Nicola Sturgeon could extend rent freeze leaving landlords unable to cover rising mortgages

Nicola Sturgeon could impose her controversial rent freeze in Scotland for 18 months with landlords only allowed to "partially" cover hikes in their mortgage bills thanks to soaring interest rates.

Emergency legislation published by the Scottish Government gives SNP ministers the power to limit rent rises for private, social and university housing until the end of March 2023, with the cap set at zero per cent.

The Cost of Living (Tenant Protection) (Scotland) Bill also gives them the ability to extend the freeze, or vary the cap, over two further six-month periods.

Landlords will be banned from pursuing enforcement of eviction legal action if the cost of living crisis means their tenants can no longer afford their rents, except in a limited number of "specified circumstances".

If the surge in interest rates leads to a rise in their mortgage payments, the Bill allows landlords to make an application to a rent officer asking for permission to impose a rise above the cap set by ministers.

Hundreds of pounds out of pocket

But they are only allowed to ask for a rent rise equivalent to "no more than 50 per cent" of the increase in their mortgage interest payments. In addition, any rent rise given the green light must be capped at three per cent.

This means landlords could be left hundreds of pounds out of pocket each month if interest rates continue to surge.

The legislation will be rushed through Holyrood this week with just three days of scrutiny. It was published on Monday evening, hours before MSPs on the local government committee were due to take evidence on it on Tuesday morning.

It is understood landlords opposed to the freeze, which will be backdated to Sept 6 for private and social housing, could argue the law breaches their right to control their own property, especially if Ms Sturgeon exercises the power to extend it.

Community housing associations, letting agents and economists have previously warned that the Bill will backfire by prompting landlords to withdraw their properties from the rental market, thereby exacerbating housing shortages.

The Scottish Federation of Housing Associations said the freeze could mean their members would stop building affordable new homes, adding that the proposals have "serious unintended consequences".

Impact in other countries

The Tories have cited evidence of the policy's impact in other countries, arguing that the average waiting time for a rent-controlled property in the Swedish capital Stockholm is nine years.

Unveiling the legislation, Patrick Harvie, one of the two Scottish Green ministers in Ms Sturgeon's government, said: "The cost of living crisis is an emergency situation demanding an emergency response.

"Even as energy, food bills and other day to day basics become more expensive, today’s legislation freezing rents and protecting tenants from eviction will give tenants stability in their homes and confidence about their housing costs."

The Tenants' Rights Minister added: "We know that many landlords have been doing what they can to protect their tenants, but some are being hit with large rent increases that are hard to justify."

The Bill allows for landlords to evict tenants if they plan to live in or sell the property because of "financial hardship", or if there are rent arrears of at least six months.

A court of tribunal must give the green light to eviction for rent arrears and damages for unlawful evictions will be increased to a maximum of 36 months’ worth of rent.

The First-tier Tribunal, the primary body dealing with disputes over land and property in Scotland, would have to find that a landlord was suffering financial hardship which the sale of the property was intended to address.

The eviction protections do not extend to tenants guilty of criminal or antisocial behaviour.