Meeting of the Parliament

Meeting date: Thursday, January 12, 2023

Official Report 1262KB pdf

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Cost of Living (Tenant Protection) (Scotland) Act 2022

The next item of business is a statement by Patrick Harvie on the Cost of Living (Tenant Protection) (Scotland) Act 2022. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.

14:28  

I am pleased to be able to make a statement to Parliament today to accompany publication of the first of the Scottish Government’s three-monthly reports on the Cost of Living (Tenant Protection) (Scotland) Act 2022, covering the period 28 October to 31 December 2022.

The Parliament will recall that we took emergency legislative action in October last year to provide critical, time-limited protection for people who rent their homes. People renting their homes have, on average, lower household incomes and higher levels of poverty and are more vulnerable to economic shocks—63 per cent of social rented households and 40 per cent of private rented households do not have enough savings to cover even a month of income at the poverty line, compared with 24 per cent of households that bought with a mortgage and 9 per cent of households that own their home outright.

With that context in mind, the 2022 act has three key aims: to protect tenants by stabilising their housing costs through the rent freeze; to reduce the impact of evictions and homelessness through a moratorium on evictions; and to avoid tenants being evicted from the rented sector by a landlord wanting to raise rents between tenancies during the temporary measures and to reduce the number of unlawful evictions.

The provisions are in place until 31 March, but the Scottish ministers can, with the approval of the Parliament, extend them for two further six-month periods, should circumstances and evidence show that to be necessary.

From our constituents across the country, we all continue to hear about the unprecedented challenges that are being faced by people across Scotland due to the on-going cost of living crisis. The unprecedented economic position has not yet changed fundamentally, and I know that many households that are on low or modest incomes continue to struggle. People face increased costs across the board, but the biggest impact is felt by people who are on the lowest incomes. The Office for National Statistics estimated that inflation for low-income households was 11.9 per cent in October 2022, leaving many people struggling to cope.

The current economic situation is a key part of our on-going review of the emergency act. Similar to the approach that we took to the coronavirus emergency legislation, we committed to reviewing and reporting on the on-going necessity and proportionality of the act’s provisions. The Parliament will recall that, during the passage of the bill, in recognition of the distinctive ways that the rent cap provisions would impact social rented sector landlords in particular, the Government lodged a stage 3 amendment in which it committed to setting out its intentions, beyond 31 March, for the rent cap provisions relating to the social rented sector in its first report to the Parliament and no later than 14 January.

That is where I will start. I have been clear from the outset that I want to work with the social rented sector to seek an agreed way forward as an alternative to the continuation of the rent cap beyond March 2023. The Parliament will be aware that we have been working closely with a range of social rented sector organisations, including the Convention of Scottish Local Authorities, the Scottish Federation of Housing Associations and the Glasgow and West of Scotland Forum of Housing Associations, through a task and finish group. Statements of intent were published late last year by COSLA, which confirmed local authorities’ commitment to keeping rent increases in April 2023 to an average of no more than £5 a week, and by the Scottish Federation of Housing Associations, which reported that its members are consulting with tenants on a set of increases in April 2023 that will average 6.1 per cent.

Although I anticipate that many rents will be increased at a level that is well below those figures, the agreement to set out average figures rather than a fixed cap allows for flexibility for social landlords to respond to their consultations with their tenants, which are part of their statutory responsibilities as landlords. Some social rented sector landlords might, for specific reasons, have to go beyond those rent levels—for example, to allow for planned improvements or maintenance to proceed as agreed through tenant engagement. That will allow for the statutory tenant consultations that are currently taking place to be taken into account in housing associations’ business plans and local authorities’ housing revenue account plans. No social landlord is consulting on a rent increase that is at or above consumer prices index inflation, which was 11.1 per cent when the data was collected. In the light of the voluntary agreements that have been reached across the social rented sector, I can confirm that we will introduce legislation to expire the social rented sector rent cap provisions from March 2023.

Having set out the position on social sector rents, I will turn to how other parts of the emergency act and other parts of the rented sector will be affected. The report to the Parliament that the Scottish Government has published today sets out that the Scottish ministers have undertaken a review of the provisions in part 1 of the act in order to consider whether they remain necessary and proportionate in connection with the cost of living. The first report considers the status of measures through to 31 December—the initial period that was covered by the legislation—and alludes to what factors might be taken into account after 31 March to determine the on-going necessity of the measures, which will be subject to a separate parliamentary process later this month.

At the end of the first reporting period, it is clear that the unprecedented economic challenges are continuing to have an acute impact on those who rent their homes. Therefore, having considered the outcome of the review, the Scottish ministers are satisfied that the status of the provisions in part 1 of the act is appropriate at the end of that reporting period. That will be kept under review.

On the next issue, although the Scottish Government is committed to expiring or suspending specific provisions when they are no longer necessary, emerging evidence on the cost crisis makes it likely, at present, that some provisions of the act will be required after the current expiry date of 31 March 2023. For example, to continue to reduce the impacts of eviction and homelessness on tenants in the social and private rented sectors, it appears crucial for the current moratorium on evictions to continue with, of course, the safeguards that were put in place last October.

In addition, the Parliament will be aware of the distinct differences in operation between the social rented sector and the private rented sector. Private renters still face economic challenges, and there is not the opportunity to agree a collective voluntary approach in the private rented sector, given the sector’s very different nature. I therefore anticipate that it will remain necessary and proportionate to extend beyond 31 March the rent cap provisions in the private rented sector, although I recognise that the act gives the power to vary what the cap is.

The rent cap in relation to student accommodation is also being considered—particularly in the light of the evidence that shows that it is having a very limited impact because of the different way in which such tenancies are managed. I hope to set out our intentions on that very soon.

We will continue to weigh up all such matters and bring them back to Parliament soon with specific proposals that are based on the most up-to-date evidence that is available. The decision on whether to extend is for the whole Parliament to make, and we look forward to hearing the outcome of the future consideration of such matters.

As is required by section 9 of the act, the Scottish ministers have conducted a review of the provisions in part 1 and have prepared a report. We are satisfied that the status of the provisions that are set out in part 1, as at 31 December 2022, remains appropriate. We have also undertaken a review of the associated Scottish statutory instruments. The Scottish ministers are also satisfied that the status of those SSIs, at the end of the reporting period, is appropriate.

The provisions that we report on today are one part of Scotland’s on-going response to the cost of living crisis. The Government will continue to do our duty to report and to be held accountable to Parliament for the use of the powers. We welcome the opportunity to engage with MSPs as the first report is considered.

The minister will now take questions on the issues that were raised in his statement. I intend to allow about 20 minutes for questions, after which we will move to the next item of business.

It is clear from the statement that the Scottish National Party, Green and Labour emergency rent legislation is rapidly becoming an unmitigated disaster. Scottish Conservatives warned MSPs that the impact would be destabilisation of the social and private housing sectors, but ministers pressed ahead anyway.

I very much welcome the removal of the social rented sector from the provisions, but the damage has been done. What does that mean for people who rent in that sector? Instead of an average rent increase of 6.1 per cent, they could have an increase of up to 11.1 per cent. The Government is driving rents up at the same time as it is saying that it wants to do something to help.

What has the minister given the private rented sector today? That sector is in the dark about its future.

I will ask the minister two simple questions. What assessment have ministers made of the legislation’s impact on private rental properties not coming to market? Here, in the capital, that is driving the housing crisis, and the situation will get worse as autumn approaches and student housing changes over.

The minister says that he has listened to and taken on board the pressures that affect the social rented sector; the same pressures apply to the private rented sector, and he should understand that. Given that, why will the cap and continuing ministerial powers over the private rented sector not negatively impact on the number of homes, on rent levels and on the number of people who can find an affordable property to rent?

I am sorry that it appears that Miles Briggs did not listen to part of my statement. I made it clear that, in the social rented sector, the position of COSLA and the SFHA means that we are looking at an average increase of no more than £5 a week, or 6.1 per cent, in those two parts of the social rented sector.

Given the concerns that were expressed by members across the chamber about the need to balance protection for tenants with protection for social housing providers—so that they can invest in the quality of homes, in maintenance and in supply, as well as in the wider services that they provide—I would have hoped for a strong welcome for the fact that we have reached an agreed way forward with the social rented sector, but that does not seem to be the case with Mr Briggs. He describes the legislation as a disaster, but I think that it would have been a disaster if Parliament had not taken the action that we proposed and tenants, particularly in the private rented sector, who had been landed with 10, 20, 30 or even 40 per cent rent increases, continued to be exposed to that kind of practice. That is still happening south of the border. It is not happening here as a result of the actions that we have taken.

Some of the other questions that Mr Briggs raised are about either the measures that we will bring forward later this month in relation to the future of the cap for the PRS or, indeed, the longer-term work that we are doing to reform the rented sector. Again, although it might already be forlorn, I express the hope that Mr Briggs will join other members in recognising that the rented sector needs continued attention and legislation to ensure that, in the future, people’s human right to decent, adequate and secure housing is met in a way that it has not, so far, been met for everybody.

I draw members’ attention to my entry in the register of members’ interests, as I am the owner of a private rented property in the North Lanarkshire Council area.

In November, the minister reiterated that the freeze legislation is temporary and can be extended only for two further six-month periods. We know that landlords are already preparing increases to be introduced once the freeze ends. The ONS said that, by November, private rent increases were at their highest level since the office started collecting data in 2012. The long-promised rent controls need to seamlessly dovetail with the end of that legislation.

Can the minister commit to ensuring that the housing bill passes and that the controls are introduced in time for the expiration of the provisions in the legislation? Although the moratorium on evictions continues, our monitoring information shows that the tenant hardship grant fund has only £2.5 million left and that 11 councils have spent the entirety of their funds. What does the Government plan to do to review that fund, so that tenants who are building up arrears through the evictions moratorium do not face a cliff edge when that moratorium also expires?

I thank Mark Griffin for his questions, which raise substantial issues that are of concern to us. We want to ensure that the tenant grant fund is achieving the greatest possible benefit for those who need it. We are actively engaging with local authorities around the guidance on how that can be delivered as effectively as possible. I hope that we can rely on the support of Labour to achieve that objective.

In relation to the longer-term reform, of course, we discussed some of that during the debates on the bill. I know that Labour understands that the emergency legislation needs to be justified in the context of the on-going economic circumstances of the cost of living crisis, and there is a requirement in the legislation for us to continue to assess and report on its necessity and proportionality. If we were not doing that, there would, understandably, be much more danger of the measures being challenged. For the time being, we are satisfied that they remain proportionate and necessary. We will have to keep that under review and that review is why we cannot give an absolute guarantee about what the subsequent decisions will be at later six-month periods. However, the legislation includes a mechanism to reform the adjudication methodology so that we can have a bridge into the longer-term work that will be taken forward later in this parliamentary session.

I thank the minister for his statement and I welcome the decision on the social rented sector. I do not agree with the Conservative assertions on rent, especially following discussions with my local authority. What discussions have been held with COSLA since the introduction of the act and what key issues were raised?

Even before we had the final debates in Parliament on the legislation, we had begun an active engagement with COSLA, as well as with social housing providers in the housing association field, through the task and finish group that I mentioned in the statement. Many of the issues that those providers raised were also raised by parliamentarians from across all the political parties in Parliament.

We all understand that the social rented sector does not exist to make profit; it reinvests rental income for the benefit of tenants and the wider community. Affordability is built into the way in which it operates, and it sets rents in a different way from the private rented sector. Representatives of the social rented sector wanted us to understand that, and we wanted to assure them that we do so, we take it seriously and we want to work with them not just on protecting tenants in the here and now but on investing for the future in adequate supply and, of course, the transition to net zero, all of which requires them to be able to manage and plan for their investments. I am pleased that we have been able to reach agreement with the sector. I hope that members across the chamber will be reassured by that.

I am genuinely concerned about the potential risk of the extension of the current approach in the private sector. I have no interests to declare, but I know that, according to quantitative and robust research data from the private rental market, agents tell us that there has been a marked increase in the number of landlords who are seeking either to sell their properties or to increase rents between tenancies. That will surely have a knock-on effect on future rentals. Does the minister think that the situation will only get worse as a result of the extension? What consultation did he have with the private rented sector in advance of making today’s decision?

We have certainly been in regular dialogue with representatives of the private rented sector, who I have to say included not only landlords and investors but tenants, whose voices also deserve to be heard. We have maintained that dialogue. Clearly, when we debated the bill the Conservatives opposed the principle of having a rent cap in the private rented sector. They are entitled to that view. However, I would point out what has been happening to rents in the private rented sector south of the border in the absence of such measures. Rents have been rising at a faster rate than has been seen for a long time. Supply is also deeply challenging. The concentration of property wealth among those who own multiple properties as landlords, or as businesses that operate as landlords, has more than doubled in 10 or 20 years.

The situation in Scotland therefore requires longer-term reform, which the Government is committed to undertaking. However, I suggest to Jamie Greene that he should recognise that, in the absence of such measures, we would be seeing a far more unacceptable position for tenants in Scotland.

A number of members wish to ask questions on the statement. We will have to pick up the pace on both the questions and the answers.

As part of the regular monitoring of this vital emergency legislation, has the Scottish Government been working with Rent Service Scotland and the First-tier Tribunal to examine the volume of exceptional rent increase applications by landlords and challenges by tenants?

We have been actively engaged in doing so. We believe that the number of applications for using the prescribed costs available has been relatively low. However, we are continuing to work with the organisations that are part of the landscape and the machinery of delivering that form of protection for landlords, given that not all landlords are in the same financial circumstances. We will continue to keep the issues under close consideration as we move forward with the short-term measures and the longer-term work on reform.

For as long as tenants have campaigned for a rent freeze, private landlords have been threatening to sell up in response. Reports of a rise in the number of landlords doing so therefore come as no surprise. What systems has the minister put in place to monitor such sales and any subsequent evictions to verify such claims? Let us remember that landlords who have sold up have been able to do so thanks to the eviction exceptions that the Government included in the legislation. Will the minister tell us how many of the properties sold has the affordable housing supply programme supported the purchase of, to bring them into public ownership and remove any need for evictions?

I know that Mercedes Villalba well understands that the exceptions were necessary to demonstrate that the protection against evictions could be presented as a defensible and proportionate measure that the Parliament was capable of passing. I point out that the exceptions do not include the simple desire to make a profit: landlords cannot apply for evictions by using that as an exception to the rule at the moment.

We must work towards a housing system that is fair and equitable and that meets people’s human right to adequate housing. On the need to achieve that, I know that Mercedes Villalba and I have more in common than separates us. I hope that we will continue to work together with Labour colleagues, as we did during the passage of the emergency legislation, to achieve that.

Pitch fees—the equivalent of rents for park home occupiers—are not covered by the legislation. I have constituents who are facing demands for a 14 per cent increase in pitch fees this year. Given that they are all older people, most of whom are on fixed incomes, that is outrageous.

I am aware of the planned consultation on changing the basis for pitch fee increases from the retail price index to CPI ahead of the forthcoming housing bill, and I very much welcome that. However, are there any additional short-term measures that the Government might explore to afford people in that situation some degree of protection?

I thank Graeme Dey for raising that issue, which he has done previously. The Government’s wider support to people in its cost of living response goes far beyond the measures that were included in the Cost of Living (Tenant Protection) (Scotland) Act 2022. I encourage him—I am sure that he is already doing this—to refer any of his constituents who have concerns about it to the Government’s wider cost of living website to identify forms of support that they might be able to access.

Pitch fees are not private residential tenancies, so it would not have been possible or appropriate to include them in the 2022 act. However, we accept the argument that there needs to be a review of that inflation measure, and we will consult on that very soon.

The minister is right about social housing. However, he did not mention mid-market rent in his statement, so I would like some clarity on that. Kingdom Housing Association tells me that, if the rent cap is applied to that tenure, it will reduce the number of MMR properties that it is able to develop. Hillcrest Homes says exactly the same. I have written to ministers several times on the issue and they have been kind enough to reply, but I am none the wiser as to what the policy is. Will the minister clear up what is happening to mid-market rent?

I thank Willie Rennie for that question, which raises a substantive issue. Mid-market rent homes are rented out as private residential tenancies. They do not fall within the social rented sector part of the legislation; they are private residential tenancies and, therefore, they are treated in that way.

It is really important to mention that, whether it is a social landlord or any other developer looking to provide new homes, the emergency legislation affects in-tenancy rent increases; it does not affect the rent setting for new homes. Given that the legislation can be in operation only for a further two six-month periods after the initial period, no developer that is looking to provide new homes should consider it a barrier to setting rents in the first instance for new homes. It is about the setting of rent increases within tenancies, which, in any case, can take place only once a year. It should have marginal to no impact on any developer that is looking to decide how much investment it puts into the provision of new homes.

The minister has highlighted the decisive action that has been taken by the Scottish Government to protect tenants through these harshest months of the cost of living crisis. The swift response sits in the context of a firm commitment to introduce long-term rent control action, which no other part of the United Kingdom has come close to matching. Will the minister say how the current response might flow into the longer-term commitment, perhaps by changing the way in which tenants can challenge future rent rises?

I am grateful to Ariane Burgess for that question. It is clear that Scotland is the only part of the UK that has taken these necessary measures. In fact, even when challenged by Plaid Cymru, the Welsh Government decided not to take bold action to protect tenants in this way.

The longer-term rented sector reforms that Ariane Burgess refers to are extremely important to me, and we are already working hard to develop proposals. We need to ensure that there is a bridge between the emergency legislation and the longer-term work. The changes to the rent adjudication methodology that the emergency act allows us to take forward in future will achieve that. If we simply return from the rent cap to open-market considerations, that could create an extremely damaging cliff edge. The adjustments to the rent adjudication methodology will provide the way forward to the longer-term work.

The Cost of Living (Tenant Protection) (Scotland) Act 2022 was a crucial and ambitious intervention during one of the hardest winters in recent times, but, for the long-term sustainability of the rented sector in Scotland, tenants and landlords will be looking towards the upcoming new deal for tenants. Can the minister assure Parliament that work is continuing to be done towards the implementation of a fairer rented housing system?

Absolutely. Several members have asked about that. We remain absolutely committed to bringing forward the new deal for tenants proposals, which the Government has already consulted on.

I want to again place on record, as I did during the debates on the Cost of Living (Tenant Protection) (Scotland) Bill, my appreciation for the incredible hard work and energy that have been put into addressing the issue by officials in the Scottish Government, who had a great deal asked of them to deliver such groundbreaking emergency legislation and to continue to work on developing the longer-term legislation. I look forward to being able to introduce that legislation to Parliament and to its being scrutinised by members of all parties.

The economic consequence of rent control is probably the least disputed of any economic theory: it drives out private landlords and drives up homelessness.

I will give a case in point, and I would like the minister to respond. Last September, the University of Glasgow, under the threat of rent controls, told students, “Postpone your courses—don’t turn up,” because of the shrinkage in the capacity of the Glasgow rental housing market.

Briefly, Mr Kerr.

So, what is being done now by the Scottish Government and its ministers to ensure that we do not have an even more severe problem this coming September?

I certainly disagree with that analysis. The idea that the serious challenges with regard to student accommodation, which have been experienced for years in Scotland and have been growing south of the border, too, relate to emergency or longer-term work on rent controls in Scotland is simply spurious.

There are other European countries with a private rented sector that is larger than ours by share of the housing stock that have had rent control systems in place for decades. High-quality, affordable, sustainable and secure housing is absolutely affordable. Further reform is required.

My final point to Mr Kerr is that the thing that is least disputable about the situation is that, if we had not taken action, tenants in Scotland would have been lumbered with the same kind of excessive, eye-watering increases that tenants south of the border are living with.

I was against enforced rent freezes in the social rented sector. I welcome the fact that that will not happen, and I acknowledge the statements of intent from housing associations, in which they say that rents will go up not by the level of inflation, which sits at around 11 per cent, but by an average of 6.1 per cent. That would represent an average increase of £3 a week and would secure £170 million to invest in the sector.

How will the Scottish Government monitor how housing associations implement those rent rises, the average of which is 6 per cent, given that some tenants could face a far more significant increase?

I ask you to be as brief as possible, minister.

We will actively engage with the whole of the social rented sector—housing associations and local authorities—to monitor the implementation of rent rises and to understand the impact on tenants.

Mr Doris is right to say that the agreement that we have reached means that the average rent increases will be low. We are all aware of the distinct nature of the social housing sector and its hugely important value to communities across Scotland.

That concludes that item of business. I apologise to the member whom I was not able to call.