private rented sector households continue to report that they are, on average, under greater financial stress than the average for all households.

Once the rent cap expires, we would expect that many rent increases that are proposed by landlords may proceed as normal, with tenants agreeing to pay the proposed increase. However, it is reasonable to expect that there may be situations in which tenants wish to refer a proposed increase for adjudication. The emergency act provides Scottish ministers with the ability to temporarily modify the basis on which rent increases are adjudicated. The long-standing rent adjudication process allows for rent service Scotland or the First-tier Tribunal to make a determination on the proposed rent increase. That is based on a comparison with the rent for other properties in the area, which is known as the open market rent.

The amended adjudication proposal would see a third factor taken into account when a determination is made. Alongside the market rent and the rent that is being requested by the landlord, there will be an additional comparator. The final rent will be determined based on the lowest of the three figures and it may not be set at a rate above the rent that the landlord is requesting. The additional comparator will be based on the difference between the current rent and the open market rent, with the level of increase being determined on a sliding scale.

When the gap between the market rent and the current rent is less than 6 per cent, the comparator will not come into play, so the rent increase will be either the rent that is being sought by the landlord or the market rent, whichever is lower.

When the gap is between 6 per cent and 24 per cent, a sliding scale will apply, with an additional 0.3 per cent increase being allowed for each percentage point between the current rent and the market rent. The increase may not exceed 12 per cent of the overall rent. That will apply in all cases. The 12 per cent maximum would be reached only in cases in which market rents are 24 per cent or more higher than current rents.

That underlying formula is necessarily more complex than a simple rent cap, and we want to ensure that both landlords and tenants have clarity. That is why a simple online rent calculator forms part of our awareness-raising work. It was launched last Wednesday, well in advance of the changes taking place. Just as people do not need to understand everything about the underlying technology of the smartphone or the device on which they will use the calculator, they do not necessarily need to know exactly how the underlying formula works in order to use it effectively. The online calculator will allow tenants and landlords to see quickly how various rent scenarios would affect their situation. They do not need to follow the formula in detail. I am aware that members have also been made aware of the recent Scottish Parliament information centre blog on the ending of the emergency measures, which includes an online calculator that is similar to the one that the Scottish Government has provided. When sample numbers are put into the calculator, it will illustrate the potential impact of the proposed changes.

The transitional arrangements will amend the basis of rent adjudication for one year, from 1 April 2024 to 31 March 2025, but they may be extended for further periods of one year, if appropriate, with parliamentary approval. That would be based on an assessment of the circumstances at the time. As well as launching the online calculator to address the underlying complexity of the changes that we are proposing, we are running an awareness-raising campaign that is aimed at increasing awareness of tenants’ rights and empowering tenants to assert their rights if required. Our renters’ rights campaign launched last Wednesday and it will run for four weeks. We are keen to work with any tenant or landlord representative body to help to raise awareness of the changes and help people to understand how they will work in practice.

The regulations that the committee is considering are vital as they signal a move away from the emergency protections that were crucial in protecting and supporting tenants during the worst of the cost crisis, while also acknowledging that challenges remain and that it is right that we protect tenants as we move towards the pre-cost crisis position. They also come as we prepare the housing bill to be debated in Parliament. That bill will set out how we aim to regulate rents in the long term alongside a wider package of changes to increase tenants’ rights and prevent homelessness.

I thank the committee for its scrutiny of the instruments. I am happy to answer any questions.

We have had to strike that balance throughout the process, from our framing the emergency legislation in the first place to considering its operation and, now, moving out of the relatively straightforward protection of a rent cap.

We have engaged with both tenant and landlord organisations and with stakeholder groups in the sector. We went through a process. It was not a full public consultation because, in order to make use of the most appropriate and up-to-date data, the process had to take place relatively soon before the end of the rent cap. It had to be close enough to that to ensure that we did not end up seeing a gap between the rent cap and the adjudication changes. We floated a lower cap of 10 per cent and an upper cap of 15 per cent. It is probably understandable and predictable that the responses to that were slightly polarised between those who represent different interest groups. However, fair arguments were made from all perspectives, and the fact that we have proposed a taper that moves to an upper threshold of 12 per cent demonstrates that we have taken account of the arguments and perspectives that a range of stakeholders shared during the process.

As we go through this year and the committee engages with the proposed housing bill, we will want to explore the issues around data collection in that context. As things stand—that is, as things stood under rent adjudication prior to the temporary emergency legislation—we do not have granular, detailed data on the rents that are actually being paid; we have information far more prominently about rents that are being advertised. That said, rent officers take into account a wide range of factors in determining what they are going to consider to be open-market rent, including the quality and quantity of housing stock, some locational issues such as proximity to shops, banks, leisure facilities and other local amenities and services, and economic factors such as local employment and unemployment rates.

A range of factors is taken into account in making that calculation. The rent officers base their valuations on confirmed lettings information, wherever possible using additional data sources to support them through the valuation process. The process of calculating open-market rent has been embedded for a number of years. Experience and skills, and knowledge of local rental market conditions, have been built up, and we will continue to rely on that process.

My only additional point is to reassure tenants who wish to bring a request for rent adjudication in those circumstances. They do not need to be able to make their own calculation of what open-market rent is; they can bring a request for adjudication, and the process will kick in and make that calculation. People do not need to have access to information that is not available to them in order to make a request for adjudication.

Absolutely—we will. The point that Mr Coffey raises is relevant to the operation of the emergency protections, but actually goes back a bit before that. If we think back 10 or 15 years, evictions from the private rented sector were one of the leading sources of new homelessness referrals. That has been reducing, so there is evidence that the gradual changes in regulation that were brought in prior to the emergency legislation over a longer period have supported improvements in those statistics and show that evictions in the private rented sector have not been as predominant a source of new homelessness as they were previously. The protections that were part of the emergency legislation have supported, and have been consistent with, that trend. We are obviously keen to ensure that that progress is not reversed.

Earlier, I made a point—to Mark Griffin, if I remember rightly—about the pre-existing package of protections. No-fault evictions have not been permitted for quite some time, and the grounds for eviction are clearly and explicitly laid out. A more recent change was introduced through the coronavirus legislation, in that the pre-action protocols that social landlords previously had to undertake before seeking an eviction have now been extended to the private rented sector.

We believe that a viable and vibrant private rented sector works at its best when landlords and tenants have a shared interest in securing, sustaining and maintaining tenancies and in avoiding breakdowns. Most landlords do not want to go through a constant cycle of losing good tenants who pay their rent, and most tenants want to be good tenants who are able to pay their rent and have somewhere that they can afford to live with some security. That is what we should be aiming for.

The requirement for pre-action protocols simply embeds the good practice that responsible landlords will, in many cases, already have been using, with landlords seeking ways to sustain a tenancy as a first resort and pursuing eviction only as a last resort, when it cannot be avoided. Sadly, in some cases, eviction will be a necessary step, but I hope that the pre-action protocols ensure that eviction is seen as a last resort rather than a first resort. The evidence shows that those protocols have been effective. We should return to the pre-existing strong package of protections, and we should continue our efforts to drive up standards in the private rented sector by supporting the actions of responsible landlords who have used good practice in the past and by encouraging others to raise their standards.

Yes. The Cost of Living (Tenant Protection) (Scotland) Act 2022 gave us the power to introduce such changes. It specified that changes could be introduced for a period of one year and that there could be subsequent decisions to extend the provisions by further periods of one year. That option will be available, but we will not make that decision automatically. We will continue to closely assess the circumstances.

In essence, we must demonstrate that any such measure is proportionate and necessary. That means that we must constantly look at the circumstances and the context in which measures are taken forward. We will look at how the measures are operating, at how the adjudication process is being used and its impact, at the economic circumstances and, of course, at any changes in the patterns of evictions and homelessness.

We will keep under surveillance the engagement that people have with the awareness-raising campaign—a great deal of it is online, so we can monitor the levels of engagement and exposure—and, as we move into the temporary measures, we will also monitor the use of the adjudication protections.

I do not think that it would be reasonable to say that there is a final, set-in-stone decision on how much awareness raising should take place. We have committed to the spend to ensure that there is an awareness-raising campaign as we move out of the temporary rent cap and into the slightly longer-term but still temporary rent adjudication changes. Any such change will increase the level of complexity that people are dealing with and increase some confusion. As a regional MSP, I am aware that my inbox contains correspondence from tenants and landlords who do not know what their rights are as we approach the end of the period.

We need to make sure that we continue to engage with tenants and landlords and provide that information both through direct channels and through working with a range of organisations and advice agencies at a local level. One of the organisations that I visited recently when I launched the campaign was Citizens Advice Scotland, which has a critical role to play as a trusted voice in the local community. Similar organisations the length and breadth of the country will play a really powerful role, too.

This is a hugely important question that we have been conscious of all through the process. It was very clear that the rent cap had to be temporary; that is the nature of emergency legislation, and I think that that was well understood across Parliament and by external stakeholders when we passed the act itself. Having the ability to modify an existing mechanism—that is, the rent adjudication mechanism—offered the clearest opportunity for an off-ramp from the temporary rent cap, if I can put it that way.

However, it does place the onus on tenants to challenge, and we need them to be aware that, even as we move out of the emergency legislation, Scotland has the strongest package of tenants’ rights and protections of any part of the United Kingdom. We are seeing on-going debates down south over whether no-fault evictions will eventually be banned or whether the proposals will be changed before they are put to the vote, but that is something that we already did a number of years ago.

The grounds on which evictions can be pursued are very clearly and explicitly laid out, and the level of protection that tenants have is very strong. We need to remind not only tenants but landlords of those rights and responsibilities, which is why the awareness-raising campaign is so important and why we will continue to engage with the organisations that provide advice. MSPs, MPs, councillors and other elected representatives can play a really important role in disseminating that information to concerned constituents, ensuring that community organisations that they are in touch with have access to that information and pointing people to online tools such as the rent calculator.

We have worked with colleagues to understand what they expect in terms of the burdens on them of processing rent adjudication requests. The process has not been taking place in the normal way during the period when the emergency legislation has applied, but it will resume now, regardless of whether we are applying an altered adjudication process. However, I would take a little bit of persuading that the numbers are going to be markedly different purely on the ground that we are adding that third comparator.

You might have heard from constituents who are concerned about the rent increase notices that some landlords have issued prematurely, ahead of the rent cap ending—I certainly have. At the moment, we can reassure them that the rent cap is still in place and that those rent increase notices still need to comply with it, but clearly a number of rent increase notices will begin to be issued when the rent cap ends, regardless of whether we take forward the power on a modified adjudication framework with the third comparator figure. It is really important that we have that third comparator figure, but, regardless of whether we use that power, there will obviously be a resumption of rent adjudication requests, and rent service Scotland and the First-tier Tribunal will need to be ready to deal with that. We will, therefore, continue to engage with them to understand how that is playing out in practice. As I said to Mark Griffin, there is a shared desire to ensure that requests are dealt with in a timely way.