One key aspect of the Housing (Scotland) Bill, introduced in the Scottish Parliament in spring 2024, was the proposed rent controls and rent increase restrictions within the Private Rented Sector. The proposals raised concerns amongst private landlords in terms of their ability to cover rising costs, including those associated with maintenance, energy, costs and inflation.
On 31 October 2024, in response to feedback from stakeholders, the Housing Minister made an important announcement on proposed amendments to the Bill, with its aim to clearly set out how rent increases will be capped in areas where rent controls apply.
The key detail of the Stage 2 amendment is that the proposed rent control levels will be limited to the Consumer Price Index (CPI) rate of inflation plus 1% with a maximum cap of 6% annually.
The proposal would allow landlords to increase rents based on the annual CPI, but with the addition of 1% to account for rising costs. However, regardless of the level of CPI inflation, the maximum allowable rent increase would be capped at 6%. For example, where the CPI is 2% the rent increase would be capped at 3% (CPI + 1%). However, where the CPI exceeds 5%, the rent increase is limited to 6% of the existing rent.
If approved, the rent cap will apply to rent increases during the term of the tenancy as well as in between tenancies and will only apply in areas where rent controls apply.
Housing Minister, Paul McLennan, in his statement to the Scottish Parliament said “…this amendment responds directly to calls for greater certainty and will offer more clarity to tenants, landlords and those who invest in and develop rented homes”.
This proposal aims to allow some flexibility for landlords to ensure they can adjust rents in line with inflation and rising costs while striking a balance with tenant protection.
Please note that the Bill is yet to be passed by Parliament. A consultation will also take place in spring 2025 on how rent control exemptions should be applied if created by Parliament.
