Last week the Scottish Government introduced emergency legislation to bring in a cap on increases in rents at 0% until the end of March 2023 for homes provided by social and private landlords.

The legislation gives ministers the ability to extend the rent cap beyond March 2023 for two periods of six months and commits ministers to set out no later than 14 January 2023 their decision on whether to expire the rent restrictions at the end of March, continue with a 0% cap for a further six months or set a different level for the cap from 1 April.

The letter sets out the Regulator’s expectations around landlords’ approach to tenant consultation on rent increases post-31 March 2023.

Helen Shaw, director of regulation at SHR, said: “I know that you will already be considering carefully the implications of this for your decision making on setting rent levels for 2023/24.

“We recognise that the forthcoming annual rent setting exercise will be one of the most difficult you will have faced, and that you will need to consider the impact of rising costs and inflation on your organisation while recognising the financial hardship that is a reality for many of your tenants. You will also have to take account of the Scottish Government’s potential intervention in rent setting. This will inevitably mean that you, together with your tenants, will face some difficult choices and decisions as a result.”

Ms Shaw added: “As things stand social landlords are able to increase rents from 1 April 2023, and it may be the middle of January before the Scottish Government is able to set out a definite position for 2023/24. We know that the process to determine rent levels, including consulting with tenants, can take a number of months.

“Given this, we advise you to proceed with the work to determine what level of rent increase you require for 2023/24, including engaging with your tenants to ensure that you understand what is important to them and what they want, and can afford, to pay for. We appreciate that this is challenging: the Scottish Government may extend the rent freeze or cap rent increases for 2023/24; and there may be uncertainty, or even confusion, amongst tenants about what is to happen in April. However, to not proceed could leave you in a position where you are not able to increase rents on 1 April 2023 if you are permitted to do so.”

The letter also issues advice on its Annual Assurance Statement following the introduction of the legislation and highlights the critical importance of RSLs reviewing their business plans to understand the potential impact of the rent cap on its ability to deliver services.

Helen Shaw said: “This is a challenging time, and the policy position is developing at pace. Please be assured that we will take account of the changing policy context in our engagement with your landlord. We will also continue to engage with the Scottish Government and your representative bodies to ensure that we provide timely, appropriate and helpful advice over the coming period.”