Private Rented Sector

Mark Pawsey Excerpts

Wednesday 23rd January 2013 Commons Chamber

[Jack Dromey]

My hon. Friend is right. The disturbing evidence of the impact on educational attainment is associated with disturbing evidence that bad and overcrowded housing—sadly, 37% of the private sector is precisely that—has a serious impact on the GCSE results of children and therefore their lifelong earnings potential.

[Mark Pawsey (Rugby) (Con)]

On the length of tenancies, does the hon. Gentleman agree that there is nothing to stop landlords and tenants agreeing longer terms? There is an institutional problem. People assume that the terms need to be six months or a year, but if we can make more people aware of the legislation, landlords and tenants should be able to agree longer terms.

[Jack Dromey]

I agree that there is an institutional barrier, but there is an absurdly short-termist culture in the private rented sector. In fairness, landlords face problems, including, for example, buy-to-let mortgages that insist that tenancies cannot be longer than a year. The question is how we achieve the security and predictability of affordable rents that I have described.

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[Jack Dromey]

My hon. Friend is exactly right. That is why the Association of Residential Letting Agents, which represents letting agents, has been one of the most vociferous advocates of letting agent regulation, supported by the National Landlords Association, the Residential Landlords Association and the British Property Federation. There is a universal agreement in the sector that the time has come to regulate letting agents, so that in the future we do not have the practices of the past that she has detailed so graphically.

[Mark Pawsey]

rose—

[Jack Dromey]

I am anxious for as many speakers as possible to contribute to the debate, so I want to start bringing my remarks to a conclusion.

There can be no place in future for rogue landlords. The time has come to drive them out, but the problem is not simply criminal landlords. There are also a large number of amateur landlords, who—through having inherited a property, for example—are often accidental landlords. Often well-meaning, many are unaware of their rights and responsibilities when letting out a property as a home for another. A recently publicised case illustrated the severity of the issue. It involved a young mother of two, just 33 years of age, who had made her dream move to a private rented home in Cornwall. Six days later she was found dead by her young daughter, electrocuted because of a faulty heater. The electricity had not been inspected since 1981, when the house was rewired.

Sadly, this is no surprise because, as I have said, 37% of homes in the private rented sector do not meet the decent homes standard—a greater proportion of the total stock than in any other sector. Nearly 15% of private rented homes lack minimal heat in the winter. Imagine, Mr Deputy Speaker, being unable to heat your home in this weather for even minimal warmth.

[Mark Pawsey]

rose—

[Robert Flello (Stoke-on-Trent South) (Lab)]

rose—

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[The Minister for Housing (Mr Mark Prisk)]

I beg to move an amendment, to leave out from “recognises” to the end of the Question and add:

“the importance of a vibrant private rented sector in providing a diverse range of quality accommodation to those who do not want or currently cannot buy their own home; supports action to be taken against the small minority of rogue landlords, without burdening the whole sector with unnecessary costs; warns that excessive red tape would force up rents, reduce choice for tenants and undermine future investment; believes that the Government should work with councils to promote their wide range of existing legal powers; welcomes the Government’s action against ‘beds in sheds’ criminal landlords and steps to tackle social housing fraud; and supports the Government’s new £200 million ‘build to rent’ fund and the £10 billion in debt guarantees for investment in the long-term rental market.”.

I very much welcome this debate, and I note your opening remarks about needing to be brief, Mr Deputy Speaker. I shall do my best to ensure that all Back Benchers can participate with their own contributions. This is an important debate because, as the hon. Member for Birmingham, Erdington (Jack Dromey) rightly said, it is about a part of the housing market that is of growing importance and concern to Members across the House. We have tabled an amendment to the motion, because we believe it is flawed. However, some of the aspirations behind the debate are shared across the House, so I would like to try to take a constructive approach to what I hope will be a positive debate.

[Mark Pawsey]

The Minister and the shadow Minister will both be aware that this subject is about to come under investigation by the Select Committee, which will take evidence from many of the bodies to which the shadow Minister referred and will be coming forward with recommendations within the next two to three months. Does the Minister agree that this debate would be more appropriately held after we have heard that evidence and come forward with some proposals?

[Mr Prisk]

I hope the Opposition have listened to my hon. Friend’s eminently wise advice about timing, but we are where we are. I will certainly want to look at what the Select Committee has to say.

As a Government, we recognise the growing importance of the private rented sector in meeting our constituents’ housing needs. Indeed, as we have heard, some 8 million people now rent privately. Home ownership, of course, remains a goal for most families, and we strongly support that ambition. Let us be clear, however, that home ownership is not for everybody. Many younger people need the flexibility that the rented sector offers. Even those who want to buy will rent while they are saving for their deposit, so a bigger private rented sector is very much here to stay.

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[Damian Collins]

My hon. Friend makes an important point. Of course, local authorities do already have the power to do that. As the hon. Member for Birmingham, Erdington (Jack Dromey) said, the London borough of Newham has introduced a licensing scheme across its entire area. This should not be a matter of national policy or a compulsory requirement but something that local authorities should have the discretion to enforce at their will. My concern, though, is that the enforcement of a licensing regime might put rents up, because the landlord will pass the cost on to their tenants, and might restrict the number of properties available in the market. Those concerns were also certainly raised in the consultation that Newham itself ran on the introduction of its licensing scheme.

I wonder whether there should be incentives for landlords to be more responsible in the way in which they manage and maintain their properties. Direct payments are probably a topic for debate on another day, but should not a landlord qualify for direct payments of housing benefits that give them a guaranteed income stream only if they maintain their properties at a certain level?

[Mark Pawsey]

Does my hon. Friend agree that a longer period of tenancy with greater security of income would be the exact incentive that landlords need to improve their properties?

[Damian Collins]

My hon. Friend makes an extremely important point. We should certainly consider doing that with regard to the social sector and housing benefits. I do not think that local authorities and the Government should be in the business of paying housing benefit to landlords who do not maintain their properties at a decent standard. We should not be doing that. I think that the guaranteed flow of income and the massive supply of people who are looking for accommodation give us the power to negotiate with the market and the private sector in an important way.

I would also say that private landlords who wish to rent their properties out to tenants on housing benefits should be part of an accredited scheme, run by one of the organisations that represent the housing sector, be it the National Landlords Association or another body. There should be an incentive for people to sign up voluntarily to those sorts of schemes.

The Private Sector Tenants’ Forum, which was consulted by the London borough of Newham, said that its tenants

“had some concerns—above all, that landlords should not be discouraged from letting properties and that licensing costs for landlords should not increase tenants’ rent levels. They also wondered if the regulations could be enforced effectively in practice.”

That is my one concern about the national register of landlords proposed by the Opposition. It is fine in principle but, on the ground, the local authority needs to have the resources to enforce the agreements and check the properties. I suspect that the reason why hon. Members from all parties have raised the concerns that they have about the state of properties in the private rented sector is that local authorities are not making those checks or enforcing measures against the private sector landlords. Perhaps the authority does not have the resources to do so. It would seem from what the London borough of Newham has said that it hopes that the licensing scheme will pay for some sort of enforcement, but I doubt whether that would be possible.

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[Mark Pawsey (Rugby) (Con)]

It is a pleasure to speak in this important debate. As I said in an intervention, I find it difficult to understand why the Opposition have initiated a debate on this topic at this time, just as the Communities and Local Government Committee is about to start its inquiry. Would it not make more sense to hold such a debate immediately after the Committee produces its report?

The private rented sector plays a significant role in housing provision, and for many people renting privately has become a preferred choice as they look for the flexibility that the sector provides. After owner occupation and social renting, the private sector has become an accepted and effective third form of occupying a home. As Shelter points out, more than 1 million families with children are now renting privately, and many are renting by choice.

In any discussion of the private rented sector it is important to acknowledge how the Conservative Government rescued it. Between 1915 and 1979 owner occupation of social housing increased dramatically, while private rented accommodation fell from 75% of all properties in 1918 to as low as 8% by the 1980s. Only the Housing Act 1988, which introduced radical change under the then Prime Minister Margaret Thatcher, ended the slide of the private rented sector and abolished rent controls.

[Jake Berry]

Does my hon. Friend agree that the Housing Act 1988—a seminal piece of legislation—clarifies the fact that reducing regulation can improve the sector? It is not always about increasing regulation.

[Mark Pawsey]

My hon. Friend is entirely right. Until 1988, anybody who owned or had inherited private rented accommodation under the fair rent regime was anxious to sell immediately on taking vacant possession because the returns available in that sector simply did not justify investment in it.

Some serious issues face the private rented sector, including an appropriate concern about rogue landlords—the House has heard accounts of tenants living in substandard accommodation. There are various claims about the extent of rogue landlords, and I hope that when the Communities and Local Government Committee takes evidence it will be able to identify the true extent of the problem. Tenants should feel confident when they enter into an agreement that their landlord will stick to his responsibilities. The question before the House is whether regulation is the best route to deal with rogue landlords, and indeed rogue letting agents. The Association of Residential Letting Agents states:

“With the majority of letting agents operating legitimate, professional practices, one could argue that it is the responsibility of consumers”—

and, in this case, landlords, who in the main are professional people—

“to make an informed decision about which agents they use”.

I agree on that point. I am not convinced the Government should get involved.

Interestingly, in June 2010, the Department for Communities and Local Government stated, as my hon. Friend has, that:

“In the past over-regulation drove landlords out of the rental market.”

Over-regulation would reduce the number of properties to rent and would not help tenants or landlords.

[Damian Collins]

Does my hon. Friend agree that the landlords who are happy to flout the current law on what is considered to be a decent standard of home will not be concerned about new regulations, because they will flout those too?

[Mark Pawsey]

Absolutely. Other hon. Members have made the point that councils have the powers to deal with rogue landlords. We need councils to use them. The Department for Communities and Local Government states:

“Councils already have powers to require landlords to take action to rectify hazards in their property and where landlords resist, to make and charge for improvements, and to prohibit use of the affected parts of the property.”

The question for the House is what the Government should do to encourage local authorities to make greater use of their existing powers. I hope the Minister refers to that.

Hon. Members have mentioned letting terms. Many tenants and landlords believe their agreements should be for either six or 12 months, but as we have discussed, there is no reason why they should not be longer. A longer-term agreement is often in the interests of both tenant and landlord. Many investors in residential property are in it for the long term. I accept the point made by my hon. Friend the Member for Rossendale and Darwen (Jake Berry) on the terms of buy-to-let mortgages, but not all properties are subject to those. One piece of evidence that the Communities and Local Government Committee hopes to uncover is the proportion of accommodation in the sector that is subject to such mortgages and the proportion that is owned outright by investors.

Tenants often want the greater security of a longer period. I would like the situation that exists in commercial property whereby people promote and advertise the properties available on the basis of the length of the letting term. Some landlords will always want to let for a short term, but those properties should be identified as such.

I look forward to the Committee’s work in talking to representatives of landlords, tenants, letting agents and councils, so that it can better understand what is happening in the sector, what is working well and what is working badly, the current state of the market, the different perspectives, and how the sector can be improved. However, I subscribe to the premise that regulation is unlikely to be the solution to all our problems. I will therefore have great pleasure in supporting the amendment.

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[Craig Whittaker]

That is exactly right. In some cases, landlords do not take deposits at all, as I shall explain later.

What is the point of having more legislation and regulation when local authorities are not enforcing what is already in place? Let me point out that a recent English Housing Survey found that 85% of private tenants were either very or fairly satisfied with their landlords, which compares with 81% for social housing tenants.

As an MP, I meet my local landlords association and associations nearby, so I can say that if a stable rental contract that gave renters a five-year term came into force, we would go back to the bad old days of the ’70s and ’80s when landlords advertising their properties would plainly put on the adverts “No DSS”. [Interruption]. It is true. I wonder whether the Opposition Members who proposed this motion ever went out to speak to landlords. If they did, they would find that landlords who rent particularly to the local housing allowance sector often cannot get a bond, let alone four weeks’ rent up front. They have to wait for the local housing allowance payment to come to the tenant before they get paid, and unless they go and collect the rent on the day the tenants are paid, they often find their rents are short.

[Mark Pawsey]

Does my hon. Friend share my concern that if there is too much regulation, landlords will simply exit the sector?

[Craig Whittaker]

My hon. Friend is absolutely right. As I pointed out earlier, we will see landlords refusing to rent to various groups within the sector.

Last week, I spoke to one of my local landlords who has more than 450 homes that he rents out in West Yorkshire. He told me—a story I hear time and again at this time of year—that 40% of his local housing allowance tenants paid short in December and a further 20% did not pay the rent at all, and not because the rents were above the local housing allowance threshold. In one story he told me, the door was answered by the tenant’s young daughter, who was keen to show him the vast array of computers and designer presents she had received for Christmas. He was then told by the tenant, however, that there was not enough money to pay last month’s rent, and he was asked if she could pay it back over the course of this year.

This is not a rogue landlord, but one who maintains all his properties to a high standard—he is actually a very good landlord. What on earth are these landlords going to do when universal credit is introduced later in the year, and the ability to get local housing allowance paid direct when the tenant is in arrears is removed? That is not an issue for today, but I can see those “No DSS” signs coming back as we speak. This will not tackle the problem of rogue landlords, but, sadly, will probably increase their number.

Many vulnerable tenants do not need five-year leases. If we want to do something to help them, let us introduce a support package of budgetary controls and training as part of the wider picture. One of the reasons—and I do mean “one” of the reasons—for the amount of churn in the sector that relies on local housing allowance is the fact that those people simply do not pay their rent, or find themselves in a financial mess.

The motion does not address the real issues, including the issue of rogue landlords. If anything, the measures that it proposes would increase the number of such landlords and push more tenants into their hands. The answer is to help, and force, local authorities to enact and enforce the 100-plus pieces of legislation that already exist, as well as helping vulnerable tenants with such matters as budgetary control.