Scottish Government unveils rent controls and housing tax reforms in draft Bill

The Scottish Government published its draft Housing Bill on 24 July 2026, proposing sweeping changes to rent controls, tenant protections, and property taxation across Scotland. The legislation would grant ministers new powers to cap rent increases through both national and localised measures tied to affordability criteria, whilst expanding limits on evictions and reshaping tax incentives to favour long-term residential use over short-term holiday lets.

Ministers have positioned the reforms as essential to tackling Scotland's housing affordability crisis, though landlord and property groups have warned the measures could discourage private sector investment in rental housing.

Rent Control Powers and Tenant Protections

The draft Bill establishes a framework for rent controls operating at both national and local authority levels, with increases linked to affordability measures rather than market rates alone. The proposed system would allow councils to implement area-specific caps where housing costs exceed predetermined thresholds relative to local incomes.

Under the proposals, rent increases would be subject to annual limits based on inflation indices and local wage data, with councils empowered to impose stricter controls in areas where average rents consume more than 30% of median household income. The Bill also introduces mandatory notice periods of at least six months for any rent increase, extending current requirements.

Alongside rent controls, the legislation strengthens tenant protections by expanding restrictions on evictions. The Bill proposes new grounds that landlords must meet before terminating tenancies, including requirements to demonstrate genuine need for property recovery and extended notice periods for most eviction categories. These measures build on existing regulations introduced in recent years to improve security for renters.

The tenant-focused provisions also include new rights for renters to request property improvements and challenge excessive rent increases through local authority mediation services, creating additional oversight mechanisms for the private rental sector.

Property Tax Consultation and Short-Term Let Reforms

The Bill includes provisions for consultation on shifting tax incentives away from short-term holiday lets towards longer-term residential use. This element addresses concerns that platforms like Airbnb have reduced the stock of homes available for permanent residents, particularly in tourist areas and city centres.

The proposed tax changes would complement existing licensing schemes for short-term lets, creating a dual approach of regulatory oversight and fiscal disincentives for property owners who convert residential housing to tourist accommodation. The consultation will examine options including higher council tax rates for short-term let properties and reduced tax relief for holiday let operators.

Local authorities have increasingly called for such powers, arguing that short-term lets have contributed to housing shortages in areas where tourism demand drives property prices beyond the reach of local residents and workers. Edinburgh City Council has previously estimated that over 8,000 properties in the capital operate as short-term lets, representing a significant portion of potential rental stock.

Industry and Political Response

Landlord and property industry representatives have expressed strong concern that the proposed rent controls and enhanced tenant protections could reduce investment in Scotland's private rented sector. The Scottish Association of Landlords warned that restrictions on rent increases may discourage property owners from maintaining or expanding their rental portfolios, potentially worsening housing supply shortages.

Property industry bodies have also questioned the economic rationale behind rent controls, citing international evidence suggesting such measures can reduce new rental supply and property maintenance standards. Several landlord organisations have indicated they will push for amendments during the parliamentary scrutiny process.

The measures have drawn enthusiastic support from tenants' unions and housing campaign groups, who view the Bill as overdue action to address rental market imbalances that have left many households spending disproportionate shares of income on housing costs. Living Rent, Scotland's tenants' union, described the proposals as a significant step towards housing justice.

Opposition parties at Holyrood are expected to scrutinise the proposals closely, with debates likely to focus on the economic impact of rent controls and the effectiveness of tax policy changes in addressing housing supply issues. The Scottish Conservatives have already signalled opposition to rent control measures, whilst the Scottish Greens have called for stronger provisions.

Parliamentary Process and Implementation Timeline

The draft Housing Bill now enters formal consultation and scrutiny at the Scottish Parliament, where MSPs will consider evidence from tenants' unions, local councils, and industry bodies over the coming months. According to BBC Scotland, parliamentary committees will examine the legislation's potential impacts on housing supply, affordability, and investment patterns.

The consultation phase, expected to run until October 2026, will allow stakeholders to propose amendments and provide detailed analysis of how the measures might operate in practice across Scotland's diverse housing markets, from rural areas to major cities like Edinburgh and Glasgow. Housing Minister Jenny Gilruth has committed to considering all submissions before finalising the Bill's provisions.

Parliamentary committees will hold evidence sessions with housing economists, local authority representatives, and tenant advocacy groups to assess the legislation's likely effectiveness. The Bill is expected to face its first parliamentary vote in early 2027, with implementation potentially beginning in late 2027 if passed.

If enacted, the legislation would represent the most significant intervention in Scotland's rental market in decades, fundamentally altering the relationship between landlords, tenants, and local authorities in managing housing costs and availability. The reforms could serve as a model for similar measures in other parts of the UK, where housing affordability remains a pressing political issue.