 Good morning and welcome to the eighth meeting in 2024 of the Local Government, Housing and Planning Committee, where I remind all members and witnesses to ensure that their devices are on silent. The first item on our agenda today is to decide whether to take item 8 in private. Are members agreed? We're all agreed. Thank you. We now turn to agenda item 2, which is to take evidence on subordinate legislation. The committee will take evidence on the following regulations. Cost of Living Tenant Protection Scotland Act 2022 expiry of section 10, extension regulations 2024. The Cost of Living Tenant Protection Scotland Act 2022 saving provisions regulations 2024. The rent, adjudication, temporary modification, Scotland regulations 2024. And we'll be hearing from Patrick Harvie, who's the minister for zero carbon buildings, active travel and tenants rights. Mr Harvie is joined for this item by Yvonne Gavin, who is the team leader at housing services and rented sector reform unit. Adam Kravchik, who is the head of housing homelessness and regeneration analysis. And Poppy Pryor, who is a Scottish Government solicitor, Yvette Shepard, who is the head of housing services and rented sector reform unit. I welcome the minister and his officials to the meeting and invite him to make an opening statement. Thank you very much, convener, and good morning to colleagues on the committee. I'm pleased to be here today to present a set of three regulations that will support the expiry of part one of the Cost of Living Tenant Protection Scotland Act after 31 March and to introduce some important measures that continue to support tenants from the first of April. Now, as colleagues know, the emergency act came into force on the 28th of October 2022, and since then it's continued to provide extra protection for tenants during very challenging economic times, including a cap on in-tenancy rent increases and a moratorium on the enforcement of evictions. However, the measures in part one of the act were only ever able to provide temporary support during the worst of the cost crisis, and the legislation has approved by Parliament in October 2022 clearly set out that it could not be extended beyond the 31st of March this year. So, to support part one of the emergency act coming to an end, we've laid the three regulations that you're considering today. The first of these, the Cost of Living Tenant Protection Scotland Act 2022, Saving Provisions Regulations 2024, is a negative instrument intended to facilitate a transition away from the emergency measures by saving certain provisions as they relate to processes commenced prior to 1 April. For the rent cap, certain Schedule 1 provisions would be saved for rent increase notices served before 1 April and any subsequent referrals, applications or appeals of them. For the temporary eviction grounds, these regulations will mean that any eviction notices served on these basis prior to 1 April can proceed or be appealed. Similarly, provisions will be saved for any actions for unlawful eviction raised before 1 April and any subsequent appeals. These provisions will be familiar to members from other time-limited legislation that we've passed previously. In effect, they mean that any actions started before the expiry date do not have to be restarted just because the source legislation itself has expired. Next, turning to the Cost of Living Tenant Protection Scotland Act 2022, expiry of section 10 extension regulations 2024, these are technical in nature. They're linked to the third set of regulations that I'll turn to shortly. This is an affirmative instrument. It modifies the emergency act to change the time when section 10 and by consequence, Schedule 3 of the act expire. It provides that instead of expiring at the end of 31 March 2024, as part 1 of the act will, section 10 and Schedule 3 will expire one year later at the end of 31 March 2025. In line with the requirements of the act, the Scottish Government has laid a statement of reasons to accompany this particular set of draft regulations. Finally, convener, the third set of regulations being considered today has engaged probably the most interests across rented sector stakeholders. The rent adjudication temporary modification Scotland regulations 2024 changed how rent in relation to private residential tenancies and statutory assured tenancies are determined on referral by a tenant to a rent officer or the first tier tribunal. Now, this process of adjudication has been in place since 2017, and although it was suspended during the period of the cap, it's now being resumed in this modified form. The changes being proposed to the adjudication process are intended to smooth the transition out of the rent cap and protect tenants from steep rent increases, which some tenants would experience if there's a move back to open market rent in a single step from rent levels that have been suppressed during the period the emergency act has been enforced. The legislation requires us to ensure that we reflect the interests of all parties in the rented sector and we recognise that landlords may have had rising costs, including the need to improve and repair properties, which is usually recouped through rents. At the same time, while there have been some signs of improvement in the economic conditions for households in recent months, this follows a period of significant pressure such that, on average, households continue to face economic and financial conditions, which are significantly more challenging than they were prior to the cost of living crisis. In particular, private rented households continue to report being, on average, under greater financial stress than the average for all households. Once the rent cap is expired, we would expect that many rent increases proposed by landlords may proceed as normal, with tenants agreeing to pay the proposed rent increase. However, it's reasonable to expect there'll be situations where tenants wish to refer the proposed increase for adjudication. The emergency act provides Scottish ministers with the ability to temporarily modify the basis on which rent increases are adjudicated. The long-standing rent adjudication process allows for rent service Scotland or the first tier tribunal to make a determination on the rent increase. The determination is based on a comparison with the rent for other properties in an area that is known as the open market rent. The amended adjudication proposal would see that determination now being made taking into account a third factor. So we would have the market rent, we would have the rent requested by the landlord as at present, but we would also have a third additional comparator. So the final rent will be determined based on the lowest of these three figures and cannot be set above the rent requested by the landlord. The additional comparator will be based on the difference between the current rent and the open market rent with a level of increase determined on a sliding scale. Where the gap between market rent and the current rent is less than 6%, the comparator does not come into play, so the rent increase would be either the rent sought by the landlord or the market rent whichever is lower. Where the gap is between 6% and 24%, the sliding scale would apply, with an additional 0.3% increase allowed for each percentage point between the current rent and the market rent. The increase cannot exceed 12% of overall rent and that will apply in all cases. That 12% maximum would only be reached where market rents are 24% or more higher than current rents. Of course, this underlying formula is necessarily more complex than a simple rent cap and we want to ensure that both landlords and tenants have clarity. That's why a simple online rent calculator forms part of our awareness raising work, which was launched last Wednesday, well in advance of these changes taking place. Just as people don't need to understand everything about the underlying technology of the smartphone or the device that they would use the calculator on, so they don't necessarily need to know exactly how the underlying formula works in order to use it effectively. The online calculator allows tenants and landlords to see quickly how various rent scenarios affect their own situation. They don't need to follow the formula in detail. I'm aware that members have also been made aware of the recent SPICE blog on the ending of the emergency measures and that includes an online calculator similar to that provided by the Scottish Government. By inserting some sample numbers into the calculator, it will illustrate the potential impact of these changes. Those transitional arrangements would amend the basis of rent adjudication for one year, from 1 April 24 to 31 March 25, but may be extended for further periods of year, if appropriate, with parliamentary approval and based on assessment of the circumstances at the time. As well as launching the online calculator to address the underlying complexity of the changes that we're proposing, we're currently running an awareness raising campaign aimed at increasing awareness of tenants' rights and empowering them to assert these rights if required. Renters' Rights campaign launched last Wednesday and it will run for a four-week period. Of course, we're very keen to work with any tenant or landlord representative body to help raise awareness of these changes and help people to understand how they work in practice. In conclusion, convener, the regulations being considered by the committee today are vitally important as they signal a move away from the emergency protections that were crucial in protecting and supporting tenants during the worst of the cost crisis, while also acknowledging that challenges remain, and it is right that we protect tenants as we move back towards a position pre-cost crisis. They also come as we prepare the housing bill to come before Parliament, which will set out how we aim to regulate rents in the long term alongside a wider package of changes to increase tenants' rights and prevent homelessness. I'd like to thank the committee for the scrutiny of these instruments today, and I'm happy to answer any questions that you've got. Thanks very much, Patrick, for that opening statement and for getting into some of the detail and also for acknowledging the very helpful spice blog with the calculator there. I was also really helpful to hear about the awareness raising campaign on renters' rights, because that is something that certainly came up in our evidence sessions around these regulations. On the matter of the rent adjudication, I'm aware that the Scottish Government is doing the work of listening to the needs of both, but I'm wondering if both landlords and tenants, but I'm wondering that the draft regulations propose a lower limit of 6% and an upper limit of 12% of rent increased, and that could be allowed on adjudication. To what extent do you have a sense that this strikes the appropriate balance between the needs of tenants and landlords? That's a balance that we've had to continue to strike from right throughout the process, from framing the emergency legislation in the first place, considering its operation, and now as we move out of the relatively straightforward protection of a rent cap. We have engaged with both tenant and landlord organisations and stakeholder groups within the sector. We went through a process which was not a full public consultation, because in order to make use of the most appropriate and up-to-date data, the process had to be relatively soon before the end of the rent cap, but obviously it had to be close enough to that that we don't end up seeing a gap between the rent cap and the adjudication changes. So we went through that process of engagement, and we floated both a lower cap of 10% and an upper cap of 15%. I think it's probably understandable and perhaps predictable that the responses to that engagement process were slightly polarised between those who represent different interest groups, but I think that there were fair arguments made from all perspectives, and the fact that we've come forward with a taper that moves to an upper threshold of 12% demonstrates that we have taken account of the arguments and the perspectives that were shared from a range of stakeholders during that process. That's good to hear that, as you obviously started with the vibe and the 15%, and there's been some engagement and listening, and you've settled on on these other figures. I'm going to bring in Stephanie Callaghan, who has a question. Thanks very much, convener. Perhaps I heard in committee, as you've mentioned yourself, that there are concerns around the fact that it can be quite confusing, and you've mentioned the only rent calculator that's been launched, and the Awareness Raising Campaign, the Renters' Rights, which seems to be limited to a four-week period of a picture up well there. So I'm wondering if you can say a little bit more about the Awareness Campaign for Renters' Rights, whether there could be scope for extending that beyond the four weeks, if that seems to be required, and how you're going to actually review how effective that is at getting the information across to tenants and to landlords. Thank you. Thank you very much. Obviously, we'll keep under surveillance not only the engagement that people have with the Awareness Raising Campaign, for example a great deal of its online, so you can monitor the level of engagement and exposure that that gets. But also, as we move into these temporary measures, we'll be monitoring the use of the adjudication protections that are being proposed here. I don't think that it would be reasonable to say that there's a final set in stone decision about how much Awareness Raising should take place. We've committed to the spend on ensuring that there's an Awareness Raising Campaign as we move out of the temporary rent cap and into the slightly longer term, but still temporary rent adjudication changes. Any change like this is going to increase the level of complexity that people are dealing with, and it will increase some confusion. I'm aware as a regional MSP, for example, that my own inbox has had correspondence from tenants and landlords who don't know what their rights are as we approach the end of this, so we do need to make sure that we're continuing to engage with them and provide that information, both through direct channels and through working with a range of organisations and advice agencies at a local level. One of the organisations I visited recently, actually when we launched the campaign as Citizens Advice Bureau, very, very clear that they have a critical role to play as a trusted voice in the local community, and there'll be similar organisations right up and down the length and breadth of the country who have a really powerful role to play. That's great, convener. Can I just very, very quickly say then, so can third sector organisations like the Citizens Advice Bureau, if they are coming up against issues, can they expect to maybe influence what will happen going forward from that point then? I mean, we would certainly welcome feedback about the both the awareness-raising work that we're doing in the immediate term, but also the operation of these temporary measures once they're in force. We'll welcome that feedback from a range of different voices, and obviously that's something that we'll continue to keep under a close eye. Now I'm going to bring in Mark Griffin. Thanks, convener. Just draw members' attention to my register of interest, as I was previously an honour of a private entity property up to July last year. Moron Minister, with the new process in place that relies on tenants taking the initiative to challenge a potentially unfair increase in, you know, we've heard a committee in their long-standing concerns about the ability of tenants to challenge their landlord with the fear that that might put their tenants in jeopardy. So just ask what steps the Government are putting in place to protect tenants through that process and give them the assurance that any challenge would not put in jeopardy their tenants whatsoever? Yeah, I mean, this is a hugely important question, and it's one that we've been conscious of all through this process. It was very clear that the rent cap itself had to be a temporary measure. That was the nature of emergency legislation, and I think that we well understood across Parliament and external stakeholders at the time when we passed the act itself, having this ability to modify an existing mechanism, the rent adjudication mechanism, offered the clearest opportunity for a kind of off-ramp from that temporary rent cap, if I can put it that way. But yeah, it does place the onus on tenants to challenge, and we need them to be aware that, even as we move out of the emergency legislation, Scotland has the strongest package of tenants' rights and protections of any other part of the UK. We see on-going debates, for example, down south about whether no-fault revictions will eventually be banned or whether those proposals will be changed before they're put to the vote. That's something that we've done a number of years ago already. The grounds on which evictions can be pursued are very clearly and explicitly laid out, and the level of protection that tenants have is very, very strong. We need to remind not only tenants but also landlords of what those rights and responsibilities are. That's why the awareness raising campaign is so important, and why we'll continue to engage with the organisations that provide advice. MSPs and MPs and councillors as well as people's elected representatives also can play a really important role here in disseminating that information to constituents who are concerned, making sure that community organisations they're in touch with also have access to that information and pointing people to the online tools such as the rent calculator. Okay, thanks. My second question, Cymru, was just around the existing procedure and to ask if the Government had given any consideration to changing an element of that, and that is around when a landlord gives notice of an increased rent, the tenant decides to challenge that. The potential gap between the existing and the new rent, there's a potential for arrears to be built up while the either rent service Scotland or the tribunal decides on which rent should apply. My understanding is that the tenant would need to pay if the increase was found to be appropriate, the tenant would need to pay from the date of the first issue, rather than the date the tribunal or rent service Scotland agreed that the rent increase was appropriate, so there's a potential build up of arrears happening there. Did the Government give any consideration to amending the process so that the date which the rent increase was applicable was the date of the decision by the tribunal? Well, landlord has to give a full three months notice of a rent increase and the rent has not changed when that notice is issued, the three months notice is there and tenants who wish to take a challenge can initiate that within the first 21 days of that period. Rent service Scotland aimed to respond to adjudications requests within 40 days. Obviously, there's a degree of independence from government about the process, but we'll continue to monitor their ability to respond to the requests that come in in a timely manner. They're required to do so within 12 weeks, but they aim to do it within 40 days, and I think if we're able to maintain that level of service, then the understandable concern that Mark Griffin raises is less likely to materialise. Thank you, Mark Griffin. I'm now going to bring in Marie McNair. Good morning ministers and officials. Do you think that rent service Scotland and the tribunal will have the capacity to deal with the potential number of challenges to rent increases that proposals may bring? We've obviously worked with colleagues to understand what they expect in terms of the burdens on them of processing rent adjudication requests. That's a process that hasn't been taking place in the normal way during the emergency legislation, but the process would be resuming now whether we were applying an altered adjudication process or not. I would take a little bit of persuading that the numbers are going to be markedly different purely on the grounds that we're adding this third comparator. There will be tenants. You may have heard from constituents yourself. I certainly have who are concerned about the rent increase notices that landlords have in some cases issued already prematurely ahead of the rent cap ending. At the moment we can reassure them that the rent cap is still in place and those rent increase notices still need to comply with it, but there's clearly going to be a number of rent increase notices that begin to be issued when the rent cap ends, regardless of whether we took forward the power on a modified adjudication framework with this third comparator figure. I think it's really important that we have that third comparator figure, but I think regardless of whether we use that power or not, there would clearly be a resumption of rent adjudication requests and the First Year Tribunal would need to be ready to deal with that. We will continue to engage with them and understand how that's playing out in practice and, as I said to Mark Griffin, the shared desire to ensure that requests are dealt with in a timely way. Thanks for that. Thanks very much, and now I'm going to bring in Pam Gosall. Thank you, convener. Good morning, Minister, and good morning, officials. Callum Cosmack from the Chartered Institute of Housing said, if we have a system that comes into place in Scotland, we need to have at its heart data on an evidence of genuine rents. We don't have this at the moment, and it will require some time to build them up. Rent Service Scotland and the Tribunal will consider comparable open market data before decisions on their rent increase can be made. How reliable is that data in allowing rent officers and the Tribunal to make informed decisions? Minister. I think as we go forward through this year and the committee engages with the new housing bill, the issues around data collection will probably be something that we'll want to explore in that context. Very clearly, as things stand, as things stood under rent adjudication prior to the temporary emergency legislation, we don't have granular detail data on the rents that are actually being paid. We have information far more prominently about rents that are being advertised. Having said that, rent officers do take into account a wide range of factors in determining what they are going to consider to be open market rent. That includes the quality and quantity of housing stock, some locational issues like proximity to shops, banks, leisure facilities, other local amenities and services, economic factors such as local employment and unemployment rates. There's a range of factors that are taken into account in making that calculation. The rent officers base their valuations on confirmed lettings and information wherever possible using additional data sources to support them through the valuation process. This is a process of calculating this open market rent that has been embedded for a number of years. This knowledge and experience and skills that have been built up and knowledge of local rental market conditions will continue to rely on that process. The only additional point I would make is to reassure tenants who wish to bring a request for rent adjudication in these circumstances. They don't need to be able to make their own calculation of what open market rent is. They are able to bring that request for adjudication and the process will kick in and make that calculation. People don't need to have access to information that is not available to them in order to make their request for adjudication. Obviously, due to the absence of data and evidence, and that was brought up last week with our evidence sessions on the housing bill as well, data is so key when you are making decisions like this. Are there any examples that you can share with us anywhere else, if not around the country, around the world, that this works without the absence of data and evidence that you can rely on the areas that you have mentioned? The evidence that the rent adjudication process can operate effectively with the current data that we have is that the rent adjudication process operated effectively before the emergency legislation was in place. This is returning to a system that has already been in operation for a number of years. It is adding an additional comparator, and I think that that makes sure that we will avoid the very steep rent increases that may take place in some parts of the country in the absence of that additional comparator, but we are essentially restarting a process that has already been embedded. In terms of the longer term debates about how to structure a permanent system of rent controls for Scotland, that is a debate that we will get into as we introduce and as the committee scrutinises the new housing bill. Absolutely, one of the questions that we are going to be needing to address within that is how much additional data needs to be collected in order for a new system that is not yet in place to operate effectively. That will be an important question for the committee to get into at that point. It is very clearly not the case that we need additional data in order to operate the rent adjudication process because we have been doing so prior to the emergency legislation. I am now going to bring in Willie Coffey. Thank you very much, convener. Good morning, minister and your colleagues. Could you say something about what you think the impact on homelessness might be as a result of this? We heard last week at the committee that the overall total homelessness has gone up in Scotland, but interestingly the numbers made homeless in the private rented sector actually dropped as a result of the measures that had been in place till then. Could you give us a flavour of what you think the impact on homelessness might be, particularly in relation to the relaxation of eviction notices and so on? I presume that the Government will be giving a close eye on that impact going forward. Absolutely, we will. I think that the point that Mr Coffey raises is relevant to the operation of the emergency protections, but it actually goes back a little bit beyond that. If we think back 10 or 15 years that evictions from the private rented sector were one of the leading sources of new homelessness referrals, that has been reducing. I think that there is evidence that the gradual changes in regulation that were brought in prior to the emergency legislation over a longer time period have supported improvements in those statistics and showing that evictions in the private rented sector have not been as predominant a source of new homelessness as previously. I think that the protections that were part of the emergency legislation have supported that. They have been consistent with that trend and we are obviously keen to ensure that progress does not go into reverse. I think that the point that I made earlier, I think that it was to Mark Griffin, if I remember rightly, about the existing, the pre-existing package of protections, in particular that no fault evictions have not been permitted for quite some time, that the grounds for eviction are clearly and explicitly laid out and also a more recent change. I think that this came in through some of the coronavirus legislation that the pre-action protocols, which social landlords previously had to undertake before seeking an eviction, have now been extended to the private rented sector. We believe that a viable and vibrant private rented sector works at its best when both landlords and tenants have a shared interest in securing tenancies, in sustaining and maintaining tenancies and avoiding the breakdown. Most landlords do not want to be going through a constant cycle of losing good tenants who pay their rents and most tenants want to be good tenants who are able to pay their rents and have somewhere they can afford to live with some security. That is what we should be aiming for and the requirement for pre-action protocols simply embeds really good practice that responsible landlords in many cases would already have been using of seeking ways to sustain a tenancy as their first resort rather than we want them to see pursuing eviction only as a last resort where it can't be avoided. Obviously it will sadly in some cases be a necessary step but the pre-action protocols hopefully ensure and I think the evidence shows that this has been effective that it is seen as a last resort rather than a first resort. So again it's about returning to that pre-existing strong package of protections and the effort to ensure that we continue to drive up standards within the private rented sector, support the actions of those responsible landlords who have been using good practice in the past and make sure that others are encouraged to raise those standards. For that, did you say Patrick that this measure today will also expire on the 31st of March 25? I think he said it could possibly extend beyond that if appropriate. I think it was the word that you used. Would you be able to keep a close eye on the impact on homelessness within any of these groupings to decide what your approach and your strategy might be at that point? Yes, the cost of living act gave us the power to bring forward changes of this kind and specified that they could be introduced for a period of one year and that there would have to be a subsequent decision to extend by further periods of one year. So that's the option that will be available but not to make that decision in any kind of automatic way will have to continue to keep a close assessment of the circumstances. Essentially, any measure like this has to be demonstrated to be proportionate and necessary and that means constantly looking at the circumstances and the context in which these measures are taken forward. So we'll look at the operation, we'll look at how the adjudication process is being used, we'll look at the impact of that, we'll look at the economic circumstances and, yes, of course, we'll look at any changes that might happen in the patterns of evictions or homelessness. Thanks very much for that. Thank you, convener. Good morning minister. Good morning to your officials as well. You said in your opening statement that renters and landlords do not need to know the detail behind this but I did wonder what modelling has taken place to look at how many landlords will look towards realising the upper limit of 12% and what that then means for the systems currently in place? Well, the circumstances will be different in not only between different geographic parts of the country but different individual tenancies. So, for example, a private rented home that has seen turnover of a tenant leaving for whatever reason, even during the cost of living act when the rent cap has been in place, if there's been a turnover of a new tenancy may well have been reset according to open market rent and be kind of at the upper end so there may be very little gap in the circumstances like that between the current rent being paid and the open market rent whereas, you know, the same property with the same landlord if there hadn't been a turnover of tenancy, if that was a landlord who prior to the cost of living crisis had done their best to keep rent rises low for a number of years because they wanted to hang on to a good tenant and sustain that tenancy, there may be a very big gap so the circumstances will be different and I think in relation to the questions about data earlier it is very clear that we don't have that granular detailed data about the level of rents which are being paid, we have much more information about the rents that are being advertised so I think this is one for keeping under careful watch as we see the rent adjudication process resume as we see Scotland moving out of the temporary measures of the rent cap but it's not one in which we have the level of detail about the rents that are being paid as opposed to the rents that are being advertised in order to give a definitive answer to the question at the moment. I asked that, you mentioned the geographical element because in Edinburgh we know that new properties coming to the market are coming on at 25-30% higher than they would have been prior to rent control so I think there is a real disturbance here in Edinburgh and dramatic increase potentially as well as a loss of properties here in the capital. I wondered what lessons have been learned from this and the lack of data, lack of consultation for future rent controls in the housing bill? I mean there's a range of views that are expressed on the potential impact of the temporary legislation on the wider PRS market. It's very clear that rent increases as advertised, new rent increases as advertised have been rising in a worryingly strong way in many, many parts of the UK. The figures that were, I think the BBC was running a story on this a few days ago, did show that Glasgow and Edinburgh are at the upper end of that. In relation to Glasgow I think it was a fraction of a percent above Bolton and Manchester. Edinburgh was a bit below Manchester in London. In my view if the factor driving the increase in new rents being set was the temporary legislation I would expect to see a big gap between areas in Scotland and areas in the rest of the UK. We don't see that. We do see a range of experiences in different parts of Scotland and cities as well as towns that are within commuting distance to cities have been seeing big increases in advertised rents throughout the UK. That's a worry and it is something that we're going to have to consider as we look at the permanent changes to legislation with the new housing bill. I don't think it could be used as a justification for not using this power to add an additional comparator as we return to rent adjudication as a process. This is the ability to provide some protection against a cliff edge for tenants as we move out of the temporary legislation. I think the evidence that we see from around the UK of rent rises for new tenancies actually reinforces the desire to ensure that that cliff edge is not experienced and we don't see annual rent increases within tenancies suddenly in a single step returning to that open market condition. I would just, in relation to the previous issue as well, also refer to Mr Briggs, the Brier that's been published alongside this, which does look at the number of properties that are likely to be affected. It's modelled some of the possible impacts and explores the issue of the level of rent that would be foregone from the point of view of landlords and saved from the point of view of tenants. Thanks for that. Just finally, the Association of Scottish Landlords have accused the Scottish Government of anti-landlord rhetoric and harming investment in private rented housing in Scotland. They're reporting today estimates of around 22,000 lost homes in the private rented sector. Just wondered how you would respond to that minister. Well, I'm certainly sorry that they've chosen to use language like that. I certainly don't believe that the Scottish Government has anti-landlord rhetoric. That's not something that I would recognise. We've said very clearly, both during the debates on the cost of living act and in relation to the development and the consultation on the wider rented sector strategy, the new deal for tenants and the development of the new housing bill, that we want a private rented sector that has high standards that is part of a housing system in which all people have their human right to adequate housing realised and that responsible landlords have nothing to fear from regulation. It's about raising the standards in places where we don't see responsible practice taking place. I think we're all conscious that the private rented sector carries within it a range of practice, a range of affordability and a range of realistic protection and respect for tenants' rights. We want to encourage the best and we want to ensure that where standards are not as they should be, we see them raised up. Good responsible landlords have nothing to fear from a proportionate approach to regulation and I think across many other European countries you see that a decent level of regulation and protection for tenants is entirely consistent with a viable private rented sector and I think actually that's the experience in Scotland as well. Over the decades we've seen gradual increases and improvements in regulation of the private rented sector and protection for tenants at the same time as a dramatic increase in the scale and size of the private rented sector itself and indeed even during the cost of living act and the rent cap the number of properties registered under the landlord register is actually slightly up. I recognise that the Scottish Association of Landlords have conducted a survey of a small number of tenants and appear to be extrapolating that as though it proves something on the wider picture which I don't think the data that we have demonstrates. That concludes our questions for today and I'd like to thank the minister and officials for giving evidence. We now turn to agenda item three which is consideration of the motion on the instrument and I invite the minister to move motion s6m 11978 that the local government housing and planning committee recommends that the cost of living tenant protection Scotland act 2022 expiry of section 10 extension regulations 2024 be approved. Thank you. Do any members have any further questions for the minister? The question is that motion s6m 11978 in the name of Patrick Harvie be approved. Are we all agreed? No, we're not all agreed. There will be a division and I'd like to ask all those in favour of the motion? All those against and any abstentions? So the results of the vote are four four zero against and two abstentions. The motion is therefore agreed. There was a numbers. Five four zero against and two abstentions. We're now going to move on to item number four which is consideration of the motion on the second instrument and I invite the minister to move motion s6m 11979 that the local government housing and planning committee recommends that the rent adjudication temporary modifications Scotland regulations 2024 be approved. Moved. Thank you. Do any members have any comments on the motion? No, okay. The question is that motion s6m 11979 in the name of Patrick Harvie be approved. Are we all agreed? We're not agreed. There will be a division. All those in favour of the motion please raise your hands. All those against and all those abstaining. The result is five four zero against and two abstentions. Therefore the motion is agreed. The next item on our agenda today is consideration of the cost of living tenant protection Scotland Act 2022 savings provision regulation SSI 2024 slash 19 and as this is a negative instrument there's no requirement for the committee to make any recommendations on it. Do members have any comments on the instrument? No one has any comments. Is the committee agreed that we do not wish to make any recommendations in relation to these instruments? We're agreed. And just to say on the previous two instruments the committee will publish a report setting out its recommendations on the instruments in the coming days. I now suspend the meeting to allow for a change of witnesses. The next item on our agenda today is to take evidence on the local authority capital finance and accounting Scotland amendment regulations 2024 from Tom Arthur minister for community wealth and public finance and Mr Arthur is joined for this item by Scottish government officials Eleanor Davies who's the head of local authority accounting and Susan Robbins a Scottish government solicitor and I welcome minister and his officials to the meeting and invite him to make an opening statement. Thank you convener and good morning to the committee and with your permission convener I'll just take a bit of time to set out what I appreciate as a potential complex set of regulations. Convener in 2016 regulations were introduced to provide greater flexibility to local authority to ensure that both current and future taxpayers are charged for their share of the capital expenditure costs of public assets being used to deliver services. To briefly explain the nature of statutory accounting arrangements accounting standards required depreciation to be charged against revenue to reflect cost of the capital expenditure for an asset such as a school as it is used over the term that it will be used for its useful life. The 2016 regulations replaced the requirements of accounting standards and instead require an annual charge against revenue in the form of loans fund repayments. To recognise the cost of capital expenditure to be financed from borrowing over the term the expenditure is expected to provide benefit to the community. The aim of both accounting standards and statutory arrangements is to accurately and transparently reflect the costs of capital expenditure to acquire an asset over the period over which the asset will be used. The 2016 regulations permit a local authority greater freedom to choose the term over which to charge the costs of capital expenditure against revenue known as the repayment of loans funds advances and to vary the period and pattern of such charges. The intention is to allow a local authority to more accurately align the period of loan funds repayment and therefore recosh to taxpayers to the period over which the asset will benefit the community. However, a review of local authority financial data shows that since 2019 local authorities have been significantly reducing their on-going annual revenue provision to meet long-term borrowing costs, despite increasing external debt and deferring a substantial proportion of capital financing costs to future years. This approach has been taken as a solution to affordability challenges and to address budget gaps rather than to more fairly allocate the cost of the capital expenditure to taxpayers. That is not in keeping with the spirit of the statutory accounting arrangements, which are intended to ensure adequate provision from revenue to meet debt financing costs and an equitable charge to taxpayers for the use of the asset for which the capital expenditure has been incurred. Furthermore, this approach creates a financial risk, as the deferred repayments will have to be met in the future. Rising demand for public services and the prolonged impact of UK government austerity on the public finances, along with economic and inflationary pressures, increases the risks that local authorities may find it difficult to service their increasing capital financing commitments, deferring provision to meet such commitments further exacerbates an already challenging longer-term financial outlook. The committee will not need me to draw its attention to the situation in England, where we are seeing stark evidence of the outcome of such accounting practices in English councils. We would entirely agree with the evidence that I know you will have heard from local authorities and that local authorities are in Scotland are not borrowing excessively nor borrowing for the purposes of commercial investment. However, the practice of reversing debt financing costs and deferring those costs to future years, which has contributed significantly to the financial collapse of a number of local authorities in England, is being adopted in Scotland. For information and for context, a House of Commons research briefing published last month states that the financial collapse of Ffyrrwch council stemmed from two principal causes, not only the loss of value of its assets but also failure to make sufficient revenue provision to meet its debt repayments. The briefing states that a major cause of slough financial difficulties was its failure to make sufficient revenue provision in its accounts to repay its debts. Woking issued a section 114 notice in June 2023 and highlighted inadequate minimum revenue provision since 2007-08 as a key contributor to the local authorities' significant financial challenges. In 2020, the UK Government took steps to amend the equivalent statutory arrangements for England and Wales to prohibit exactly those accounting practices which continue to be adopted in Scotland, namely to prevent local authorities from reversing costs incurred in previous years as a means to increase reserves and preventing the deferral of debt repayments to future years as an affordability measure. Convener, while the situations are not identical between ourselves and England, res amendment regulations simply align Scotland with the improvements made to the statutory framework for England and Wales. Contrary to the suggestion that res amendments have been rushed through in some way, the need for a review of statutory capital financing and accounting was identified in 2019 and confirmed in the resource spending review in 2022. Despite that, local government has resisted any such review and has requested successive delays over the past two years. The committee may be aware that we consulted on a number of other reforms in late 2023, but in light of the valid feedback from respondents, we wish to take more time to consider the implications of those reforms before bringing them forward. No specific concerns were raised over the amendments that have been taken forward at this time, and while the UK Government intervened reactively, we are intervening proactively to protect Scotland's public finances from the risks of the outcomes that we have seen in England. I therefore consider it important to deliver that alignment as soon as possible. In summary, the amendment regulations will more clearly articulate the policy intent of the 2016 regulations and will harmonise statutory arrangements not only with accounting standards but also with England and Wales to better ensure an equitable charge to current and future taxpayers over a period commensurate with the benefit and asset that provides to the community. I will conclude with that, convener. Thank you very much, Tom. I thank you for taking the time to lay it out in quite a bit of detail there and also the work that you have been doing on the regulations. I would be interested to understand why the Scottish Government feels that regulations are needed now given that COSLA has stated that there is no requirement for a review of capital accounting and, similarly, local government directors of finance said during last year's consultation that there is no clear rationale for this review that has been provided to support the proposed changes. I think that the case for this action is underlined by the point that I made around the need to be proactive. Now, we have, as I have touched on, seen the situation that some local authorities in England have found themselves in. That is something I am sure no one around this table would want to see before their own local authorities. Ensuring that accounting practices are consistent with the standards that we would all expect is important. A Scottish Government and Scottish ministers have an important role as stewards of the public finances in ensuring that there is an appropriate regulatory environment to facilitate those standards that we would seek. As I have touched on, that is something that has been given careful consideration over a considerable period of time. I made reference going back to 2019, when indications of some of the practices that were causing concern became evident. We have signposted in terms of going back to the resource spending review. That was our intention. We have consulted on where there have been areas where there have been valid points and concern raised. We have not taken them forward with the current amendment, but we recognise that we have a responsibility to ensure that accounting practices are consistent with what is required to provide long-term stability and transparency in the public finances. That underpins the reason for bringing those amendments forward. I am going to bring in Myles. Good morning, minister. Good morning to your officials as well. Not for the first time, we have heard concerns from COSLA and other local authorities who have been unhappy around the short period of time allocated for consultation on this, held in December for just four weeks. I wondered in the spirit of the Verity House agreement what consideration has been taken into that. I thank you for the two points that I would make. One is the, in reference to my previous answer, is the, in my introductory remarks, the timelines and the signalling of our intent here. But specifically on the consultation, a consultation that is just with local government may be just around about two weeks. Correct me if I'm wrong, I think it's just four weeks, so above what the normal time would be. We have consulted in a way that is consistent with how we would normally engage with local government, but more generally, the context in which that consultation was undertaken was one of where there had been quite extended engagement over some period of time indicating our particular concerns. I'm going to bring in Stephanie Callaghan. Thank you very much, convener. Minister, just to put on the record, first of all, sorry, that I was a councillor at South Lancer Council until 2022, and certainly I remember the information sessions and the intense scrutiny from councillors right across the board when we looked to reprofiling loans-funded repayments. So a few questions here. I'm wondering what assessments have been made around the extent to which local authorities have actually used the 2016 flexibilities. If you're able to put a number on that, if that's known, that would be really, really helpful. And you have a figure in how much council reserves have been boosted across the country. Just on the support specifically last, Eleanor, if she wants to come in and provide some additional information. I apologize, I was just looking for the values, I did have them to hand. But essentially, yes, if you look at any of the budget reports for local authorities for 2324 and 2425, you will see that many of them have applied flexibilities of the statutory regulations to defer the revenue provision for capital financing to future years. And we've also seen in the local financial returns and the statistics that we capture that revenue provision to meet their borrowing costs has been declining since about 2018-19. So the old Scotland balance for the loans funds at 31st March 2022, which is the latest data we have, is £16.9 billion. And comparing the loans fundary payments, which are required by statutes against accounting standards, that the loans fundary payments made on the account for 30% of the costs that would have been charged if they were required to apply accounting standards and charged depreciation. So if year on year, 70% of the costs have been deferred to future years, and that represents quite a significant future sustainability risk. Okay. So you have the figures then for how many councils have actually taken that step? Apologies, I don't have numbers of councils, but I can certainly provide that. That's something you could send on to us, I think that would be really helpful. Okay, thank you. Stephanie, I'm now going to bring in Willie Coffey. Thanks, convener. Good morning, minister and your colleagues. Tom, it doesn't apply to new, sorry, it only applies to new loans. It doesn't apply retrospectively. Could you tell us why we've made that decision, if the extent of the problem is as described by Mr Davis? Well, to say, I'll ask Ellen if she wants to provide some more detail, but this has been a product of engagement, and it will help to provide clarity and certainty going forward and consistency with the accounting standards that we want to see in terms of the actual process around consideration with regards to any potential retrospectivity. Yeah, so essentially the regulations would not have retrospective effect, so given that these provisions would only be introduced from the point at which the regulations come into force, which will be 1 April 24, we can't ask local authorities to consider decisions that have already taken, given that we've so close authorities have already applied the flexibility to their existing loans fund advances. What we're instead doing is making sure that that can't be applied subsequently. Okay, thank you. Thanks for that. Now I'm going to bring in Mark Griffin. Thanks, convener. Minister, you set out some of the financial challenges that have resulted in this flexibility being used in England, and they're well documented. I just wonder what assessment the Government has carried out essentially into the financial health of local authorities in Scotland who've used this flexibility and whether that has put any of them at risk of going down the same road of some of the English local authorities that you mentioned. Thank you. As we touched on my remark, so there are differences between the circumstances in Scotland and England that was sought to be clear and won't do in-draw. I suggest that it was a full equivalent, but on the specific point around the accounting practices, that was an area of concern that we can address. We recognise, of course, that right across the public sector, as public finances are creating significant challenges and pressures. We've got a broader process of engagement we're embarked upon in the local government through the Verity House agreement and the commitment to developing a fiscal framework. Indeed, the local government budget settlement for 24-25 represents a greater percentage of ministers' discretionary spend on the previous year's budgets. But with regard to perhaps some of the specific aspects of the health of local government finance in comparison with what we've seen in England, I don't know if there's anything we'd want to add. It is an on-going piece of work. We are reviewing the financial health and resilience of local authorities and I could certainly provide further information following the committee when that work is complete. In advance of that work being completed, does the Government have any concerns about the risk of financial failure of any particular Scottish local authority? Of course, there are specific roles and responsibilities that are exercised by the Accounts Commission, for example, in relation to assessing the performance and financial management of local authorities. We recognise the challenges that local authorities are facing, but we are in a different set of circumstances than what certain local authorities in England were in because of some of the decisions that have been taken by individual local authorities. However, as I highlighted in my remarks, a contributing factor was the particular approaches around accounting that we're discussing, the way in which they had been taken in England. The UK Government reacted to that. We are getting ahead of that by being proactive to ensure that we are not creating a situation where, over time, the level of risk increases and it starts to present these long-term sustainability challenges. In terms of this particular point, we're taking that proactive action. It brings it into alignment with the situation in England and Wales, and, indeed, it's prospective going forward. It doesn't ask the question that Mr Coffay raised about having any retrospective effect. Just before I ask my question, the clear interest is from our councillor in Western Bartonshire up until 2022. Good morning, minister and your officials. The consultation in December included other proposals that have not been taken forward at this time. Coffay has concerns that the Government still intends to do further work on those proposals. What are the Scottish Government's plans regarding those proposals and for any wider review of the capital financed accounting? We will continue to engage constructively with local government on those matters, but we have an obligation in government to, as I touched on earlier, in that broader stewardship of the public finances and assuring that it is an appropriate regulatory environment. In terms of the consideration of the other elements that were consulted on in the work that was on-going with Regastr, I'll ask the honour if she wants to provide some more detail. We have already discussed with local government and we have suggested a collaborative working group. We have also provided assurance that any further amendments would not be introduced before 2027 so that there is time to give it due consideration and be reflected in longer-term financial plans. Good morning, minister and good morning, officials. Coffay raises concerns that creating additional administers burdens on local authorities and their auditors is an unnecessary risk and an unnecessary additional burden. Have you discussed how that might impact on local authorities and how the best way is supported to deal with any additional administers burdens? Of course, as has been touched on, we have consulted. The regulation is, of course, a public subject to parliamentary scrutiny. Of course, we will continue to engage with local government and monitor it. Should any particular unanticipated issues arise, we would, of course, want to engage with local government constructively to remedy that. Thank you, minister. Is there anything around this that causes us to raise that concern? Is there any work that you are doing around that to help councils when they have this additional administrative burden? Again, if there are particular points that local authorities want to work with the Government on in addressing any of these concerns that they have and any potential issues that could arise, we want to have that, I think, touched on with regards to the areas that we consulted on, which we are not taking forward. We are taking quite a constructive approach to that. We are, of course, establishing a working group, deferring any further changes until 2027 at the earliest. I think that that demonstrates the balanced proportionate approach that we are taking in government. Very much in such a spirit have we been constructive in partnership on the specific regulations that we are bringing forward today for the reasons that we have already set out. We regard that as something that has to be taken forward at this time, given the significant risks that we could ensure if we do not. Thank you, minister. I have one more question. Is that okay, convener? Thank you. Does the Scottish Government believe that it would be worthwhile clarifying the rules relating to council capital loans and what the rules are regarding economic assessments of the value and sustainability of the council loans? If there are specific areas that local authorities would welcome clarification on on any matter, of course, around the broader regulatory environment, that is something that we would, of course, want to engage on constructively. Is there any specific points in that area that you would want to respond to, Eleanor? Yes, it will be clarified. Statutory guidance will be issued that will support these regulations that will set out clearly how local authorities are to account for the loans, fund advances and the repayments. That concludes our questions on that evidence session. I appreciate the minister and the officials for providing us with that information. We are now going to turn to agenda item 7, which is consideration of the motion on the instrument. I invite the minister to move motion S6M-12003 that the local government housing and planning committee recommends that the local authority capital finance and accounting Scotland amendment regulations 2024 be approved. Thank you. Do members have any further comments? The question is that motion S6M-12003 in the name of Tom Arthur be approved. Are we all agreed? Thank you for that. The committee will publish a report setting out its recommendations on the instrument in the coming days. We agreed at the start of the meeting to take the next item in private, so that was the last public item in our agenda for today. I now close the public part of the meeting.