A new era for tenants but a blow for investors
In a move described as “historic” by proponents and “reckless” by critics, the Scottish Parliament has passed sweeping housing reforms that will, for the first time in nearly four decades, allow councils to cap rent increases in designated areas. The Housing (Scotland) Bill, passed by 89 votes to 28, marks a significant shift in the country’s approach to the private rented sector and is likely to reverberate across the British housing market.
Under the new legislation, Scottish ministers may designate “Rent Control Areas” where local authorities can limit annual rent increases to one percentage point above inflation, capped at 6%. The measure, expected to take effect by 2027, is being hailed by the Scottish Greens as a “first stage of the new deal for tenants.” However, the controls will not apply to mid-market rent, build-to-rent properties, or student accommodation, a concession to developers and investors who argued that blanket controls would stifle much-needed housing investment .
Temporary rent freezes, introduced during the pandemic, expired earlier this year. The new bill thus establishes a permanent framework, though the details will be fleshed out in secondary legislation.
A broader reform package
The Bill’s scope extends beyond rent controls. It introduces a duty - dubbed “ask and act” - on public authorities, including councils, police, and the health service, to intervene earlier when individuals are at risk of homelessness. Councils will now be required to act up to six months before homelessness is imminent, rather than the current two months.
The legislation also incorporates “Awaab’s Law,” obliging landlords to address health hazards such as damp and mould promptly, following the tragic death of a toddler in Rochdale in 2020. Other measures include new rights for tenants to keep pets, make changes to their rented homes, and updated protections for victims of domestic abuse .
Political and sector reactions
Housing Secretary Màiri McAllan described the passage of the bill as “a landmark moment for how we prevent homelessness in Scotland,” adding: “Families across Scotland will have the confidence that their rented home will be free from damp and mould as we take forward work to implement ‘Awaab’s Law’.”
The Scottish Conservatives, however, refused to back the bill. Housing spokeswoman Meghan Gallacher warned: “If returns are capped permanently, if revenue streams are constrained, then the very incentive to build disappears. It is a simple economic fact – rent controls do not build homes, they prevent them”.
Industry and tenant voices
The property sector remains divided. The Scottish Property Federation welcomed the balance struck between attracting investment and protecting residents, but warned that uncertainty during the bill’s passage had already stalled investment. Robin Blacklock, Interim Director, said: “We have found a balance between attracting investment and protecting residents: inflationary linked uplifts in Rent Control Areas protects tenants with the CPI+1% mechanism capped at 6%; while the exemptions from rent controls for the Build to Rent sector and mid-market rent housing recognise the need for large-scale investment into the sector.”
Tenant campaigners, however, argue the bill is a diluted compromise. Ruth Gilbert, national campaigns chair for Living Rent, said: “The housing bill is an important step forward but given the extent of the housing emergency it is the bare minimum tenants need. Over the last few months, the government has capitulated to the demands of landlords and has gutted the housing bill of key progressive mechanisms.”
Implications for UK brokers
For mortgage brokers in the UK, Scotland’s reforms offer a glimpse into the future of rental regulation that may influence policy debates south of the border. The Scottish model—tying rent increases to inflation, with a modest cap and significant exemptions—seeks to balance tenant protection with continued investment in housing supply. Yet, the mixed reactions from both landlords and tenant groups highlight the challenge of crafting policy that satisfies all stakeholders.
