Meeting of the Parliament [Draft]

Meeting date: Thursday, October 31, 2024

Official Report 1154KB pdf

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Housing (Scotland) Bill

The next item of business is a statement by Paul McLennan on the Housing (Scotland) Bill. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.

14:22  

I am pleased to make a statement to the Parliament on the rent control measures in the Housing (Scotland) Bill. In March this year, the bill was introduced to the Parliament, bringing forward a package of reforms that will help to ensure that people have a safe, secure and affordable place to live.

Today’s statement provides an update to the Parliament on the Government’s intentions to lodge an amendment at stage 2 on the rent control measures as they are currently set out in the bill. The amendment will deliver on the commitment to provide further certainty on how rent control will be implemented—a commitment that was set out in the programme for government, which was published in September.

The proposal that I will set out offers clarity on how rents will be capped in areas where rent control is applied. The Government remains committed to delivering long-term rent control in order to stabilise rents, where needed, to protect the social and economic interests of tenants who rely on the private rented sector for a home.

Eradicating child poverty remains the Government’s priority, and I am sure that we can all agree that having a home can make a direct contribution to achieving that. That is why, as part of our approach to tackling the housing emergency, we are ensuring that families can have secure and affordable homes that meet their needs.

The Government has a strong record of acting to protect tenants, recognising that households in the rented sectors are more likely to be in relative poverty and to be financially vulnerable. Scotland has the strongest tenants’ rights in the world, and the Government acted to mitigate the impact of the cost of living crisis on tenants through the emergency Cost of Living (Tenant Protection) (Scotland) Act 2022, which protected tenants by stabilising their housing costs and preventing most evictions. In the United Kingdom, Scottish tenants alone had that protection.

The introduction of a long-term system of rent control for Scotland builds on that record, working towards a fair and well-regulated private rented sector that delivers for tenants and responsible landlords. It is another step in ensuring that we make further progress towards Scottish tenants being able to access a secure and affordable rented home.

However, it is clear that that must be done in a balanced way that provides appropriate protection for the property rights of landlords and continues to support investment in private rented housing. That will make sure that the system of rent control that is introduced continues to support the supply of rented housing while recognising that the rented sector is a critical part of Scotland’s overall housing system. The amendment that the Government will lodge at stage 2 has been developed in a way that recognises that the need to strike such a balance is a key driver in the approach to implementation.

Over the past few months I have been grateful for the opportunity to give evidence to both the Local Government, Housing and Planning Committee and the Social Security and Social Justice Committee as part of that process and to see and hear the evidence that has emerged as part of their considerations. I have also continued to engage with a wide range of stakeholders and have had the opportunity of hearing in detail from tenants, landlords, investors and developers on the rent control measures in the bill.

Through the work of the housing investment task force, there has been an opportunity to work directly with investors and developers to understand how we can establish a system of rent control that both works for tenants and supports continued investment in private rented housing. In recognition of the role that social landlords play by offering properties at mid-market rent levels to support those on lower incomes, it has also been helpful to hear from Scottish Federation of Housing Association members on how rent controls will affect registered social landlords that offer mid-market provision.

It has been positive to see that, across all stakeholders, there is a consistent view that Scotland needs a thriving private rented sector—one that offers good-quality, affordable housing options and values the benefit that investment in rented property delivers. It is clear that all those involved in the rented sector recognise the contribution that a good-quality, affordable, and well-regulated housing system makes to tackling poverty.

In those discussions, there have been on-going calls for further certainty on how rent control will be implemented and how rents will be capped in areas where rent control applies. To respond to that, the programme for government made a commitment to lodge an amendment to the bill to set out clearly how rent increases will be capped in areas where rent controls apply.

Having considered how best to formulate the cap, the Government will lodge an amendment at stage 2 that will explicitly set out that, where a rent control area is designated, the cap that would apply to rent increases while rent control is in force would be set at the level of the consumer prices index plus 1 per cent, up to a maximum increase of 6 per cent. That would mean that, where a rent control area is in place, in most cases rents would be able to increase by CPI plus 1 per cent of the existing rent. Where the relevant CPI figure exceeds 5 per cent, the increase permitted would be capped at 6 per cent of the existing rent. The rent cap will apply to rent increases both during the term of a tenancy and between tenancies in the period where an area is designated for rent control.

Lodging such an amendment will respond directly to calls for greater certainty and will offer more clarity to tenants, landlords and those who invest in and develop rented homes. Setting out the form of the rent cap in this way—with CPI as its basis—will allow for a reflection of the costs to landlords of offering a property for rent while providing protection for tenants by limiting more significant rent increases. That approach has been shaped by input from stakeholders on how to develop an approach to rent control that provides protection for tenants while continuing to support investment in new and improved private housing.

I turn to other measures in the bill on which stakeholders would welcome further detail on how rent control will be implemented. The bill contains powers for Scottish ministers to make regulations that allow for certain types of property to be exempted from rent control and for rents to be increased above the level of the rent cap in some circumstances. The bill currently sets out that any such exemptions or modifications on how the cap will apply are to be supported by consultation with tenants, landlords and others who may have an interest.

It is essential that the circumstances in which such exemptions or modifications to how the cap is applied are subject to full and open consultation that will allow everyone who is affected to have their views considered. That will ensure that the impacts of any decisions on how the powers are used can be fully understood and the measures are developed in a way that is not only fair but robust in the face of challenge and that can be clearly set out in legislation.

In order to respond to the calls for further clarity in respect of those aspects of the rent control system at the earliest opportunity, the consultation that will support decisions on how the powers might be used will take place in early spring 2025. It will build on the work that has already been carried out to support development of the rent control measures in the bill and, in particular, the landlord and tenant questionnaire that was issued in October 2023.

That questionnaire sought views on allowing increases above the rent cap where there had been improvements to the quality of fixtures and fittings or the energy efficiency of the rented property, or where the landlord’s costs incurred in letting the property had increased.

Reflecting on the important part that investment plays in growing the supply of housing, including in the private rented sector, the questionnaire sought views on circumstances in which exempting certain types of property from rent control could be considered. Specifically, it highlighted rented property offered for social good, with rents controlled below market level, and purpose-built accommodation for rent at scale.

The feedback from the questionnaire will feed into the development of the consultation, and there will be continued engagement with stakeholders on the circumstances in which it might be appropriate to exempt certain types of property or to apply a modified rent cap over the next few months. That engagement will inform what is brought forward in the consultation in early spring 2025.

The Government remains committed to bringing forward a system of rent control that works for Scotland—a system that supports the stabilisation of rents for tenants while ensuring that there can be a balanced approach that provides appropriate protection for the property rights of landlords and supports investment in the development of rented homes.

The amendment that the Government will introduce at stage 2 to set out the form of the rent cap will help to support the delivery of those aims. I look forward to continuing to work with Parliament as the bill continues its progress.

The minister will now take questions on issues that were raised in his statement. I intend to allow around 20 minutes, after which we will need to move on to the next item of business. I invite members who wish to ask a question to press their request-to-speak buttons.

I thank the minister for advance sight of his statement.

The Housing (Scotland) Bill was the opportunity for the Scottish National Party Government to address the housing emergency, but his statement has done nothing to address the housing shortage or to reassure housing developers and landlords that the Government understands the issue at hand.

The minister has already taken a sledgehammer to the rental market, and today’s announcement will only cause further worry to an already unsteady housing sector.

As the Government is hellbent on being anti-house building, developers have axed plans to deliver hundreds more houses since the introduction of the SNP rent cap legislation. Because of the SNP, around £3.2 billion-worth of build-to-rent developments have stalled. How on earth will we tackle the housing emergency if the Government does not understand that we need to build, build, build and not cap, cap, cap?

Has the Government consulted build-to-rent developers regarding the minister’s proposals? If the minister is serious about addressing housing shortages, is he prepared to exempt social housing from rent controls?

I will make a couple of points before I address Meghan Gallacher’s main point.

The biggest impact on house building was caused by the 9 per cent capital cut that this Government had to suffer from the UK Government. Another big impact involved the local housing allowance—again, a result of a policy of your Government.

Speak through the chair, please.

On the point that the member raised about consulting the sector, in April last year we set up the housing investment task force, which includes a number of investors. We have consulted those investors on the proposals and will continue to do so through the consultation that I have set out. That gives investors certainty in that regard and we will continue in that way, involving those investors in discussions as we go forward.

After years of talking, the Government finally managed to introduce a bill on rent control, but somehow it did not include any actual detail on rent control. The Government has plugged one gap by means of a framework bill, but has ignored the facts that the dam is collapsing around it and that there are thousands of people in temporary accommodation right now. More detail on rent control has been demanded, and we welcome what has been said in that regard, but the housing bill will build not one house and provides no support to local authorities that are dealing with a housing crisis.

Given what the statement had to say about amendments and regulations, the Government also seems to accept that the bill lacks fundamental detail. Does the minister agree that the bill should be fundamentally redrafted then, in its new form, subjected to full scrutiny and consultation by the Parliament in order to give tenants, landlords, councils and house builders certainty, and to enable us to get on with tackling the housing emergency?

We are talking about rent controls today, but the Housing (Scotland) Bill also mentions homelessness prevention duties, as Mark Griffin is well aware. We are consulting and working very closely with the sector on that.

As I mentioned to Meghan Gallacher, one key thing is to give certainty, which the sector has been saying to us over a number of months. That is what we are trying to provide today. We have already had extensive consultation with the sector as we have developed the bill, and it still goes on in terms of the timeliness of the bill. We will continue to have extensive consultation, including with local authorities, investors and registered social landlords. The consultation has already been extensive, and it will continue to be so over the next number of months.

The minister will be aware that many people who have spoken out on the need for rent controls have highlighted the imbalance of power in private tenancy agreements, with tenants often being afraid to raise issues or to escalate unfair actions. How will the rent control proposals ensure that tenants have protection and power, with the onus being on landlords to justify rent increases, and not on the tenant to fight against them?

Emma Roddick has raised that point on a number of occasions. Requiring all rent increases to be assessed or approved by an external decision maker would be resource intensive and administratively burdensome for landlords. The Scottish Government considers that the majority of landlords are good landlords that seek to comply with legislation and to provide a good experience for tenants who are living in their properties.

However, for cases where an incorrect rent increase is proposed, either in error or because the landlord chooses to act unlawfully, routes for challenge are provided in the bill. Before making an application to a rent officer or tribunal under those routes, a tenant will be required to make their landlord aware of the issue and to give them reasonable time in which to respond. That will give landlords an opportunity to resolve cases of genuine error.

I have met representatives of many house developers here in Edinburgh and Lothian, and they all tell me that because of rent controls they are going to axe plans to deliver hundreds more houses in the city. Does the minister accept that, in the medium to long term, fewer houses will be built because of the policy? Yes or no?

One of the key things that investors have been saying to me about that is about giving them certainty, and we have certainly given them that today.

As for moving forward, we have talked about the consultation, and I have mentioned the housing investment task force, which has been discussing the issue that Jeremy Balfour has raised. There have been discussions with investors on issues around rent controls, so they have been well involved. The purpose of today’s statement is to provide certainty to allow them to move forward along with a full discussion in the consultation.

One of the key things about rent controls, which are really important to keep in mind in the debate, relates to how we tackle poverty. There are far too many people in poverty. Just yesterday, Shelter said:

“rocketing private rents is tearing communities apart—pricing families out of their local areas and pushing over 151,000 children into homelessness.”

That is a UK figure.

The bill is about tackling poverty as well as bringing in investment.

The policy memorandum to the Housing (Scotland) Bill states:

“the Bill has no significant differential effects upon island or rural communities”.

I represent rural communities. The statement says that the Government will say where a rent control is in place and how rents will be capped. There is a very different problem in rural areas when they are compared with urban areas. How will the bill take account of rurality?

That is a really important question that I know was raised in committee. Rent control measures are being introduced to create a nationally consistent approach that can take account of local circumstances. We are conscious of the concerns that have been raised by rural landlords regarding operation of rural housing markets. We will continue to engage with stakeholders in the sector as we progress towards the consultation in spring 2025.

Given the importance of robust data on rent levels and housing quality, what steps will the minister take to ensure that councils have a rigorous, transparent and properly funded process for collecting that data? Where, in the landlord register, does the Scottish Government envisage the data being stored?

I have been working closely with local authorities and I understand how they will use the powers. The matter of provisions being resourced properly is for the financial memorandum, and discussions are continuing. It is important to note that amendments on that point will be lodged for stage 2.

We are aware of existing data gaps in the private rented sector, so we have included provisions in the bill that will give local authorities the power to collect data directly from landlords, to underpin effective rent control area assessments. That engagement will inform any necessary longer-term data development work, thereby ensuring that we collect the right data in a practical and cost-effective way in order to support our long-term aspirations.

The proposed amendment to the bill will help to provide the clarity that is required for us to implement a sustainable rent control system for Scotland, and will balance vital protections for tenants with the need for investment in our housing supply. We certainly need to build, build, build.

Can the minister set out in more detail the steps that the Government is taking to ensure that there is confidence among investors, while also—crucially—protecting tenants by preventing homelessness? In addition, has he given consideration to testing or piloting the new prevention duties ahead of their full roll-out, in order to ensure their effectiveness?

We are talking about rent control today, but on the homelessness prevention duties, which are an incredibly important part of the bill, we have met a number of stakeholders. We are already encouraging stakeholders including local authorities, the Scottish Prison Service and so on, to try to bring in some of the prevention duties just now, because that does not require legislation.

On Elena Whitham’s point about investment, we will continue to work with stakeholders among tenants, landlords and investors as we develop a system of rent controls that works for Scotland, and which brings in investment but also tackles poverty. The legislation needs to be robust and fit for purpose, and the issues that stakeholders are raising about investment will be an important consideration in the implementation of rent controls.

I previously mentioned the work of the housing investment task force. It was set up in March 2024 and will continue to identify actions that will unlock both existing and new commitments to invest in housing by bringing together the key interests of investors and investees.

Scottish Greens do not believe that the current formulation will tackle the significant unaffordability of rents in many areas across the country. It does not give tenants in the private rented sector the security or stability that they have been promised. Can the minister explain how legislation that requires that rents always increase above the level of inflation, even in rent control areas, will make housing costs more affordable for tenants over time or help to tackle child poverty?

It is important that any design of rent controls considers the longer-term picture, as rents can grow below, as well as above, inflation. We consider that allowing some margin over inflation, such as 1 per cent—as has been mentioned today—would give investors some assurance that, over the long run, periods when growth is below inflation might be balanced out with periods in which rents might grow a little above inflation.

On Maggie Chapman’s point about affordability, a good-quality, affordable and well-regulated housing system generates benefits that can tackle poverty—as she mentioned, including for families with children—promote equality and support wellbeing.

Rent controls are designed to help to stabilise rents when market rents have been increasing particularly steeply, but we need to ensure that we bring investment into the sector, too. Affordability is much broader than just what we are talking about here. Yesterday afternoon, I was disappointed that the Labour Government, in its budget, abandoned tenants in that regard when it failed to uplift the local housing allowance. That is one of the key things on which we will continue to push the Labour Government in our discussions. Affordability is much broader than the points that Maggie Chapman made.

It is not especially clear, but it looks as though the Government is moving to exclude mid-market rents from the rent controls. I see that the minister is nodding in agreement that that is the intention. That would make sense, because it would secure extra investment in the sector while treating mid-market rents on the same basis as social housing. For clarity, is that what the minister is planning? If so, by when will that be done?

I appreciate that Mr Rennie has mentioned that issue on a number of occasions. I have talked about consultation. One of the key considerations when we were preparing the bill was how we tackle poverty. That is incredibly important, and we cannot forget that. However, we need to ensure that we also get investment in the sector, as we recognise the important part that investment plays in that regard.

As part of our work to seek views, as I mentioned, we issued the landlord and tenant questionnaire in October 2023. Further to that, we will speak to stakeholders about a number of issues, including the particular point that Willie Rennie made. As I mentioned, that consultation will be in spring 2025. That is within the proposed timeline for the bill, so it will not delay the bill in coming forward. I look forward to discussing with Mr Rennie the matter that he raised as we go forward.

According to the Office for National Statistics, on average rates, rents for my constituents have increased by about 14 per cent in the past year, compared with an increase of 7 per cent across Scotland. That is why, particularly among young people who are renting while looking for their own home, there is notable support for effective rent controls in the capital city. However, I appreciate that there is a need to increase supply and attract investment within a UK finance market. How will today’s update help to achieve a balance by meeting both those important aims, especially in order to tackle Edinburgh’s housing emergency?

I have mentioned that balance a few times during this discussion. It is about how we tackle the poverty element, which is one of the most important things.

One aspect of affordability relates to supply and demand. How do we increase the supply in Edinburgh? I know that the City of Edinburgh Council recently passed a motion supporting rent controls in principle, but it has said to me that we also need to get investment into the city. Through our discussions with the City of Edinburgh Council, and through the Housing (Scotland) Bill and the consultation, we are trying to make sure that we get investment so that we can tackle the supply issue that we are dealing with, and we are tackling the poverty issue through rent controls.

I press the minister for the third time on what he thinks about mid-market rent properties. Does he think that they should be exempt from rent controls or not? If he thinks that they should be exempt, why can we not do that at stage 2?

One of the key things all the way through this process is that we are, responsibly, making sure that we take account of the views of people in the sector. As I mentioned, we will consult on exemptions through the consultation. It is not just a question of our discussing the matter today; it is important that we speak to as many stakeholders as possible, given that there are different interests. One of the reasons why we are bringing out the consultation is to talk about exemptions.

Many of my constituents will have found yesterday’s UK Government budget disappointing due to the lack of action to correct insufficient local housing allowance rates. With some rents for one-bedroom flats in Edinburgh being more than £1,000 a month, will the minister set out why rent controls are key to stabilising rents and protecting tenants’ bills in Scotland?

Families who rely on housing benefits to cover their rent need certainty to be able to plan for the future and put down roots. As I mentioned in my answer to Mr Griffin, the UK Government’s decision to maintain the freeze of LHA rates leaves families in an uncertain position, and I regret that it did not change that. Rent controls will give some certainty around that.

The Scottish Government has repeatedly called on both the previous Tory Government and the new Labour Government to link LHA rates to real-world rents. It is really disappointing that the Labour Party has not done that, and I hope that Mark Griffin will continue to push his UK colleagues on that. If families cannot rely on UK Government assistance with their housing costs, rent controls will become even more necessary to help families to know whether they will be able to turn the heating on or feed their children.

The minister will know that effective rent controls require detailed and comprehensive supporting measures. When rent controls were introduced in Glasgow more than a century ago, it led to a collapse in factoring of tenement stock in the city. Will the minister ensure that, in introducing rent controls, he also expedites measures such as mandatory owners associations, five-yearly tenement building inspections and compulsory building reserve funds to ensure that we do not see a decline in the quality of our housing stock?

One of the main reasons why we are consulting is that very reason—to make sure that the legislation will have no unintended consequences. The reason why we are doing the consultation is to raise and speak to the points that Mr Sweeney has raised. I look forward to discussing the matter with him, if he wishes to do so, in the future.

That concludes questions on the ministerial statement. There will be a brief pause to allow the front-bench teams to change before we move on to the next item of business.