The Scottish Government has confirmed that temporary rent caps and restrictions on rent increases will be withdrawn from April 1, 2025. But
what does that actually mean and what sort of impact will that have? We spoke to Jonathan Gordon, Director at Clan Gordon Limited, who explained the situation more fully in our latest blog.
What are rent controls – is it just relevant in Scotland or UK-wide?
Scotland has completely different legislation to the rest of the UK for most tenancy issues. All new tenancies since 1 December 2017 (other than social housing) must be Private Residential Tenancies (PRT) and that’s what we’ll cover here.
Tenants have always been able to challenge rent increases in their PRT if they think it is too high and can apply to have their rent set by the First-tier Tribunal (Housing and Property Chamber) at what they consider to be the market rent. It is very unusual for tenants to do this.
Post Covid and Cost of Living crisis the Scottish Government announced an immediate ban on rent increases from 6 September 2022 to 31 March 2023 – worded as a cap of 0% on increases – and a ban on evictions. You could still end a tenancy with notices and, if the tenant left, that was fine but if they did not, any eviction would not be allowed.
There was a provision for a landlord to apply to a Rent Officer for a rent increase during the rent cap period, but only in certain circumstances. These circumstances included where a landlord can evidence an increase in certain ‘Prescribed Costs’ such as higher mortgage repayments, with increases being limited to 3% of the rent OR to 50% of the increase in ‘Prescribed Costs’, whichever was lower.
The legislation was extended until 31 March 2024, but with a rent increase cap of 3% instead of 0%, and allowed landlords to apply for 6% re the aforementioned ‘Prescribed Costs’.
On 1 April 2024 a tapering formula was introduced – if the application to the rent officer was made BEFORE 1 April 2025, the rent officer must apply a tapering formula to the increase. If the increase proposed by the landlord is higher than that allowed through the tapering formula, then the rent officer will set the rent at the lower level. The tapering formula will only apply if the tenant challenges the increase. If they don’t, then the amount proposed by the landlord will take effect from the end of the notice period.
These rent control measures are being ended on 31 March 2025 though tenants will still be able to apply to the tribunal per the original PRT legislation to have rent set at a market rate if they think it is too high.
Why are the regulations changing?
It’s hard to say but perhaps changes to parliamentary arithmetic – the Green Party, which proposed the original controls, is now no longer in government.
Who does it affect?
All private residential tenancies except some created before 1 December 2017. It only applied/applies to mid tenancy increases – landlords are free to advertise at whatever rate they like for new tenancies.
Does this change affect house purchases?
It does not but if there is a tenancy in place whilst it is being sold it would have been harder to end a tenancy/evict the tenants. Any buyer of a property with sitting tenants would take on the restrictions in rent increases.
Is the change generally good or bad for the housing market?
Landlord bodies and letting agent bodies obviously believe it is bad for everyone, that it is encouraging landlords to sell which is reducing supply in the market and so increasing rents.
What it definitely did was increase the likelihood of landlords and agents raising rents as soon as the cap was lifted/tapering was introduced when they might otherwise have not increased rent on existing tenancies.
Will it all change again when the Housing (Scotland) Bill comes into effect in 2027?
Yes, but that depends what changes occur to the Bill – it was drafted when the Green Party were in government and the feeling is it may now be altered a bit.
For more information on ‘tapering’ see https://www.gov.scot/news/continuing-rent-protection-for-private-tenants