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That question is closely connected to Willie Coffey’s points about running costs. We want everyone to live in a home that is not only of a high standard and warm but which is affordable to keep warm. That has posed the most extraordinary challenges, given the energy prices over the last period, and nobody will underestimate the impact on people’s quality of life, health and economic wellbeing. However, if we take an approach to new-build housing that achieves what we are seeking to achieve with regard to the existing energy standards; the future development of a Passivhaus standard, which I talked about in response to the convener’s earlier question; and zero-emissions heating—all of those elements together—I believe that we can produce homes that are more affordable to live in than those that we have built in the past.

Those homes will also be less vulnerable to the economic shocks that will come with future energy crises. Let us not kid ourselves that the energy crisis that the world has been living through over the past few years is the last one. Fossil fuels are price volatile, as they have always been, and keeping people connected to a dependence on fossil fuels means keeping them vulnerable to that volatility.

As I said in response to Willie Coffey, fuel poverty issues are not going to be addressed by this Government alone; they will also have to be addressed by decoupling the prices of gas and electricity. That is a necessary part of the journey. It will happen—I just wish that the UK Government would pick up the pace on delivering that and work with us on designing how it will be delivered.

As for fuel poverty, the only solutions are absolutely those that move us away from price-volatile fossil fuels and which give people highly energy-efficient homes to live in. That will be easier with new-build housing, and the new-build heat standard will help achieve that for the new homes that we are building. Many social housing providers, as well as commercial housing providers, are already doing that to a very high standard, and they are innovating with great ambition and creativity.

I think that one of your witnesses said that the retrofit agenda will be a “nightmare”. I hope that it will not be, because I am working on that, too. It is a huge challenge, but it is a bigger challenge on the retrofit side than it will be on the new-build side.

Tangentially, in answer to your point about transport, that is one of the reasons why we were keen to develop the free bus travel for young people policy. I have spoken to young people who did not take up college courses, because their bus costs would have been £10, £20 or £30 a week, which was just not viable. I am therefore very pleased to hear support for the Government in that area.

Antonia, do you want to respond to some of the other questions?

I just thank the committee once again for its scrutiny and for giving me the time to explore the issues with you.

Again, I would draw a distinction between anecdotal evidence that is being put about and what we are seeing on the ground. It was only ever possible for the Cost of Living (Tenant Protection) (Scotland) Act 2022 to have a direct impact on rental incomes for a period of 18 months. Now that we are at the point of proposing the extension for the final six months, the effect of a decision today cannot possibly impact on the rental income of properties that are subject to investors’ decisions at the moment. Investors’ decisions at the moment would be about the supply of homes that are available to generate rental income in the future, after the temporary provisions in this legislation have ceased.

Some of the wider concerns of institutional investors are around the Scottish Government’s longer-term proposals for rebalancing the private rental sector and, in particular, for a new national system of rent controls. We are keen to continue to work closely with the sector, which includes engagement that I and Paul McLennan as Minister for Housing have with investors as well as developers as we work through the process to determine the shape of the housing bill that will be introduced next year to give effect to that commitment to a national system of rent controls.

The impact that we are seeing on rental prices reinforces the need to commit to that work. We need to ensure that affordability is part of our understanding of what adequate housing is and that all people have a human right to adequate housing. We will continue to develop that work in a way that is well informed by the perspectives of tenants, landlords, the people who work with them and investors. Across Europe, the situation that Scotland and the rest of the UK have been in in recent years and decades is unusual. It is a particularly unregulated market in private housing terms.

Investors—particularly the bigger institutional investors—make decisions across a wide range of countries and they are well used to making decisions about more regulated and less regulated markets with regard to rental property. Evidence from across Europe is very clear: a well-designed rent control system is entirely compatible with a vibrant housing market and investment in homes made for private rent. We believe that that can be achieved in Scotland as well and that it will be consistent with supplying the quality homes that Scotland needs and achieving affordability, which has been lacking in too many cases.

I do not agree with that characterisation of what the legislation has done.

Pam Gosal is right that rent increases between tenancies are not covered by the legislation. As it is emergency legislation, it was not ever going to be possible, through it, to fundamentally restructure the way that private residential tenancies—PRTs—work. There was recognition that the 2002 act was only ever going to provide protection within tenancies in relation to the annual in-tenancy increases that are allowed under the PRT.

As a result of the legislation being in force in Scotland, the difference is that we are seeing only inter-tenancy increases and tenants are—excepting the exceptional 6 per cent cases—being protected with a 3 per cent rent increase cap within tenancies. Down south, people are being subjected to both. We know that increases in market rents—rents that are being advertised—are significant; for example, the increase is 12 per cent in Glasgow and 10 per cent in Aberdeen. We also know that similar figures are being seen in parts of England; for example, we see increases of 10.4 per cent in Cardiff, 10.7 per cent in Southampton and 13 per cent in Manchester.

The inter-tenancy increases are happening for a wide range of reasons. I am sure that they are a necessity in some cases, but some landlords are pursuing whatever they can get away with. That last point is by no means a characterisation of the whole private rented sector. There are landlords out there who are committed to trying to provide housing that is as affordable as possible for their tenants, but there are also landlords who will go to the maximum that they think the market will bear.

In Scotland, sitting tenants have protection from annual in-tenancy rent increases, rather than their being subjected to both in-tenancy and intra-tenancy rent increases. The level of protection that exists for tenants is higher in Scotland as a result of the legislation.

Yes. That is why we are keen to ensure that we are hearing from the widest possible range of voices, as we come to a decision. I hope that broad support exists for the principle that such a mechanism is necessary to prevent a cliff edge—I do not recall there being serious opposition when the legislation was passed in Parliament—but Ivan McKee is quite right to say that it needs to be designed in a way that is consistent with both our protection for tenants and the wider need for a housing market that meets people’s needs.

Again, some of that variation will be to do with protections being brought in due to Covid and then starting to ease off. Over time, such things can change significantly. I do not think that we have to go back very many years to see a period when evictions from the private rented sector were the principal—the biggest—route into homelessness. That level started to come down because of a number of actions that were taken. We need to continue to ensure that people are protected from the risk of homelessness, and the new homelessness prevention duties are going to be important in achieving that. However, it is pretty clear that the legislation has given additional protection that has been necessary, particularly for people living in the private rented sector.

Rural developers and housing providers do face additional costs, which is why many of the funding streams that we offer have uplift for remote, rural and island communities. For example, we announced—I think, 10 days or two weeks ago—an additional uplift to the social housing net zero heat fund of 11 per cent for rural areas and 22 per cent for remote areas.

Some of those issues will need be addressed. Island communities in particular are sharply aware of some of the additional challenges that they face, whether around skills and capacity or around trust, as folk in some island communities have been stung by sharp practice, with developers with a bad intention coming in from the mainland and doing work to a poor standard, never to be seen again.

We know that we need to address particular issues there, but real innovation and creativity are being brought to bear, which I know from when I was up in Shetland recently. The Hjaltland Housing Association is doing interesting work in addressing net zero challenges in a way that is consistent with the aspiration for high-quality social housing in the more general sense, not just in a narrow energy sense.

There are issues in relation to remote, rural and, in particular, island communities. Those have been assessed in part through the island impact assessment. We are working on a great many of those challenges and we can turn some of those challenges into positives because of the level of creativity that is being brought to bear in many of those communities.

Thank you very much, convener, and good morning, colleagues. I am pleased to be here to present the Building (Scotland) Amendment Regulations 2023, which is also known as the new-build heat standard. It is an important step because it is the first time since all parties in Parliament passed the net zero legislation that we have considered regulation to explicitly reduce emissions at scale from heating systems in our buildings. I remind colleagues that the sector represents about 23 per cent of our total emissions.

To meet our legally binding climate targets, we need to decarbonise all existing homes—that is, more than 2 million homes—by 2045. So as not to compound that challenge further, it is vital that the new buildings and homes that we build do not add greenhouse gas emissions to the atmosphere. It is clear that the continued use of high-carbon-emitting heating systems in homes and buildings is simply not consistent with the targets that are set out in the Climate Change (Scotland) Act 2009, for which all parties in Parliament voted.

I have often said that that challenge would still be significant but much easier if we had begun to take the steps that we should have taken 20 or 30 years ago. Although we cannot wind time back, we can ensure that what we build today is future-proofed for the decades to come. We have an opportunity to take significant and impactful steps to move away from delivering what some developers are already calling “yesterday’s homes”. Instead, we will ensure that homes and buildings are future-proofed with climate-friendly heating systems that will be compliant with the upcoming heat in buildings standard, which will give peace of mind to the people for whom those new properties will become homes and businesses.

I understand that a change away from a practice that has been the norm for a long time might make some home buyers and building owners nervous, particularly around what it means for their fuel bills when the UK Government continues to stall on rebalancing energy costs. However, the cost of living crisis and the recent surge in energy prices make tackling those challenges not just harder but also more urgent.

We are not, by any means, the only Government or country that is taking bold action to reduce the emissions from our new buildings. Neighbours in Europe have already implemented similar measures or have plans to do so. Many of them are moving ahead at scale and pace. If passed, the regulations will come into force a year earlier than the UK Government’s equivalent future homes standard. The committee might already be aware that our statutory adviser, the Climate Change Committee, has called for the UK Government to align with the Scottish Government’s timescales for implementing its future homes standard by bringing it forward to 2024.

We propose to implement the new-build heat standard using existing powers through fully devolved building regulations. That would mean that compliance with the standard would be achieved using a mechanism that developers across Scotland are already familiar with. I want to reassure the committee that we are not introducing a blanket ban on direct emissions systems in new buildings from 1 April 2024. The proposed amendments to the building regulations will apply only to new buildings constructed under a building warrant that is applied for on or after 1 April 2024. So, because of the nature of building warrants in Scotland, we expect that some new developments will continue to install direct-emissions heating systems, such as gas boilers, until—at the very latest—April 2027. That supports the transition for the construction and house building sectors.

The introduction of the regulations will accelerate the shift toward greener homes across the country, as well as helping to grow the capacity of Scotland’s zero-emissions heating supply chain. I want to take the opportunity to highlight how many organisations have already embraced the shift away from direct-emissions heating. Many industry forerunners are already delivering homes that are served by zero-direct-emissions heating systems across Scotland.

The Scottish Government’s affordable housing supply programme continues to support affordable housing providers who wish to install zero-emissions heating systems, and many providers are already installing such systems in rural and urban settings across Scotland. That includes the West of Scotland Housing Association’s new development in Dundashill, in Glasgow, which I had the pleasure of visiting this summer. That project will see 90 new highly energy efficient homes built with zero-direct-emissions sources to meet the space and water heating needs of tenants. That is part of a wider master plan to regenerate the local area. It is just one of many examples of the excellent work that is being undertaken around Scotland.

There are also examples of private developers already building to the highest standards of energy efficiency and zero-emissions heating. Forward-thinking organisations such as Cala Homes have set their own targets for designing new developments that are gas-free from January 2024—months in advance of the regulations coming into force.

However, we recognise the challenges that the shift away from direct-emissions heating may bring, and it is critical to ensure that Scottish consumers and businesses are not left behind. That is why, together with our external working group, we have carried out extensive engagement through the development of these regulations, through two full public consultations as well as through both formal and informal industry engagement. Our working group has brought together key trade industry bodies, including those representing the construction and house-building industries, as well as both of Scotland’s distribution network operators and a wide variety of other interests. All of that has ensured that, from the outset, industry has had a voice in shaping the regulations to ensure that they are practical and fit for purpose. The group has acted as a critical friend throughout the process.

The group is co-chaired by Professor Lynne Sullivan. Committee members may be familiar with the Sullivan report, which, as far back as 2007, set out a number of recommendations for new buildings in Scotland, including the proposal to achieve net zero carbon new buildings in terms of space and water, heating and lighting and ventilation by 2017. The regulations are an important step in our net zero journey. They should not cause anyone any surprise or alarm. They are looking to achieve what was recommended by industry representatives on the Sullivan expert group more than 15 years ago.

The responses to both of our public consultations were overwhelmingly in favour of our intention to regulate for zero-emissions heating systems in new buildings. That is a very positive endorsement and demonstrates broad support for the proposals.

We have also listened to feedback that has been raised throughout the consultation periods, including as part of the public workshops that were held while both consultations were live. That is why we have introduced a probation for the continued use of direct-emissions heating in the system in the event of an emergency. That will help to increase resilience, particularly across remote and rural properties, ensuring that they are better protected against grid or other heating system failures, should they ever happen.

By legislating now, we are sending a strong signal to industry that the Scottish Government is serious in moving to a more sustainable net zero future and providing confidence for business to invest in zero-emissions alternatives. The committee will be aware that the Building (Scotland) Amendment Regulations 2022 set higher targets for the energy performance of new buildings. The regulations that I am presenting today seek to build on those, and they are the next key step in achieving the transition to net zero.

Although it is crucial that we reduce the demand for heating in new homes, we cannot insulate our way to net zero. We also need to break away from what has been business as usual by shifting away from fossil fuel heating systems that create emissions towards zero-direct-emissions alternatives.

During the development of the regulations, we have acknowledged industry concerns about the capacity of Scotland’s electricity grid and supply chain capabilities. Although the regulations are technology neutral, it is likely that we will experience a significant increase in the use of electrified heating systems such as heat pumps. We continue to work with industry and Scotland’s electricity networks to identify and address the issues that can frustrate or prevent the connection of low-carbon technologies. The Office of Gas and Electricity Markets charging and access review decision and the RIIO-ED2 outcome have provided welcome support for developments that seek to electrify.

Scotland is well placed to grasp the opportunities that the regulations will bring. For example, Livingston, which is less than 20 miles from here, is today home to one of Europe’s largest heat pump manufacturing facilities. There is also an opportunity to deliver maximum benefits for Scotland’s people, workers and communities and our economy, particularly through the creation of new high-quality jobs for the future. Many of the core skill sets that are needed to support the transition already exist in the traditional heat and building improvement sectors. That gives us a strong foundation on which to build and grow our supply chains.

The introduction of the regulations will provide needed certainty to industry to invest and will help to build confidence and stimulate Scotland’s zero-direct-emissions heating market. It is of vital importance that we take these meaningful and immediate steps to address the climate emergency, and I hope that it is clear to the committee that these steps are, indeed, necessary if we are to meet our net zero goals.

I am very clear in my conviction that we can and must act now to secure the legislation and change definitively the way in which we heat our buildings, from the combustion of fuels to clean sources from electricity and heat networks. There may potentially be a limited role for hydrogen as well.

This is a moment to make the commitment to the generations to come that we are the ones who finally did the right thing and put an end to fossil fuel heating.

I thank the committee for the scrutiny that it is bringing to the instrument, and I look forward to any questions that members have.

I ask Antonia Georgieva to come in on this point.