Rent Caps and the Moratorium on Evictions - An Update

In September 2022, Scottish Government announced a temporary rent freeze for existing tenancies and a prohibition on evictions for all rented housing (including student accommodation) as part of its measures to address the cost-of-living crisis.

In January 2023, rent freezes for social housing and purpose built student accommodation were suspended from 26 February 2023 and 30 March 2023 respectively. Rent freezes for the private rented sector were replaced from 1 April 2023 with a 3% rent cap (or up to 6% to cover specific costs). The prohibition on evictions (except in limited circumstances) across all tenures was also to continue.

Yesterday it was announced that, subject to approval in the Scottish Parliament, those rent caps and the moratorium on evictions for the private rented sector will continue beyond the end of September 2023 for a further 6 months, until 31 March 2024 at the latest. This is on the basis that Scottish Government have complied with the Cost of Living (Tenant Protection) (Scotland) Act 2022 (the "2022 Act") by reviewing and reporting on the continued requirement for these measures.

The 2022 Act provides that 31 March 2024 is the latest date that the emergency measures, such as rent caps and eviction bans, can apply. This means that as things stand, there can be no further extension of these measures beyond this date. In his statement, Tenants' Rights Minister Patrick Harvie MSP acknowledges that Scottish Government is now looking at how to transition out of the emergency measures provided for by the 2022 Act.

However, given that the Scottish Government is currently working on a Housing Bill which will include long-term rent control proposals for residential tenancies, rent controls will be here for the long term. The key question then becomes how will rent controls operate between the end of emergency measures on 31 March 2024 and the Housing Bill becoming legislation (which will be potentially in early 2025, although the timescale will be dictated by legislative processes)? This question was put to Mr Harvie today during a briefing for stakeholders. The answer was that a version of the emergency system whereby landlords seek the approval of Rent Service Scotland to increase rents up to 6% will continue to apply. It is not clear what the legislative basis for this will be, more details will presumably follow in due course.

We are now starting to see some positive activity from investors considering investment in this sector in Scotland. As such, we can only hope that any permanent rent caps introduced in future legislation will recognise that, whilst a stable rent cap at 3% may be borne by the investment markets, recent experience also tells us that any perceived risk of sudden change, without appropriate consultation will not create an enticing investment environment. Thorough consultation with all stakeholders will be required to develop a workable, fair, long-term system.