The Political Landscape For Property In Edinburgh

Government policy has a significant effect on the rental sector in Scotland and there are a number of changes afoot in 2024 and beyond, including the end of the rent increase cap introduced during the pandemic.

Rent Increases

As things stand, we are currently still operating under the Cost of Living (Tenant Protection) (Scotland) Act 2022, whereby ‘in-tenancy’ rents can only increase by 3.0% at the annual review date.  This cap is set to end on 31st March as the act was always a short-term emergency act, and there cannot be extended further.

There has already been a consultation on a ‘new deal for tenants’ which we and many of our landlords submitted responses for circa two months’ ago.

However, ministers have been worried that rents may jump again if there is nothing in place by the start of April, given that the above ‘new deal’ and subsequent regulations are still in draft form and won’t be in place any time soon.

As a half-way house, a new consultation was published on the 15th December 2023 to suggest ways to sensibly transition out of the current 3% rent cap, and prevent a spike in rents immediately after 1st April.

In short, the existing and overarching ‘Private Housing (Tenancies) (Scotland) Act 2016’, which has governed the sector for the last eight years, has a provision which allows tenants to appeal to a Rent Officer if they feel that a rent increase proposed by their landlord is too high. The Rent Officer would then look at the proposed increase and adjudicate a rent which could be higher, lower, or the same as the proposed rent increase. This appeal and adjudication process has all been paused whilst the emergency act has been in place.

However, the 2016 Act does allow ministers to amend or alter the adjudication process, and this new consultation is basically suggesting that if a tenant were to take the case to rent adjudication, there would be a proposed new limit of 6.0% in any normal scenario, with additional higher rent increases up to a max of 15.0% where the current rent and market rent were significantly different.

The consultation reads as though the proposal is a rent cap at 6.0%, with contingencies.  But this would only apply if the tenant were to take the case to rent adjudication.  The key word here being the ‘if’.

Two thoughts here.  Firstly, outside of rent control measures, we would rarely suggest an increase of anything more than circa 5.0% anyway, unless there was a significant gap to market rent, which the proposed process recognises, and caters for, too.

Secondly, in the last seven years we have only seen one rent adjudication case, so it is very rare for tenants to undertake the process anyway.  Intuitively, this makes sense, because we only propose rent increases which are fair, reasonable and in keeping with the wider open market rates, negating any sense of unfairness from the tenant’s viewpoint.

It remains to be seen how this will play out, but this does seem like a softer and more sensible approach than some of the previous attempts to control an open free market, which, as the data above suggests, hasn’t helped tenants to see lower rental levels. Quite the opposite in fact.

Housing Bill

Beyond this, we are still expecting a new Housing Bill at some point in the current Parliament between now and May 2026 and will keep you updated as events occur. There may well be further movements on the topic of rent control but it’s worth noting that the noises being made feel and sound similar to the addition of the 'Rent Pressure Zones' (RPZ) element of the 2017 PRT legislation. This was effectively a concession to concerns in some ministerial quarters to provide a mechanism to allow local authorities to request an RPZ if they felt it necessary. The process requires a local authority to collect rental data and submit a report and request to the Scottish Parliament to have the RPZ authorised. So far, more than six years on, there has not been a single RPZ requested by any local authority throughout Scotland and none has ever commenced the task of collecting the necessary data and evidence to submit a request.

This new rent control discussion sounds similar so far, although it is worth noting that Government proposes to make the assessment of rents in their area mandatory for all local authorities and that may well require some relaxation in the data collection requirement so that Councils can meet the new requirement.

Incidentally, the RPZ formula, if used, basically caps rental increases at CPI + 1.0%. In other words, any RPZ would have allowed rent increases between 4.9% – 10.2% depending on which month the CPI was taken during 2023.

In summary, until the details come out, there’s a lot of signposting and little substance, but it's certainly not helping either landlords or tenants.

Short Term Lets

We’ve written a number of blog posts on this topic so it may be worth reading these for a bit of background information.

As matters stand, the City of Edinburgh Council has seen both its licensing policy and its planning guidance challenged through the Court of Session in the last six months. Under Judicial Review, Lord Braid ruled that the licensing policy was ‘illegal’, and then subsequently ruled that the planning guidance was ‘unfair and illogical’, effectively throwing out both documents and demanding that they be re-written. The licensing policy has now been changed, but the planning guidance is still to be rolled out.

The council had sought to effectively ban short-term lets from any property in a communal environment, e.g. a tenement or block of flats, unless the owner had planning permission for a ‘change of use’ from ‘residential’ to ‘short-term commercial visitor accommodation’, or a ‘Certificate of Lawfulness’ in lieu of planning permission if they had been operating for more than 10 years.

By 1st October 2023, owners needed to have either applied for planning permission and a licence, or stop operating until they had applied for, and received, a licence.

The Judicial Review rulings have opened a can of worms. Consider the operator running a successful business for a number of years, who stopped doing so based on the policy and guidance and didn’t apply for a licence before the 1st October 2023. They then found out that the policy was illegal and they could have continued operating, but now they can’t.

It remains to be seen where this will go next but it’s currently not clear what the STL landscape will look like after the dust settles.

If you have any questions about the laws and regulations surrounding landlords and rental properties, please get in touch with our highly knowledgeable team.