Cost of Living (Tenant Protection) (Scotland) Act 2022
North Lanarkshire Council · 16 November 2022
Back to Housing Committee — 16 November 2022 and its agenda
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North Lanarkshire Council Report Housing Committee Does this report require to be approved? ☐ Yes ☒ No Ref SL/ MK Date 16/11/22 Cost of Living (Tenant Protection) (Scotland) Act 2022 From Stephen Llewellyn, Head of Housing Solutions E-mail llewellyns@northlan.gov.uk Telephone 01698 274192 Executive Summary As part of the 2022-23 Programme for Government, the Scottish Government announced its intention to introduce a temporary rent freeze and moratorium on evictions which would be applicable to both private and social sector tenancies. This is being implemented through the Cost of Living (Tenant Protection) (Scotland) Act 2022, which came into force on 27 October 2022. The provisions of the Act will remain in force initially until 31 March 2023. However, the provisions can be extended by regulations to 30 September 2023 and, thereafter to 31 March 2024. The Scottish Government will confirm by 14 January whether the provisions will continue beyond 31 March 2023. This report outlines the details of the measures contained within the Act and potential implications across the wider housing sector. Recommendations It is recommended that Committee: (1) Note that the Cost of Living (Tenant Protection) (Scotland) Bill 2022 was passed on 6 October 2022, received Royal Assent and became an Act on 27 October 2022. (2) Note the requirements set out in the Act will be in place until the end of March 2023, although they can be extended beyond this period for up to a year, and that, the Scottish Government will confirm by 14 January 2023 whether these provisions will continue beyond 31 March 2023. (3) Note the potential implications arising for the council and wider housing sector in North Lanarkshire. (4) Note that any future extension of measures contained within the Act if enacted beyond 31 March 2023 to be reported to a future Committee. The Plan for North Lanarkshire Priority Improve economic opportunities and outcomes Ambition statement (11) Increase economic opportunities for adults by understanding, identifying, and addressing the causes of poverty and deprivation and barriers to financial inclusion
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1. Background 1.1 On 6 September 2022, the Scottish Government published “A Stronger and More Resilient Scotland: the Programme for Government 2022 to 2023”. The 2022-23 Programme for Government was published in the context of one of the most severe cost of living crises in recent history and sets out several short and long-term measures to help those impacted by the crisis. 1.2 The Cost of Living (Tenant Protection) (Scotland) Bill 2022 was introduced as part of the Scottish Government’s overall response to the cost-of-living crisis and aimed to help mitigate the impact for those renting their home. 1.3 The Bill was passed on 6 October 2022, received Royal Assent and became an Act on 27 October 2022. 2. Report 2.1 The Cost of Living (Tenant Protection) (Scotland) Act 2022 introduces temporary measures which are intended to: • Protect tenants by stabilising their housing costs. • Reduce any negative impact on health and wellbeing where tenants are evicted or made homeless when they are already struggling because of the cost-of- living crisis. • Avoid tenants being evicted by a landlord seeking to raise rents during the temporary measures. 2.2 The Act introduces three key measures: • A temporary cap on rent increases. • A temporary moratorium on evictions (a pause on enforcement of an eviction order or decree, similar to what was in place in response to the Covid-19 pandemic), except in a limited number of circumstances. • An increase to the damages which can be awarded in cases where a landlord carries out unlawful eviction. 2.3 The measures will be in place until at least 31 March 2023. Scottish Ministers will be expected to review the measures regularly during this time (every 3 months) to ensure they are still necessary and proportionate. The Act also includes the power to extend the measures for two further six-month periods beyond the end of March 2023, however this would require agreement from the Scottish Parliament. No agreement has been made about use of the measures after 31 March 2023. The Scottish Government will confirm by 14 January 2023 whether the measures will continue beyond 31 March 2023. Rent Cap 2.4 A rent cap has been introduced which sets the maximum permitted rate that rents can increase. The cap is set at 0%, meaning landlords are not allowed to increase their rent during this period. The cap is expected to remain at 0% until 31 March 2023, however Scottish Ministers will have the power to vary the cap in line with wider economic circumstances. Should the cap change, landlords will be allowed to increase their rent up to this amount.
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2.5 The cap is applicable to both social and private tenancies, with the exception of some assured tenancies, regulated tenancies under the Rent (Scotland) Act 1984, common law tenancies, and any new tenancies. 2.6 The cap applies to any rent increase proposed on or after 6 September 2022. It does not apply to any rent increase notice issued before this date. 2.7 Since most social sector rents are set from 1 April each year, the cap will have no immediate effect on the rent currently set by Local Authorities or Registered Social Landlords. The Scottish Government will discuss any approach to be taken beyond 31 March 2023. 2.8 In recognition of the impact these measures may have on private sector landlords, landlords will be allowed to apply to Rent Service Scotland to increase the rent for a property, provided they are able to show an increase in certain prescribed costs associated with letting the property. These costs are related to the interest payable on the mortgage or standard security, insurance premiums connected to offering the property for rent, and service charges recoverable from the tenant as part of their tenancy agreement. The landlord must notify the tenant of any application to Rent Service Scotland to increase rent. Moratorium on Evictions 2.9 The moratorium on evictions prevents the enforcement of an eviction order or decree for a maximum of six months (except in limited circumstances). The moratorium applies to both private and social tenancies. 2.10 Similar to the rules in place during the pandemic, the Act does not prevent landlords serving a notice to leave or notice of proceedings. Landlords are still allowed to apply to the Tribunal or Sheriff Court, and the Tribunal or Court will still make a decision. However, there will be a delay (of up to six months) in the Sheriff Officers enforcing the eviction order or decree. 2.11 There are limited circumstances in which evictions will be allowed to take place, including in cases of anti-social behaviour, criminality, abandonment, where there are substantial rent arrears, or in cases where landlords find themselves in financial hardship and are required to move into or sell the let property (this will be assessed by the Tribunal). 2.12 The moratorium will not apply to cases where an eviction order or decree was granted prior to the legislation coming into force. Increased Damages for Unlawful Eviction 2.13 Due to concerns that the measures may lead to an increase in unlawful evictions, changes have been made to the way in which damages can be awarded. 2.14 The Housing (Scotland) Act 1988 has been temporarily amended to: • Change the way in which damages are assessed so that they are based on a calculation of monthly rent. • Set the minimum and maximum level of damages that can be awarded to a minimum of 3 times the monthly rent and a maximum of 36 times the monthly rent.
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• Place a new requirement on the Tribunal or Sheriff Court to inform relevant authorities of any unlawful eviction (relevant authorities include the Local Authority, Police or Scottish Housing Regulator (in the case of social sector landlords)). Additional Points 2.15 The Act includes provisions to temporarily change the current rent adjudication process so that rents are not increased disproportionately after the temporary measures have ceased. 2.16 The Act does not apply to homes with pitch agreements. Potential Implications 2.17 Whilst it is recognised that these are unprecedented financially challenging times, which require an extraordinary response to mitigate against the damaging impacts of the current cost-of-living crisis, it is also recognised that these measures may present other unintended consequences, which would increase pressure across both the social and private housing sector and create potential adverse impacts for tenants. 2.18 From a local authority perspective, the Housing Revenue Account (HRA) makes a significant contribution towards delivery of several of the council’s ambitions. These include the: • Delivery of 5,000 new council homes by 2035 • Expansion of the Open Market Purchase Scheme • Investment and progression of the ongoing Tower Re-provisioning programme • Continued investment in improving and maintaining council homes through the capital programme, a 5-year programme, delivering £306m of investment in council homes over the 2021/22 – 2025/26 period, including £138m which is targeted at achieving our climate change and net zero goals, through energy improvement and efficiency measures 2.19 In setting the HRA budget and rent levels the council agreed to a rent increase of 5% for 2018/19 and for the three years up to 2021/22. The rent setting strategy set out a potential rent increase of 3% for 2022/23, considering the impact and recovery from the Covid-19 pandemic. This is significantly below inflationary increases. 2.20 The council’s rental levels have remained consistently below the Scottish average for local authority landlords and are even lower when all social landlords are considered, with average council rents ranging from 12% to 17% lower (1 and 2 apartment properties respectively, with other property sizes falling within this range). 2.21 The impact of wider inflationary rises on the HRA is evident with increasing cost pressures projected over the 2022/23 period and beyond. These cost pressures include increasing costs associated with contractual costs for the delivery of housing repairs, improvement works, and new supply, in addition to rising employee costs, loan charges, linked to increases to the Bank of England base rate, and other inflationary pressures, which include energy price increases and other contractual rises. 2.22 Given the increasing cost pressures, a potential rent freeze, would impact on the delivery of the priorities outlined in section 2.18. In addition to this, it may also impact on other service provision areas, such as tenant involvement and participation, estate management, rent arrears prevention and allocation functions.
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2.23 Although the new measures are in place until 31 March 2023, if the council approves a rent rise later this year, consideration will need to be given to the potential deferral of a rent increase from 1 April 2023 if the measures are extended beyond 31 March 2023. Consultation on any potential rent increase, however, must go ahead as planned to ensure the council is in a ready position to implement any approved rent increase should the measures end on 31 March 2023. 2.24 It is also of significance to note that a sizable proportion of council tenants are in receipt of either Housing Benefit or Universal Credit where the impact of the new measures will not affect their income levels, providing any additional protection from the cost-of- living crisis. Around 65% of council tenants are in receipt of some form of support for their housing costs with 35% in receipt of full or partial housing benefit and 30% transitional onto Universal Credit. 2.25 Registered Social Landlords (RSLs) will potentially experience all if not most of the aforementioned impacts, with potentially more significant impacts in some respects due to the nature of funding and resourcing of some activities, and additional costs in relation to how RSLs operate. The Chartered Institute of Housing (CIH) and Scottish Federation of Housing Associations (SFHA) have highlighted these concerns, setting out the risk of unintended consequences which will potentially undermine the Scottish Government’s ambition for the housing sector as well as having a negative impact on tenants’ housing outcomes. 2.26 Private landlord representative organisations have also raised concerns in relation to potential impacts associated with increasing interest rates leading to private rental properties being sold, reducing the supply of private rented accommodation available to meet housing needs. Concerns have been voiced by the sector which highlight the potential exacerbation of this trend, further reducing supply and creating other challenges in relation to improving the quality standards in the sector. 3. Measures of success 3.1 Balanced approach to addressing the cost-of-living crisis whilst ensuring the continued delivery of high-quality housing services to meet housing and related support needs. 4. Supporting documentation 4.1 N/A Stephen Llewellyn Head of Housing Solutions
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5. Impacts ( http://connect/report-template-guidance ) 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? The measures have significant impacts on Equality Duty and Fairer Scotland Duty. It is the responsibility of Scottish Government to complete and publish and EqIA outlining impact. If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality-and-fairer- scotland-duty-impact-assessments Yes ☐ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☒ No ☐ If Yes, have all relevant financial impacts have been discussed and agreed with Financial Solutions? The new measures present significant financial implications for the council. These implications are being fully considered by Financial Solutions and the Housing Service. Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People and Organisational Development? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☒ No ☐ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic Solutions? The Act brings about new legislative requirements for landlords in both sectors. These requirements and impacts have been discussed with Legal and Democratic Solutions. Yes ☐ No ☐ If Yes, please provide a brief summary of the impact?
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5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for technology, has an assessment been carried out (or scheduled) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ Not at this stage, however introduction of the measures will have a potential impact on delivery of energy efficiency and improvement measures in council stock, which has a consequential impact on the council’s ability to meet its Net Zero targets. If Yes, please provide a brief summary of the impact? 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.9 Risk impact Is there a risk impact? Yes ☒ No ☐ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g., Corporate or Service or Project Risk Registers), and how they are managed? Key risks are outlined in the body of the report and will be considered further through the rent setting process and confirmation from Scottish Government on the 14 January 2023 of intentions in relation to extension of measures beyond 31 March 2023.