Anna Evans gave evidence.

Straighten your ties, because we are now going to be on Zoom. We have until 3.20 pm. Please can you introduce yourself?

Anna Evans:

I am Anna Evans, director of Indigo House. We are a housing consultancy based in Scotland, but we cover the UK in terms of affordable housing research and consultancy.

Q Particularly given your experience in Scotland, it is valuable to have you as a witness. Your organisation talks about wanting to improve the effectiveness and affordability of the housing market. To what extent do you think the Bill will contribute to achieving those goals?

Anna Evans:

I am here as an expert on the Scottish private rented tenancy and the reforms that have happened in Scotland, so I do not think I could necessarily answer the question about what the Bill could do. So far, the legislation in Scotland, through the private residential tenancy, has failed to address anything on affordability. It brought in rent adjudication and what were called rent pressure zones, which local authorities had the power to determine. Those failed due to a lack of data, and the rent adjudication system has been effective for only about 230 tenants out of the 300,000-odd households in the private rented sector. The Scottish Government are looking to address that through the current Housing (Scotland) Bill, rent regulation and rent control, but to date, the legislation has done nothing for affordability.

Q That is enormously helpful, because clearly, the Bill is very similar to the legislative underpinning of what is going on in Scotland. We are also interested in how it will impact on regeneration projects and the ambition to deliver more housing—we know, for example, that the build-to-rent sector is interested in that. So we are interested in your perspective on how the Bill will impact the ability to deliver regeneration projects, or how the similar situation in Scotland has done so.

Anna Evans:

We have not examined that particular question, but in terms of supply, new build in the private rented sector in Scotland has probably stabilised rather than grown. Most of the growth in the private rented sector has been through the existing stock, and of course, there is growth in purpose-built student accommodation. There has not been a huge amount of new build and regeneration in the private rented sector, certainly over the last five years, but I do not think you could necessarily attribute that lack of growth solely to new tenancy. A huge number of other things have been happening in regulation in Scotland, and there is obviously the wider tax regime, too.

Q Final question: what are the main consequences you expect from the Bill for residential landlords and tenants in the private rented sector?

Anna Evans:

For tenants, the positives are a new foundation of rights and there should be more legal security. Tenants in Scotland enjoy open-ended tenancy and specific grounds for eviction, and there are longer notice periods. It is gradually moving to more of a contractual, rather than a subjective, relationship.

I should say, though, that there are very considerable differences in satisfaction between the general population of private rented tenants and the lower end, where lower income tenants or those who are more vulnerable are still disadvantaged. That is because of the overriding demand-supply imbalance. There is a fear among tenants about challenging, if they know that there are very few affordable alternatives on the market.

For landlords, I would say that they are generally settled with the private residential tenancy now—it has been in place for over five years, and they can see the consistency in practice and greater clarity in rights and responsibilities. Clearly, it is less flexible, but the difficulties that landlords have in Scotland are to do with subsequent legislation, and in particular, rent control.

Q Perhaps I can just check this, because I am not entirely clear: did your organisation author the Nationwide Foundation report?

Anna Evans:

Yes.

Q So I think it would be worth teasing something out, because it was an interesting report. To touch on what you just said, I took from the report that the tenancy reform in Scotland seven years ago had a number of benefits for tenants, but it has not adversely affected landlords. As you say, the system has bedded in and they have adapted to it. The shadow Minister said that this is largely the same set of reforms that happened in Scotland, so could I encourage you to touch on any differences between the approach we are taking in this Bill and the Scottish experience? Could you then perhaps touch a bit more on the specific impact of the rent control measures in Scotland—which we are not proposing—on that supply issue? I recognise that there is a wider supply question about the housing market in Scotland more generally, but what did your research suggest was the impact of the rent control measures that were introduced in Scotland?

Anna Evans:

I will take the rent control issue first. This was nothing to do with private residential tenancy; it was the result of emergency legislation on the cost of living, which was brought in in 2021-22. That brought in a rent increase freeze and then rent increase caps. If we look at the data following that on rent increases, there are arguments around this, but basically average rent increases have not frozen or been curtailed. Some would certainly argue that rent increases in Scotland have been greater than what you could see across the UK.

We should remember—I was looking at evidence on this earlier—that landlords, certainly in Scotland, usually increase rents at a change of tenancy, not on an annual basis. What happened when rent control came in, with a range of other pieces of legislation and regulation, was that it became more of a hostile environment—that is what landlords are saying—and so as a result, they tended to hike rents up more at a change of tenancy. But we have found that most landlords want good, stable tenants for a long time. Most actually do not increase rents during a tenancy, but only take the opportunity to increase rents at a change of tenancy, and because of the environment and the hostility that they were feeling, they thought they had better increase rents at change of tenancy. Does that answer your question on rent control?

Yes, that is very useful. Thank you.

Anna Evans:

In terms of the differences between your Bill and the private residential tenancy, I have to confess that I am not an expert on your Bill, so I cannot answer that in detail, but I can say that the PRT is an open-ended tenancy. It has no fixed-term period. There is the eradication of eviction with no grounds. Eviction proceedings are simplified to 18 statutory grounds and there has to be a reason—what are the grounds for eviction? There are extended notice periods and also a phased implementation. I think that is a key point. A lesson that the current Housing (Scotland) Bill is looking at is whether short assured and assured tenancies should actually just be terminated now because there has been long enough. There is still a good proportion of assured tenancies in existence—we estimate probably about 20%. Short assured tenancies are certainly less secure, so one lesson would be that if you are changing, do not do it over seven years; do not delay.

Q Since you are an expert on the Scottish system, I will make use of your expertise; I want to ask more about rent controls. In my understanding, when the Scottish Government initially brought in rent controls in tenancy, that was because that was all they had the power to do at the time—they brought it in using existing legislation, initially during the cost of living crisis triggered by the pandemic—and ultimately, that they might do something different. You mentioned the Bill going through at the moment. In your view, is there an inherent problem with rent controls, or could the problems that you described be remedied by having some kind of controls between, as well as within, tenancies?

Anna Evans:

I think what we have concluded from all of the evidence is that the rent control has to be very carefully designed to avoid unintended consequences. It is above my pay grade to say what that design might be, but there could be a range of ways in which landlords try to get around rent control. We have seen examples of offers from tenants—I understand that your Bill will avoid wars between tenants, in terms of rent levels, but because of demand-supply imbalance, tenants do offer landlords higher rents to get properties. Evidence across different states shows that rent control efficacy is variable, so it has to be very carefully designed.

Q You mentioned unintended consequences, a topic that I have come back to repeatedly today. We heard evidence earlier that rents in Scotland have outpaced those in the rest of the United Kingdom quite considerably in, I think, the last five years. You mentioned the 2022 rent control legislation and the impact that that has had on rents. If you can strip that out in your own mind and give us an assessment of what impact rent reform has had on rents over the past seven years, can you give the Committee a flavour of whether rents have gone up as a result, stayed the same, or reduced?

Anna Evans:

We show in the report that the rents increased at a similar rate to the rest of the UK until ’22. If you were trying to isolate why there was a more considerable increase since that time, you could probably fairly conclude that it was because of the 2022 legislation, but it is very difficult to isolate out. The range of legislation that has been implemented in Scotland is significant, but there was a tipping point in ’22 when rents in Scotland appear to have increased at a greater rate than in the UK. The key point was the 2022 legislation.

I should also caveat all of that—as we have in our report—by saying that the Scottish rent data is not as good. It is based on advertised rents rather than any survey of in-tenancy rents. The published data on rent levels and the hike in Scotland will be for new tenancies, and therefore, that will naturally be inflated compared with most tenancies, because we know that landlords do not tend to increase rents in tenancy. They prefer to keep them at a level that keeps tenants content and therefore they have a longer rental period. That evidence has to be considered with caution, because it is based on advertised rents.

Q Just for the eradication of any doubt, are you under the impression that the introduction of rent controls has led to an increase in rents?

Anna Evans:

As I said, I do not think it is possible to absolutely isolate this out, but on advertised rents—new advertised rents—there was an increase post 2022 when that legislation came in. But you must remember that that does not include evidence of in-tenancy rents, which would be lower. So we cannot say that all average rents have increased as a result of that—we cannot say that at all.

Q So you cannot say that all average rents have increased because of in-tenancy rents, and you do not have the data on that, but in terms of advertised rents, since the introduction of rent controls, you have seen an increase in Scotland?

Anna Evans:

Yes.

Thank you.

Would anybody else like to ask a question, very quickly?

I am interested in the experience you have on regeneration. Social housing ends up with quite a lot of funding going towards regeneration in a way that the private rented sector would not necessarily automatically qualify for, in my understanding. What do you think the provisions of the Bill would be on regeneration—Q [Interruption.] Oh, we have covered regeneration. I am interested specifically in enhancements that you might have in a social housing setting that would not automatically be available for private rented housing. Have you seen anything that the Bill might have an impact on in relation to that?

Anna Evans:

Not through this research, sorry; no.

That is fine; thank you.

Thank you very much indeed for your evidence, and I hope the weather is good in Scotland.

Anna Evans:

It is a beautiful day today.