The Scottish Parliament has excluded Purpose Built Student Accommodation (“PBSA”) from rent controls in the primary legislation, while mid-market rent (“MMR”) and build-to-rent (“BtR”)are set to be exempted through future regulations.
The Scottish Parliament has now passed the Housing (Scotland) Bill. The debate surrounding the Bill was dominated by questions of rent regulation, with particular focus on whether MMR, BtR and PBSA should sit inside, or outside, the new rent control framework.
Although more than four hundred further amendments were tabled, Stage 3 discussions largely centred around the potential exemptions from rent controls and how they will be implemented.
Stage 3 in review
Stage 3 commenced on 23 September and proceeded over two sittings. MSPs revisited a number of Stage 2 amendments, but the Cabinet Secretary for Housing, Mairi McAllan, entered the chamber having already signalled her intentions in a letter of 5 September.
That correspondence confirmed the Government’s plan to protect investment-led tenures (MMR and BtR) by exempting them “where appropriate” from the Bill’s rent caps through secondary legislation, while simultaneously deleting PBSA from the definition of a “relevant tenancy” on the face of the Bill.
The Bill had initially provided that the formula for calculating the cap in rent increases would also be determined by secondary legislation however the Scottish Government tabled an amendment at Stage 3 to provide clarity on the calculation. This was set out as Consumer Price Index (CPI) + 1% up to a maximum of 6%, a move that was ultimately welcomed by The Scottish Association of Landlords.
The chamber ultimately settled on the following:
- amendments seeking to write hard-wired MMR and BtR exemptions directly into the Bill were defeated;
- amendments re-inserting PBSA into the rent control regime were voted down;
- the Government’s proposed amendment removing PBSA from the scope of a “relevant tenancy” succeeded with cross-party support; and
- the amendment setting out the rent cap calculation was accepted.
In practical terms, the Bill proceeding to Royal Assent contains no immediate exemption for MMR or BtR, but does include broad regulation-making powers that Ministers have pledged to exercise swiftly once the Act is on the statute book.
Mid-market rent and build-to-rent: the promised carve-out
During the debate the Cabinet Secretary stated unambiguously that the decision “was based entirely on investment and investment leading to new stock”. The Government’s position is that applying rent caps to MMR or BtR would slow down new building projects, jeopardising new supply at precisely the moment when Scotland faces acute housing shortages.
Stakeholder sentiment was closely aligned, with housing associations holding MMR portfolios, the Scottish Federation of Housing Associations and BtR investors lobbying hard for certainty. MSPs across Parliament acknowledged that rationale, but opposition members pressed for a statutory exemption to be etched into primary legislation. Government Ministers, citing the need for flexibility and detailed consultation on eligibility criteria, preferred secondary legislation. The Government prevailed, leaving the substance of the carve-out to future regulations that will be subject to the affirmative procedure.
Student accommodation: an on-the-face exemption
PBSA followed a different trajectory. At Stage 2 the Bill was amended against Government advice to sweep student tenancies into the rent control net. By Stage 3, the Cabinet Secretary returned with an amendment restoring the original position. Her argument was that PBSA “is not part of the mainstream private rented sector and should not be included within rent controls … to avoid deterring investment and exacerbating supply issues.” This reasoning secured the votes required to remove PBSA from the scope of the rent control provisions of the Bill. As a result, once the Bill becomes law, both university-nomination stock and private PBSA schemes will operate outside the rent cap regime.
Why a regulatory approach for MMR and BtR?
The Government advanced three principal justifications for leaving MMR and BtR exempt from regulations:
- Flexibility to fine-tune eligibility criteria and adjust to market evidence without re-opening primary legislation.
- The ability to consult formally with investors, lenders and local authorities on the technical design, including how new stock is distinguished from legacy portfolios.
- A mechanism to revisit scope swiftly if market conditions or supply data change.
Opponents countered that investors need certainty now, not later, and that deferring to secondary regulations leaves a window of ambiguity. While that criticism resonated with parts of the chamber, ultimately the Bill as passed did not provide that certainty. The terms of the Bill (as passed) reflects the Governments’ preferred approach, affording it a broad regulation-making mandate. The Government has already indicated a short timetable for bringing draft secondary regulations to committee, likely in early 2026.
Next steps
Royal Assent is expected before the end of the calendar year. Thereafter, attention will shift to three principal workstreams:
- Draft regulations setting out the exemption criteria for MMR and BtR. Consultation papers are expected early in the new year, with the affirmative approval process running through the spring term.
- Statutory guidance for local authorities on designating rent control areas, including how exempt tenures must be taken into account in setting local permitted rates.
- Supplementary regulations clarifying operational details such as rent review notices, procedural safeguards and Tribunal jurisdiction.
We are expecting a phased implementation in which the headline rent control procedure commences first, followed by staged commencement orders bringing the exemptions and enforcement mechanisms into force.
Implications for investors and landlords
For investors in MMR and BtR the headline message is encouraging: there is now strong political backing for the exemption. The residual risk lies in the detail of the forthcoming regulations – particularly how “new build” and “where appropriate” will be defined and whether any claw-back provisions could apply.
PBSA operators have obtained immediate relief, but should keep a watching brief. Any material evidence of disproportionate rent inflation in the student sector could trigger political pressure for revision.
Conclusion
Stage 3 resolved the most contentious headline questions and while the passage of the Bill on 30th September provides clarity on the rent cap calculation and the status of PBSA under the new rules, much of the Bill’s practical impact will hinge on the secondary legislation now promised.
Between now and Royal Assent stakeholders should maintain close engagement with Government consultations to ensure that the forthcoming regulations deliver the intended balance between investor confidence and tenant protection. The parliamentary debate may be over, but the implementation work is only beginning.
