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Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
Before we move to the debate on the amendments, I will make a statement. I remind the House again of the protocol around declaring interests. As I mentioned last week, noble Lords should declare relevant interests at each stage of proceedings on a Bill. That means in Committee, relevant interests should be declared during the first group on which a noble Lord speaks. If a noble Lord declared an interest during the last two days in Committee, that is sufficient, but, if this your first contribution, any relevant interests should be declared in a specific but brief way.
Amendment 69
Baroness Scott of Bybrook
“Assessment of operation of possession process(1) The Lord Chancellor must prepare an assessment of the operation of the process by which—(a) on applications made by landlords the county court is able to make orders for the possession of dwellings in England that are let under assured and regulated tenancies, and(b) such orders are enforced.(2) The Lord Chancellor must publish the assessment at such time, and in such manner, as the Lord Chancellor thinks appropriate.(3) In this section—“assured tenancy” means an assured tenancy within the meaning of the 1988 Act;“dwelling” means a building or part of a building which is occupied or intended to be occupied as a separate dwelling;“regulated tenancy” means a regulated tenancy within the meaning of the Rent Act 1977.”Member’s explanatory statement
This amendment would require the Lord Chancellor to assess the operation of the possession process to ensure that the courts service has the capacity to deal with the increased demand expected because of this Bill.
Baroness Scott of Bybrook (Con)
My Lords, I rise to speak to this group of amendments and to thank my noble friend Lord Young of Cookham, the noble and learned Lord, Lord Etherton, and the noble Baroness, Lady Thornhill, for their amendments.
Before I get into the substance of the debate, I would like to issue a plea. I hope the Minister knows that I have the utmost respect for her. However, so far in Committee, we have been disappointed with the responses we have received to our debates and amendments. I can say in good conscience that, when I sat in her seat on her side of the Chamber, I treated every amendment put before me with respect; I often took issues back to the department to consider and, where possible, made changes. That is because I understood that it was the role of the House of Lords to scrutinise, revise and improve legislation. Unfortunately, it does not feel like this is still happening. Questions go unanswered and suggestions are dismissed without sufficient consideration.
This House has always been more about reason and substance than blind political ideology. I hope that the Minister can approach our debates going forward in that vein. I know full well that Ministers cannot always have the answers at their fingertips, and I am very happy to have written answers on points of details. However, I do ask that the Minister treats our House and our suggestions seriously, in the nature that they are intended.
This group addresses a critical issue that will determine the success or failure of the Bill: the capacity of our courts to deliver it. Let me say from the outset that we fully support the ambition to strengthen security and fairness in the private rented sector. That commitment was made clear in the previous Renters (Reform) Bill. Within that, the previous Conservative Government set out that Section 21 would not be abolished until meaningful court reform had been undertaken and sufficient progress achieved. Such caution was not merely prudent but essential, considering the challenges facing our courts system.
This Bill abandons the careful sequencing we set out under the previous Renters (Reform) Bill. Under our approach, Section 21 would not have been abolished until meaningful improvements had been made to His Majesty’s Courts & Tribunals Service. We also committed to a six-month implementation period for new tenancies to ensure that the system could cope. These safeguards were not incidental; they were essential.
However, in this Bill, those safeguards are gone. There is no clear commitment to upgrade court capacity before abolishing Section 21 and no phased rollout to protect the system from being overwhelmed. As a result, we face a real risk that our courts will be asked to carry out a far more demanding role without the necessary resources, reforms or readiness.
The ambition of the Renters’ Rights Bill is commendable, but ambition alone is not enough. We must also confront the operational realities. This legislation will place significant demands on our already stretched courts and tribunals system. If we press ahead without ensuring that the system is properly resourced, modernised and fully functional, we risk undermining the very objectives that the Bill sets out to achieve. Tenants and landlords alike need a process they can trust: one that is timely, fair and accessible. Without that, this reform will falter at the first hurdle.
Let us be clear about the scale of what we are asking the courts to do under this legislation. With the removal of Section 21, we are fundamentally reshaping the legal framework for possession. Possession cases that might previously have been resolved swiftly, albeit controversially, will now be channelled through more complex, contested grounds. This is a just and necessary step, but it is one that demands an equal and opposite increase in our ability to administer justice efficiently.
Yet the system is not ready. The Civil Justice Council, the Law Society and countless court users have been sounding the alarm for years. Backlogs are rising, court rooms lie unused for lack of staff and overburdened judges are stretched too thin. In some parts of the country, landlords wait months, not weeks, for a simple hearing. In turn, tenants are left in limbo and often under the threat of eviction without resolution or recourse.
We must remember that delay is not neutral. It is not a benign inconvenience. It is a deeply disruptive force in people’s lives. For a landlord, it might mean months without rental income, with mortgage arrears mounting. For a tenant, it means living in a state of uncertainty. That silence—those weeks and months of not knowing—is not just stressful but debilitating. It leaves tenants feeling powerless and unable to plan their future and move forward.
It is for that reason that I urge the Minister to consider carefully Amendment 69 in my name, which requires the Lord Chancellor to conduct an assessment of the possession process. This assessment would examine how county courts handle applications from landlords for possession of properties under both assured and regulated tenancies, and how those orders are subsequently enforced.
This is a foundational step. If we are to move away from Section 21, we must be absolutely confident that the remaining legal routes for possession are functioning effectively, fairly and in a timely manner. This is not just a tick-box exercise; it is about ensuring we have a legitimate understanding of where our courts stand, their capacity and whether they are in any fit state to take on the increased volume and complexity of cases that this Bill will inevitably bring.
The amendment ensures transparency, accountability and evidence-based implementation. Without such an assessment, we risk walking blindly into a situation where the courts become the bottleneck, where neither landlords nor tenants can get timely access to justice. Likewise, Amendment 283 provides an essential safeguard. It would ensure that Section 21 cannot be abolished until the assessment outlined in Amendment 69 has been published and, crucially, that the Secretary of State is satisfied that the courts have the capacity to manage the increased demand. This is not an attempt to delay reform indefinitely; it is a commonsense measure to ensure that reform is deliverable. It puts the infrastructure in place before the policy takes effect. Without this step, we risk setting both tenants and landlords adrift in a system that simply cannot cope.
I look forward to hearing from other noble Lords on this very significant group. The amendments from the noble and learned Lord, Lord Etherton, in particular, underscore the necessity of certifying that the court system has the capacity to manage the anticipated increase in possession cases. Amendment 279 in his name stipulates:
“None of the provisions of this Act, other than this subsection, come into force until the Secretary of State certifies that the average time for the court’s disposal of landlords possession actions in respect of residential property is as timely as in the year ending 23 March 2020”.
This benchmark is not arbitrary. It reflects a period when the system was functioning at a level that we can reasonably expect to return to. Furthermore, Amendment 280, also in his name, reinforces this by requiring the Secretary of State to certify that the courts are not only timely but efficient and adequately resourced to handle the increased caseload.
These amendments are not about delaying progress. They are about ensuring that progress is achievable and that the reforms we implement are not undermined by an overburdened and underresourced court system. As we have discussed, the abolition of Section 21 will undoubtedly lead to more contested possession proceedings. Without the necessary court capacity, we risk exacerbating the very issue that we seek to address: delays, uncertainty and a lack of access to justice for both tenants and landlords. The amendments before us today provide a prudent and responsible approach to ensuring that our court system is ready to meet these challenges.
In conclusion, I urge the Government to give serious consideration to these amendments. They represent a balanced approach that aligns the ambition of the Renters’ Rights Bill with the practical realities of our courts system. We have noble Lords present who are experts in that system and I look forward to listening to their contributions. I beg to move.
Lord Young of Cookham (Con)
My Lords, Amendment 205 in my name has much in common with the other amendments in this group, which are probing amendments to see whether the capacity of the courts is up to dealing with the cases that are likely to come before them—not least the likely increase in possession cases when the Act is implemented, and of course to deal with any backlog that has accrued between now and when it comes into effect.
Amendment 283, in the name of my noble friend Lady Scott, is the most demanding of the amendments. It basically defers the abolition of Section 21 until an assessment of court capacity has been completed and the Secretary of State is satisfied about capacity. Amendment 69 finds her in a more conciliatory mood. That amendment does not delay the abolition of Section 21 but requires the Lord Chancellor to monitor progress and ensure that the capacity is there, and it sets no time limit on that assessment. My Amendment 205 finds a middle way, requiring the assessment to be carried out within six months of the passage of the Bill, while Amendment 264, in the name of the noble Baroness, Lady Thornhill, is more generous, allowing two years. Neither would hold up the abolition of Section 21.
Lord Cromwell (CB)
My Lords, the noble Lord, Lord Young of Cookham, has again spoken so much sense that it leaves me little to add. I should warn him that in our previous day’s debate I was described as “irritatingly persuasive”, so I hope not to damage his case by supporting it.
There is a real issue here and it does need some serious probing. I am not suggesting that we retain Section 21, but noble Lords have raised at Second Reading and today in Committee, as I am sure others will raise again, the courts simply not being ready to take on the burden that is coming to them. There is no credible timescale to transform the clogged courts and tribunals system. However, my main reason for speaking is to put on record and advise the House that I attended a meeting—with the Minister and other noble Lords, some of whom are present today—with those responsible for the court digitisation, which has been held out as the kind of techno magic that will transform the speed of court processes.
This was illuminating, but it left attendees, a good number of whom have very considerable experience of our legal system, very doubtful about this still-evolving IT system. The view from the people I spoke to was that it would take at least five years to bed in.
The Earl of Kinnoull (CB)
My Lords, Amendments 279 and 280 stand in the name of my friend, the noble and learned friend, Lord Etherton. I signed those amendments as well, not with a legal hat on but more with the hat of someone who has been there for the development of a large number of complex IT systems over the years, and has probably contributed to almost every mistake it is possible to make in doing that.
The noble and learned Lord, Lord Etherton, unfortunately cannot be here today, so I am going to make some observations that follow on nicely from what the noble Lord, Lord Cromwell, has just said. I refer the Committee to my register of interests. I am, in my own capacity and to a small extent, a landlord, but in Scotland. I am also trustee of a couple of trusts in Scotland that are renting properties out.
The problem was set out by the noble and learned Lord, Lord Etherton, at Second Reading. I am afraid that, because he is not here, I will use his words very briefly. He said:
“We all know that there will be many more contested possession proceedings by landlords following the enactment of the Bill and the abolition of Section 21 no-fault evictions. It would not be right to abolish no-fault evictions without adequate speed and resources for dealing with the increase in contested proceedings … The Government need to demonstrate that measures have been or will be put in place which will help to secure that court claims by landlords for possession of residential properties will be disposed of in a timely and efficient way”.—[Official Report, 4/2/25; cols. 623-24.]
The meeting to which the noble Lord, Lord Cromwell, has just referred took place on 11 March. There were half a dozen Cross-Bench people there. I am holding the 30-page presentation that was handed out. There were officials there from the Ministry of Justice, in particular from HM Courts & Tribunals Service, and from MHCLG; the Minister was there as well. It was an extremely interesting presentation, and there were two things that came out that I feel I should speak to the Committee about today. The first was about the size of the problem. There is a slide that scopes out the size of the IT system that is involved. This IT system exists today. The noble and learned Lord, Lord Etherton, is very familiar with the IT systems that support the court services, as he was responsible for a large number of them for some years, and he was very much the driver for the half a dozen of us who were there.
That IT system has separate subsystems for case management, hearings management, work allocation, user registration and fee payment—there are others as well. Noble Lords can see just how complex this IT system is. In each of the things I have just mentioned, there would of course be major changes required to the IT system that would need to go through development and be dealt with in a proper way.
After considering the size of the problem, which I certainly assess as pretty big, we went on to discuss their approach to the design and build of the new system. This was in a slide that was extremely clear, and they were pleased to report that the prototype stage had arrived. The prototype stage sounds very hopeful, but in fact this comes before the fifth of the six stages, which is “prepare for build”; the sixth stage is “build and test”. The prototype is literally that—something which comes at a pretty early stage in the development of the IT system. All that comes, of course, before user acceptance testing and actually training up people involved in the court system to use this complex system in an efficient manner. The acid question that was put to the people advising us on this was how long they thought it would take to get to the end of the “build and test” stage. The answer on 11 March was two years.
The people who were briefing us universally gave a very good impression indeed. I have met a lot of IT people, but they seemed to me very steady in every way and have clearly been through this a lot before, so I have no reason to doubt their two-year estimate for getting to the end of the IT build. In speaking to colleagues afterwards, I think they also felt that the people who were presenting it—who were, after all, the people who were actually doing the programming—were of a very high quality.
With no IT system, the presentation explains that there are 110,000 cases a year, and this is without any uplift in the number of cases that one would expect. The uplift referred to earlier in this debate, and by the noble and learned Lord, Lord Etherton, in his Second Reading contribution, was 110,000 cases a year. Let us say that we had only a year and a half of it because things went on, but that would be 165,000 cases clogging up a system that is already under strain, producing delay and, because it is going into the county court system, affecting access to justice for the rest of the county court system as well, one assumes. The amendments that the noble and learned Lord prepared—and I was very much in consultation with him while he was doing it—were aimed at trying to prevent undesirable outcomes.
Can the Minister update us on the progress of the IT system that was presented to us on 11 March? Will she agree to meet further to discuss this issue after Committee?
Lord Empey (UUP)
My Lords, in previous contributions to the Committee, I made the point that our objective should be to increase supply and simultaneously reduce demand. I think we are now facing a situation in which we are doing everything in our power to decrease supply. The amendments tabled by the noble Lord, Lord Young of Cookham, and the noble Baronesses, Lady Thornhill and Lady Scott, are all basically meritorious in their own way, but they are all trying to solve a problem that we foresee. It does not have to be thought about as something that may happen as a remote possibility: it is almost a certainty and therefore has to be addressed.
There are other things that I think the Government are doing that are decreasing supply. The prospect of a landlord entering into the relationship with a tenant is even further off-put by these measures in the uncertainty that they could be left with no income for very long periods of time and tenants could find themselves stranded if they cannot go to a court and have the thing settled.
I also raised with the Minister the ECHR implications. There is yet another matter that is arising: there are reports that the Government are effectively talking out of both sides of their mouth at once. Here they are telling us that we have to get rid of Section 21 as we do not want agreed-term tenancies; on the other hand, it appears that the Government are going to landlords and offering them up to five-year tenancies if they house asylum seekers. You cannot have it both ways. The Minister told me that you could not discriminate between one tenant and another, but in fact that is precisely what we are doing. We are introducing a new class of tenant—a tenant who is in a superior position to the ordinary tenants we have at the moment. There is a great deal of uncertainty around this. Common sense dictates that this matter of the courts has to be addressed, and the very fact that we are having to burden the courts with our legislation tells us that perhaps there is something fundamentally wrong with this in the first place.
Lord Wolfson of Tredegar (Con)
My Lords, I speak in support of Amendments 279 and 280 in the name of the noble and learned Lord, Lord Etherton, who is unfortunately unable to be in his place today. I hoped to have added my name to them, but I think I got to the Public Bill Office after the Marshalled List had gone to print. These amendments, together with others in this group, address an issue that is central to the Bill: the capacity of the courts. I declare at the outset my interest as somebody who benefits from rental income from residential property, as set out in the register.
Lord Northbrook (Con)
My Lords, I declare my interest as a landlord of rental properties in Hampshire. I support all the amendments in this group. I fear that the Government may not support Amendment 283, even though it was in the original Bill that was presented when we were in Government.
I will focus on the amendment from the noble Baroness, Lady Thornhill, which would require the Government to conduct a formal review of the Bill’s impact on the court system within two years of its enactment. This review, supported by the National Residential Landlords Association, would assess case volumes, the court’s ability to manage demand, the efficiency and timeliness of proceedings, and the administrative burden on the courts. It would require the Secretary of State to consult legal practitioners, court officials and other relevant experts to ensure that decisions are based on reliable evidence.
Crucially, this amendment does not seek to delay the abolition of Section 21. Instead, it would ensure that the Government monitor the impact of these changes and, if necessary, take action to address the extra pressures on the justice system.
With the abolition of Section 21 no-explanation repossessions, landlords will become more reliant on the courts when seeking to gain possession of a property using the legitimate grounds under the Section 8 process. However, as many other noble Lords have said, this shift raises serious concerns about the capacity of the justice system to handle the increased caseload. The Law Society notes:
“The bill in its current form, may lead to an increase in contested hearings in the short term, as landlords that would previously have used no-fault provisions will instead have to show good reason for eviction”.
The Housing Minister has said that the Government are working to ensure the courts are “ready” for the system replacing Section 21. As other noble Lords have said, they have given no indication on what this means in practice or how it will be achieved. The court system was already struggling. As the noble Lord, Lord Young of Cookham, has said, the Housing Minister told the Bill Committee in the Commons that
“the court system is on its knees”.—[Official Report, Commons, Renters’ Rights Bill Committee, 22/10/24; col. 9.]
Government data shows that the average time to process and enforce a Section 8 possession case—the grounds-based route to possession—is over seven months. That is seven months in which a responsible landlord might be left unable to recover their property in cases of serious rent arrears or anti-social behaviour; seven months where neighbours may have to endure disruption; and seven months in which tenants who are genuinely in need of housing will not have access to the market because homes that should be available are instead tied up in legal delays. It is only right and fair that responsible landlords have confidence that the system will not leave them in limbo when they have legitimate grounds for possession.
Tenants also face major barriers to justice. As the noble Lord, Lord Young of Cookham, has said, close to a majority of the population of England and Wales do not have a housing legal aid provider in their local authority area.
Given all this, Richard Atkinson, the president of the Law Society, has rightly concluded that
“the bill will not be effective without further investment in the justice system. We urge the government to provide greater funding and more clarity to the enforcement provisions so that justice is accessible to renters and landlords alike”.
No mention is made in the impact assessment of what the extra costs of improving the Courts & Tribunals Service will be, or of implementing the new IT system that other noble Lords have met with the Minister to hear about. Does that mean that nothing extra will be spent on improving systems in the Courts & Tribunals Service?
Baroness Grender (LD)
My Lords, I wish to ensure that there is an awareness within the context of these amendments of the current state of play. According to a briefing from Generation Rent, which I thank for the information, only a tiny minority of tenancies ever get anywhere near a court—currently, about 0.3% end in repossession in the court. While the courts are indeed very overcrowded and have a lot of cases coming before them, it is important to understand where in the hierarchy tenancies currently are.
In addition, the vast majority of tenants, the minute they receive a notice—whatever the notice is—tend to see the writing on the wall and leave, because there is such a strong power imbalance, and therefore it never makes it to court. Although I recognise that we are hearing about the situation when something reaches court, the likelihood of anything actually reaching court is, as we will discuss in further amendments later today, often very remote, from both sides of the argument.
Lord Northbrook (Con)
I am sorry to disagree with the noble Baroness but, sadly, from practical experience, I think what she is saying is not necessarily the case.
Baroness Thornhill (LD)
My Lords, I will wind up on this group and give a little more detail on my Amendment 264. It is a straightforward amendment; I like to be straightforward. Based on the facts given by noble Lords in this debate, there is evidently a genuine concern about the capacity of the courts to deliver. All contributions have been well evidenced and—I will be quite frank—are worrying.
From our perspective, as was evidenced by the contribution from my noble friend Lady Grender, we support this legislation, we want ir to work and, for it to work, we know that the courts have to be efficient. If they are not, it could undermine the core purpose of the Bill, as was passionately said by the noble Baroness, Lady Scott. We know of, and understand, the issues regarding the courts. These have been well articulated in every contribution across the Committee, so I will not repeat them. However, many legitimate questions have been posed to which we need answers.
On Amendment 264, it is vital that court capacity is reviewed, and that this is enshrined in the Bill to make sure that it happens formally and can be scrutinised within two years. We feel that two years is probably enough, certainly to sort out the IT—as referenced by the noble Earl—and to feel whether we are moving on to an even keel after an initial transition period. I am sure that, as we go through the rest of the days in Committee, we will look at that transition period.
The amendment looks at all the key components for the effective working of the courts. It asks to look at access to justice. We must ensure that the system is accessible, affordable and understandable for all, regardless of a tenant’s background and circumstances. It is legitimate to ask the Government for their commitment to resourcing the courts and to have hard evidence about case volume, how many cases, and how long they are taking—the last aspect being very important for both landlords and tenants.
As has been mentioned, the current evidence is of the months ticking by, which is unfair to landlords. Their concerns in this instance are valid. Under the new grounds, if eviction is legitimate, it needs to happen quickly. Delaying things by months could put some landlords in financial jeopardy and tenants in real limbo and uncertainty. I am sure that any Secretary of State would want answers to these pertinent questions within a reasonable timeframe to ensure that all is working as intended, or, if not, in time to make some remediation, as the assessment will be based on real data. I am certain that the Government, too, are concerned about this and are doing everything they can to make sure that the courts are ready; I look forward to the Minister’s reply.
However, we do not support in any way Amendment 283 in the name of the noble Baroness, Lady Scott, to delay the abolition of Section 21. The sooner the long-promised abolition of Section 21 happens, the better. Indeed, Amendments 279, 280 and 283, as well as, to a lesser extent, Amendment 69, would certainly result in delays in the Act coming into force. For this critical reason, we cannot support them.
However, this does not mean that we do not take this issue seriously; I am not wearing rose-coloured spectacles. I expect full answers on the readiness of our courts to deal with these radical changes. The criticism and concerns regarding the courts have been known now for some considerable time. Work must have been done, so we would expect the Government now to have some hard answers.
Lord Carter of Haslemere (CB)
My Lords, I support the comments of the noble Baroness, Lady Thornhill, and all noble Lords who have spoken about concerns about court capacity to deal with the huge increase in loads that will come their way. This is not just a serious policy issue; it is an important legal one. Article 6 of the ECHR guarantees rights of access to justice within a reasonable time, and if those rights are delayed then that will impact also on landlords’ rights under Article 1 of Protocol 1 of the ECHR, which is about rights to property. I am afraid there is nothing in the ECHR memorandum, which I have with me, addressing the Article 6 and Article 1 of Protocol 1 points relating to delays to justice in the courts. That is an important issue that has to be addressed, and I cannot see how this sensible Amendment 264 can be denied. Incidentally, the amendment overlaps with Amendment 106, which we will consider later; for some reason, they have been put in different groups.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, I thank the noble Baronesses, Lady Scott and Lady Thornhill, the noble Lord, Lord Young of Cookham, and the noble and learned Lord, Lord Etherton, for their amendments, and I thank the noble Lords Cromwell, Lord Empey, Lord Wolfson and Lord Northbrook, the noble Baroness, Lady Grender, and the noble Earl, Lord Kinnoull, for their comments and for bringing the noble and learned Lord’s amendments before us.
I understand the concerns that Members have on this issue, which is why we engaged early on with noble Lords in advance of the Bill coming before this House. We have listened to noble Lords’ views and experience in this area. I appreciate that we may need to have further discussions.
I say to the noble Baroness, Lady Scott, that I started working with noble Lords on the Bill some months ago to understand the concerns that they had. Where probing amendments have been tabled, I have attempted to answer in detail. On matters requiring factual answers, such as data that I did not have at my fingertips, I have responded either in writing and/or offered further meetings to noble Lords.
However, it was too late in the day when the party opposite recognised the dreadful housing crisis that it had led us into, which meant it was too late for it to finish legislation to deal with it. Today, we are faced with amendments seeking to remove core principles of the Bill that is trying to deal with it. If those come before us, I will have no option but to disagree with them. Some of those core principles were in the Bill of the party opposite when that sat before this House. This Government will take up the challenge of dealing with the issues with a degree of balance between landlords and renters and, I believe, will do a better job of it.
The amendments before the Committee today would all require the Government to make an assessment of the justice system as a result of these reforms and, in some cases, delay commencement of the reforms until certain conditions were fulfilled. Amendment 69, in the name of the noble Baroness, Lady Scott, would require the Lord Chancellor to prepare an assessment of the operation of the process by which a county court is able to make possession orders for rented properties, and how such orders are enforced. That assessment will be published at such a such a time and in such a manner as the Lord Chancellor sees fit. The noble Baroness, Lady Scott, has also tabled Amendment 283, which, if made, would delay the commencement of these important reforms until the Lord Chancellor had carried out and published the proposed assessment and was satisfied that the court service had sufficient capacity.
The Government’s view is that the implementation of our tenancy reforms should not, as the noble Baroness, Lady Thornhill said, be held back by an assessment of current working, especially one that is so broad and undefined. We have no intention of delaying these urgent reforms while we wait for an unnecessary assessment of the existing possession process. The proposed assessment will provide no new insight or benefit to interested parties. Compelling the courts and tribunals to undertake such an assessment would detract from their vital work to make sure that the courts are ready for our reforms.
Quarterly data on the operation of the court possession process for rented properties is already, and will continue to be, published by the Ministry of Justice. This is regularly reported and scrutinised. The published statistics include both the volumes and timeliness of possession orders and the enforcement of those orders. Court rules specify that possession claims requiring a hearing should be listed within four to eight weeks of the claim being issued. Landlord possession claims are taking an average of eight weeks—not seven months, as quoted by the noble Lord, Lord Northbrook—to progress from the issue of a claim to a possession order in the most recent quarter from October to December 2024.
Instead of publishing this unnecessary assessment, we will carry out our tenancy reforms as quickly as possible. I want to reassure the Committee that we are fully focused on making sure that the justice system is prepared for the changes to court caseload and procedures which will be required for our reforms. We are working with the Ministry of Justice and HM Courts & Tribunals Service to that effect. This includes investing in additional court and tribunal capacity to handle any extra hearings generated. I hope that answers the point from the noble Lord, Lord Wolfson. I therefore ask that those amendments are not pressed.
Amendment 205 in the name of the noble Lord, Lord Young of Cookham, would require the Secretary of State to lay a Statement before Parliament setting out how the Government will ensure that the county courts are prepared for the impact of the Renters’ Rights Bill on possession cases. The Statement would need to be made within six months of the Bill being passed and assess the effect of the Bill on the volume of cases, the efficiency and timeliness of judicial proceedings, and the resource requirements of the courts in future.
As I have said, I fully recognise noble Lords’ concerns that this Bill will impose an additional burden on the justice system and understand the concern of my honourable friend at the other end of the building about the court system. As already noted, I reassure the Committee that we are fully focused on making sure that the justice system is prepared for changes to court caseload and procedures which will be required for our reforms and we are working with the MoJ and HMCTS to that effect.
To pick up the point from the noble Lord, Lord Young, about resources, we are working together to agree how these reforms are implemented. This will include ensuring that the county court will have the capacity and resources it needs to adjust to any changes in possession caseloads—which will, of course, involve the assessment that the noble Lord, Lord Northbrook, referred to—and commitments to address the resources needed. Work is also progressing on updating rules and procedures in readiness for the implementation of the new legislation.
In the longer term, we expect our reforms to reduce the volume of court possession claims, as only those cases where there is a clear, well-evidenced ground for possession will be able to proceed. This will help offset any increased pressure on the courts resulting from our reforms in due course.
His Majesty’s Courts & Tribunals Service is building an end-to-end digital service for resolving all possession claims in the county courts in England and Wales, to make processes more efficient and easier to understand for landlords and tenants—a much-needed reform. Funding has been agreed and provided to enable the design and build of this new service, which is well under way and builds on the existing digitisation of the justice system.
The noble Lord, Lord Cromwell, said it had left him with the impression that this was five years away. That is not what the court service said and not my understanding of where we are with it. As I have explained, this is not a new system that is being built from scratch; it is a further module of an existing system.
The noble Earl, Lord Kinnoull, commented on the outlining of the size of the problem that our colleagues from HMCTS set out. That was the hold system that they are developing, with the approach to design and build being at prototype stage. I understand what he is saying, but the digitisation process is not the whole picture of what we are doing with our colleagues in the courts service. This service will offer an online route for making and responding to possession claims, filing documents and receiving updates and outcomes, offering improved user experience through guided journeys.
As we have heard, some noble Lords heard first-hand about the progress being made. The noble Earl, Lord Kinnoull, said that the question was put, “How long will this take?” and colleagues replied, as I understand it, “Two years from March”. I thank him for those comments, but that is not the totality of the work we are doing with the courts service, so, while progress on that is really important to driving this forward for the future, we will be working with our friends in the courts service and supporting them in the interim. I therefore ask him not to press his amendment.
I reiterate my thanks to the noble Baroness, Lady Thornhill, for Amendment 264, which would require the Secretary of State to publish a review of the impacts on the judicial system arising from the Renters’ Rights Bill within two years of the legislation being passed. The review would need to consider the effect of the Bill on the volume of cases, the efficiency and timeliness of judicial proceedings and the resource and administrative burdens on the courts.
As I already outlined, I want to reassure the Committee that we are fully focused on making sure that the justice system is prepared for changes to court caseloads and procedures. We are taking that issue very seriously. We will monitor the effects of these reforms on the justice system by closely engaging with the sector and analysing the comprehensive data that is already collected. It is not that we do not think it is necessary to analyse the data; it is more that we think committing to a formal review on the face of the Bill is unnecessary.
The points the noble Baroness made about justice delayed being justice denied are quite right. That is why we do not want to delay all this, including abolishing the Section 21 evictions that have caused so many problems. We want to do that as quickly as possible, but I want her to be assured that we believe that analysis of the impact of the Bill on the system is critical and important, and we will be doing that using the information that is already available.
Baroness Thornhill (LD)
I thank the Minister for giving way. Does that mean, as I take from her words, that such monitoring and review will be an ongoing and rolling process from day one?
Baroness Taylor of Stevenage (Lab)
That is completely correct. We need to make sure we are taking account of the impact on the system from the start. We believe that over time it will reduce the volume of cases going to the court service. As the noble Baroness, Lady Grender, pointed out, not many cases end up in the courts system, but there are some that go down that route. We will be monitoring them from the outset.
Baroness Scott of Bybrook (Con)
On that point, I have just gone online and it is still being quoted that there is a seven-month delay, as my noble friend Lord Northbrook said. If it becomes clear during the process leading to the implementation of the Bill that the courts cannot cope and it will have a severe impact on people’s lives—the lives of both landlords and tenants—will His Majesty’s Government be brave enough to slow down the implementation of this Bill?
Baroness Taylor of Stevenage (Lab)
As I hope I have already made clear, we do not want to slow down implementation. We think the reforms we are bringing forward are really important and very much overdue. We do not expect that it will have the impact the noble Baroness has just outlined, but we will continue to monitor it and we will support our friends in the courts service with whatever help they need to make sure the impact is mitigated.
I turn finally to Amendments 279 and 280, in the name of the noble and learned Lord, Lord Etherton. I thank the noble Lord for his continued engagement on the Bill, particularly on the judicial impacts. It has been incredibly valuable to me to have that input. Amendment 280 would require the Secretary of State to certify that landlord possession actions in respect of residential property are processed by the courts in no greater time, on average, than they were in the year before the first Covid-19 lockdown. In addition, Amendment 279 would delay the commencement of important reforms until this proposed assessment had been carried out.
As I have previously outlined, I recognise that landlords need a smooth and efficient process in the county court for the minority of cases where court action for possession becomes necessary. But we will not tie the implementation of these urgent reforms to an arbitrary target of court timeliness. The sector has already waited too long.
As noted, the Ministry of Justice already publishes quarterly statistics on the operation of the county court possession process, and court rules specify that possession cases requiring a hearing should be listed between four and eight weeks from the issue of the claim. If the noble Baroness, Lady Scott, says that that figure is still disputed, I am happy to get back to her on that.
Setting a target for the possession process as a gateway for the operation of other Bill provisions would not be meaningful. A key stage of the process is the application for a warrant of possession. This is dependent on the actions of the landlord and is therefore outside the control of the courts service. Where a tenant stays in a property beyond the date set out in the possession order, a landlord can choose whether to apply for a warrant immediately to enforce a possession order granted by the court, and whether to apply to transfer the case to the High Court. We will continue to work closely with the Ministry of Justice on implementing these reforms. This includes ensuring that the county court has the resources it needs to adjust to any changes in case loads, and that the relevant rules and procedures are updated. The noble Earl, Lord Kinnoull, requested a meeting. I am very happy to continue meeting on the progress of digitisation and the other interim steps that we are likely to take.
Lord Empey (UUP)
Will the Minister agree to write to us about the Home Office and place a copy in the Library? Additionally, the Minister said on the previous day in Committee that she did not want to see different classes of tenant. How is it possible to have this Bill on the statute book and at the same time have the proposed Serco arrangements in operation without creating two classes of tenant?
Baroness Taylor of Stevenage (Lab)
I think it is best to wait until I have the detail of the Serco arrangement before we debate that. As I said, I will give noble Lords a response in writing and place a copy in the Library.
Lord Northbrook (Con)
I listened carefully to the Minister’s encouraging remarks on improving capacity and resources, and on the digitisation process. However, the impact assessment—if I have read it correctly—says there was no extra expenditure on this. I am not quite sure how to square the circle on that.
Baroness Taylor of Stevenage (Lab)
As I said, we are working very closely with our colleagues in the Ministry of Justice and the courts service. The digitisation process is already under way and is already costed, and we are looking at other impacts. If the noble Lord’s view is that they are not clearly set out in the impact statement, I will come back to noble Lords on what they may be.
Lord Cromwell (CB)
I just want to come back to the estimated five-year implementation period that the Minister responded to. That arose from conversations with people who have had a lifetime of professional involvement in legal processes, so I would not brush it aside too early. I have been on the sharp end of a number of these sorts of IT projects that get built. If you build anything, you always double the budget and double the time you are told it is going to take; anybody who has built anything knows that—I will not touch on R&R.
The Minister has told us a number of times that the Government are fully focused—a phrase that has been used a number of times. I do not wish to be discourteous, but it sounds like the Government are being fully optimistic, almost to the point of naivety, on this. These are probing amendments. There is a general agreement, including from the Government, that there really is a problem here that needs to be solved. There is no dispute about it being a problem. I urge that, before we get to Report, we need a crisp, specific, clear and credible statement about what exactly will be done to resource this properly, because our current court system is not a model of swiftness and efficiency, and it is hard to see how this will be magically transformed.
Lord Wolfson of Tredegar (Con)
I will follow on from that so the Minister can reply to both. I retain a certain fondness for my former department, and I know that the budget of the Ministry of Justice is extremely tight. I have not seen any scope in that budget for the expected increase in the courts’ workload that the Bill will generate. The Minister said she will work very closely with the MoJ, and I know that, when I was an MoJ Minister, that meant that people would work closely with me by telling me that I needed to spend money from my budget on what they wanted. Can I therefore take it that, when she says she will work very closely with the MoJ, what she actually means is that, if the MoJ needs money to do what the Bill requires, it will come from her budget?
Baroness Taylor of Stevenage (Lab)
In response to the noble Lord, Lord Cromwell, I say that I too have been involved with a number of IT projects over the years, and I understand his scepticism. However, having listened to the excellent presentation, I agree with the comments that the noble Earl, Lord Kinnoull, made about the nature of the team that came to present to us, which was outstanding in the straightforward way it presented to us both the challenges it faced and the success it had had in taking the project forward so far. We are making good progress on that project and, as the noble Baroness, Lady Scott, said, the benefit of bringing Bills before this House is that we get the outside experience that people bring. But we will see in due time whether it will move forward as quickly as we hope. I do not think that is overly optimistic—we have had a presentation from the team that is doing the work.
I understand the comments on funding, but the way that our Government have set about working across departments to deliver objectives has been incredibly productive so far. We are working very well across government, led by the team in the Cabinet Office, and I hope that means that we will not have this shunting around of costs but will all sit down and decide what we need to prioritise. It all depends on the spending review, and this would be a lot easier if we had not been left with a £22 billion black hole.
The Earl of Kinnoull (CB)
I am sorry to put something else to the Minister, and I am very grateful to her for the offer of a meeting. I have here the latest possession statistics, which I printed off beforehand, so I thought I would merely inform the Committee what they say: claims to order is currently eight weeks, but claims to repossessions is 25 weeks. So everyone was saying something correct, but in fact they were looking at different bits of the statistics. But, of course, claims to repossessions is what a landlord would be thinking about. You cannot start the claim until various amounts of time have passed, so actually the median 25 weeks for claims to repossessions is quite a long time. Going on from that, I turn to item 7, on regional possession claims. In fact, there are quite big differences between the regions, and there are some regions where claims are quite slow.
Baroness Taylor of Stevenage (Lab)
I thank the noble Earl for clarifying that point. Indeed, I was talking about the claims to order median timeliness being eight weeks. It is difficult to take measures from different places—there are lies, damned lies and statistics, as we all know—but, as I mentioned, in the longer term we expect the reforms we are introducing to reduce the volume of possession claims. That is why the monitoring that I set out in response to the amendment of the noble Baroness, Lady Thornhill, is really important, so that we can see where this is taking us. We expect that only those cases where there is a clear, well-evidenced ground for possession will be able to proceed, and that should, over time, reduce the volumes overall.
Baroness Scott of Bybrook (Con)
My Lords, I am grateful for the insightful contributions made during this debate and the amendments we have discussed, particularly those proposed by my noble friend Lord Young of Cookham and the noble and learned Lord, Lord Etherton. I thank my noble friend Lord Wolfson for speaking to them with such in-depth knowledge, which was much appreciated. The whole debate underscores shared concerns across the Committee about the capacity of our courts to effectively implement the Bill.
As I made clear throughout the previous days in Committee, the ambition to reform the private rented sector is commendable, yet without a robust and adequately resourced court system, these reforms risk being totally undermined. Amendments 283 and 69 in my name would create a foundational aim to ensure that the necessary infrastructure is in place before significant changes are enacted, thereby safeguarding the interests of both tenants and landlords.
The Minister remarked on the first day of Committee and has continued to say that the Government are working with the Ministry of Justice to complete a justice impact test. This assessment is intended to identify the additional burdens on the system arising from the new policies in the Bill and to ensure that the system is fully prepared for any increases in workload. This commitment is welcomed, but we need to know how long this justice impact test will take to complete. Will it be ready before the Bill progresses through Parliament? Given the significant implications for the court system, it is imperative that this assessment is thorough and timely and that the Bill is impacted only once we know the court system is ready for these changes.
The capacity of our courts is not a peripheral concern; it is central to the success of this legislation. As we have discussed, delays in the court process are not merely procedural; they have a real-world consequence for tenants and landlords alike. I urge the Minister to expediate the impact test and to ensure its findings are fully considered before any further steps are taken. I reiterate the importance of aligning the ambition of the Bill with the practical realities of our court system. The amendments before us provide a prudent approach to achieving this balance. I look forward to the Minister’s response and to continuing our discussions on how best to deliver. I beg leave to withdraw my amendment at this point.
Baroness Coffey
“Repossession of homes during school holidays(1) The court may only make an order for possession of a dwelling which houses children of school age during the school holidays.(2) The Secretary of State may by regulations define the period of school holidays under subsection (1) on an annual basis.”
Baroness Coffey (Con)
My Lords, my Amendment 70 is fundamentally to help children. We should recognise that certain changes have made it far more profitable for landlords to change long-term family-home lets to homes in multiple occupation or sometimes, depending on location, to holiday lets. Losing family homes in rural locations from both the private and social housing sectors is a real issue, particularly when one considers that median salaries tend to be considerably lower than in towns and cities.
I was inspired to put forward this amendment after a discussion with a landlord in Suffolk about various reforms being considered by this House that would likely reduce the availability of rented accommodation for families, particularly in rural areas. This landlord told me of one change that he would put into law if he had the opportunity—a practice he undertakes himself today—and that is making sure that any changes in tenancy arrangements for properties occupied by families happen only during the school summer holidays. My amendment seeks to ensure that any such eviction could happen only during a school holiday.
I understand that it is the Government’s intention to reduce evictions, particularly no-fault evictions; however, they do accept that a landlord may need to require such actions. That said, disruption of a child’s education through absolutely no fault of their own can have a real impact on their life in both the short and long term.
For what it is worth, I also think that the situation is more likely to be acute for children living in rural areas. Often, people displaced from accommodation in rural areas end up having to move considerable distances to much more urban conurbations, which would likely require a change of school, whether that be at primary or secondary age. My amendment would at least limit this potential disruption to the child’s life to be only during school holidays, giving parents and the child time to find a new school or to make alternative transport arrangements if necessary. I appreciate that we are still in Committee, so I am floating this idea to consider what we can do to help children in these challenging moments in their family’s life. I would be grateful if I could meet the Minister to discuss this issue further. With that, I beg to move.
Baroness Thornhill (LD)
I do not doubt the genuine compassion and sincerity of the noble Baroness, Lady Coffey, but I feel there is a real incongruity about the current position of His Majesty’s Official Opposition to favour landlords and make evictions quicker and easier. The message to tenants via this amendment is, “Your unwanted evictions will take place only in the school holidays, so on 21 December rather than earlier in December”. I genuinely feel that it would be unworkable and that circumstances differ. I could actually argue the opposite: I would rather my children were safe in school while I negotiated trying to find where we were to live. I just do not think we can say that one size fits all on this.
Baroness Scott of Bybrook (Con)
My Lords, I thank my noble friend Lady Coffey for bringing Amendment 70 before the Committee today. It is a thoughtful and considered probing amendment that rightly recognises the significant impact that housing stability can have on a child’s education. During the pandemic, our children and grandchildren suffered greatly. Schools were closed, youth clubs shut down and extracurricular activities ground to a halt. The disruption left many young people adrift at a crucial stage of their development, and only now are we beginning to understand the effects. It is therefore incumbent on us all to support and uplift the next generation. However, the Government must ensure that the burden does not fall disproportionately on individual landlords. It is not, and should not be, their moral obligation to serve as the final safety net for vulnerable families. That responsibility lies with us—with the state, with local authorities and with society.
Owning a property does not automatically confer great wealth. It does not equip an individual to shoulder the complex needs of a struggling family. The Government must tread carefully to ensure that their actions do not drive up costs in this sector, which fall most heavily and disproportionately on low-income families and the most vulnerable members of our society. A sustainable housing market depends on both tenant security and landlords’ confidence. This is a very tough balance to strike, but I believe that the onus is on us all to strike it.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank the noble Baroness, Lady Coffey, for her amendment, which would allow the court to grant an order for possession of a property that houses school-aged children only during school holidays, and I thank the noble Baronesses, Lady Thornhill and Lady Scott, for their comments. I understand the probing nature of the amendment and the compassion that sits behind it. However, I gently point out that at the latest count, we have 160,000 children in temporary and emergency accommodation, a situation driven by the lack of attention to the housing situation paid by her Government. Therefore, while we want to do as much as we can to support families and children, I think it takes quite a lot of front to come before this Committee with this kind of proposal when we have that terrible situation of 160,000 children in temporary and emergency accommodation. I heard this morning of a three year-old who has been homeless for his entire life—astonishing.
Anyway, I appreciate the sentiment; however, I am going to talk about the practicality of delivering it. It would likely mean that, where possession has been sought, the courts would need to check whether the property contains school-age children and whether it is the school holidays or not, before scheduling a hearing. Not only would this create additional work for the courts—we have just spent quite some time debating the pressure the courts are already under—it could cause delays for landlords in obtaining possession orders. That is an issue the Opposition have taken great interest in. For example, a landlord’s case could be next in line to be heard, but, because it is the beginning of the school summer holidays, the hearing would be delayed for six weeks.
Furthermore, although provision is made within the amendment for regulations to be made annually to define the school periods, it would be an onerous task. School holidays vary across local authority areas and sectors; they can even vary within an individual area. My grandchildren live at the same address but go to different schools and have different holidays. This would likely cause confusion and added complexity for landlords who wish to seek possession of their properties.
While it is absolutely right that tenants enjoy a greater level of security in their homes, we have said that landlords must enjoy robust grounds for possession where there is good reason for them to seek to take their property back. It would not be reasonable to add additional barriers, complexities or delays to the possession process.
Our reforms give renters much greater security and stability, so they can stay in their homes for longer, build lives and communities and avoid the risk of homelessness. That is why we are introducing the many protections for tenants, such as banning Section 21 evictions, increasing notice periods and introducing a 12-month protected period at the beginning of a tenancy during which landlords cannot evict them to move into or sell the property. However, that must be balanced with the needs of landlords, who must enjoy those robust grounds we have already spoken about. Judges already have some discretion when deciding the date on which a tenant should give up possession. Even if an outright possession order is made, pursuant to a Section 21 notice or on a mandatory ground, the date for possession can be postponed for up to six weeks if a tenant can show that this would cause exceptional hardship.
As well as it being impractical, there is also a principled argument against this amendment. Being evicted will almost always be a significant upheaval for tenants—I accept that—particularly for those with children, so I understand the intent behind it. However, it would not necessarily—as the noble Baroness, Lady Thornhill, pointed out—always be easier for parents to deal with a possession order or eviction during the school holidays. During termtime, parents may have significantly fewer caring responsibilities, particularly if their children are younger. Therefore, many parents find the school holidays a time of increased responsibility and stress. Families being evicted during school holidays may also mean having to take up that school holiday with the necessities of moving, rather than doing activities with the children. So it may make it more difficult for families, not easier. It is for these reasons, both practical and principled, that I ask for this amendment to be withdrawn.
Baroness Coffey (Con)
I thank the noble Baronesses for speaking to this amendment. I am slightly surprised to hear a Member of this House being accused of having some front, based on previous government policy. I recognise this is a political debate, but I am talking about children and the UN Convention on the Rights of the Child should be considered in any consideration of legislation when it comes to this.
There has also been a kind of city and urban perspective on where children go to school; there has not been a realisation of quite how far some children in the countryside have to travel. If you are moved from, say, the middle of coastal Suffolk to Lowestoft, there is no way you could continue going to your school without considerable upheaval to your parents’ lives, and indeed at great expense.
I am conscious of the limitations being put on landlords. I had hoped to be able to speak to the Minister in more detail, but I have heard what she said and will consider potentially speaking to her noble friends in the Department for Education. I beg to withdraw this amendment.
Baroness Taylor of Stevenage (Lab)
My apologies, I neglected to say that I am very happy to meet with the noble Baroness.
Lord Jamieson
Member’s explanatory statement
This amendment, and another to this Clause in the name of Baroness Scott of Bybrook, probes the Government’s reasons for increasing the notice period for rent increases from one month to two months.
Lord Jamieson (Con)
My Lords, before I turn to the amendments, I will respond to the Minister’s comment. On this side of the House, we want to see a successful, thriving private rental market which gives everyone the opportunity to have a stable and secure home. However, as we have seen in Scotland, rental reform can have a deleterious impact on the availability of rental homes, and increase pricing. It is our concern that some of the reforms being proposed may harm tenants and the market. It is perfectly reasonable for us to have different views on what the potential reforms may or may not do, but let us be absolutely clear that, on this side of the House, we want successful tenanted private rentals. The Committee should have no doubt about that.
I turn to Amendments 72, 73, 74 and 81 in the name of my noble friend Lady Scott of Bybrook. The group addresses the matter of notice periods. Amendments 72, 73 and 74 are all probing amendments and seek to question the purpose of increasing the notice periods for rent increases and why the retention of one month is not kept. The Government have failed to sufficiently explain why the Bill looks to change the minimum period for notice of a rent increase from one month for assured periodic tenancies, particularly as landlords will now be able to increase rent only once a year, which we support.
In that case, a rent increase could reasonably be anticipated by the tenant. It should also reflect the current market conditions and economic factors such as interest rates, particularly with the increased powers to challenge by the tribunal. Increasing the notice period means that those data points are more out of date. Surely the Government would wish for rent increases that reflect current market and economic conditions, and to reduce the likelihood of tribunals. This change will undoubtedly have significant implications for landlords and the rental market more broadly. On a personal level, many landlords rely on the funds they intend to retrieve from an increase in rent payments to meet loan repayments and other financial obligations.
It is important that all noble Lords consider this change in the wider context of this Bill and the other factors which landlords will have to tackle. Changing notice periods for rent increases is just one obstacle that landlords will have to address. Others include the annual rent increase, which tenants will be able to challenge through First-tier Tribunals, which will subject landlords to greater risk of court backlogs. These changes may result in increased administrative burdens for landlords, brought about by the use of Section 13 notices for rent increases and the two-month notice period.
The ultimate issue with the rental market is one of supply. There are simply not enough homes to meet the demand. We must look not only to incentivise landlords to stay in the market but to encourage new entrants. It is vital that the Government avoid introducing unnecessary measures that create a hostile market.
The proposed changes to the notice period will, with many other new measures, cumulatively create significant consequences for landlords across the country. Will the Minister confirm whether the Government have consulted with landlords on the impact of these measures, and will they publish the findings from this consultation? If not, do they intend to do so? Similarly, will the Minister confirm whether the Government have conducted, or intend to conduct, an impact assessment on the changes to the notice period for rent increases?
Amendment 81, also in the name of my noble friend Lady Scott of Bybrook, seeks to question the Government’s reasons for having one-month notice periods for rent increases in the low-cost tenancy sector, despite the fact that those who are not in those tenancies are entitled to two. For clarity, we are not decreeing that it should not be one month; we are asking why there is the difference and seeking to understand the logic behind it. I look to the Minister to explain exactly why someone in a low-cost tenancy would get less notice of a rent increase compared with someone renting in the open market, such as those on assured periodic tenancies. Should not those who are the poorest in our society require greater notice, particularly given the importance of financial planning?
I look forward to the contributions of all noble Lords on this group of amendments and to the Minister providing clarification on the concerns I have raised. I beg to move.
Lord Marlesford (Con)
My Lords, I find these amendments very curious. The whole principle of the private rented sector is that it is a capitalist operation; it is an operation which has costs and revenue. The revenue comes from rent. Obviously, rents must be very carefully determined. As to whether it is one month or two, that seems to me of little account. Basically, what tenants need to know is that rents are likely to increase by some measure which is generally agreed. In the private rented sector, this is normally the retail prices index—the RPI, as opposed to the CPI. If there is not a return on the investment, the investment will not continue to exist. Nobody can afford to let properties if there is no return on the property. The question, of course, is: what should the return be?
There are two very important factors to think of. The first is the gross return, the gross rent, as a percentage of the market value of the property, and the question of what percentage it should be. I have produced a table which shows the different levels of rent for different values of property, but, of course, that is not the only factor, because one has to remember that the rent charged is gross before the cost of maintenance, and maintenance is hugely important. The solution to having a good private rented sector is proper maintenance and, indeed, improvement through modernisation maintenance. It may be that you put in a more economic burner to heat the house—they vary a lot, and later ones are much more efficient, but that is an expenditure. You have to get a balance there.
I suggest that very often, about a third of the rent, on average, will go on the maintenance—keeping up to date—and administration of properties. If we said, for example, that a 3% return on capital was a reasonable level for the rent to be set at, that might end up at a net 2%, which is probably about what equities yield at the moment. We must see that.
Then comes a very important point, which we shall no doubt be discussing later: the affordability of rents for tenants. The Government’s guidance has for a long time been that rents should not be more than 30% of household income. Therefore, that calculation should be made. If somebody is renting a property, they should bear in mind that that is the Government’s advice as to the amount that they can afford to pay, other things being equal. Equally, the landlord letting the property will also have to take into account whether or not the prospective tenant can afford their property. Again, it is essential that if you set a rent, you know the household income, to see whether it reaches the affordability stakes.
These are important and complicated matters, but they are crucial to the private rented sector. My worry about the Bill is that half the time the Government do not seem to understand the private rented sector. It is a business enterprise like many other business enterprises. It is not particularly virtuous or unvirtuous, but I wish I could feel that the Government, in fiddling around with it all, were trying to make it work in a practical manner for investors and those receiving the benefit of the investment; that is, the product. There is no real difference between a house that you rent and a product that you buy in a shop. It is part of how the system operates, how civilisation operates. The Government are very muddled in their thinking on this. I would have liked to have got rid of the Gove Bill, which also was ill considered and ill conceived, lacking in understanding of the real world.
Baroness Thornhill (LD)
My Lords, we have several groups of amendments that talk about rent, money and finances, so before commenting specifically on this amendment, I want to have a little rant regarding landlord finances. The narrative is that the majority of landlords are in a terrible financial position. What evidence do we actually have for that? It is certainly not borne out by my anecdotal evidence and could be conceived as scaremongering, because my understanding is that being a landlord is, and will remain, profitable.
The idea that, to remain sustainable, landlords must be able to pass the entirety of any increased business cost and risk on to the tenant through a rent increase is, frankly, ridiculous. There is no other business model that operates in this way, and it does not add up when we look at the sum of the data that we have. The English Private Landlord Survey said that the median income of landlords, including rental properties, is around £52,000. According to the Shelter/YouGov survey of private landlords, rental income is largely additional for landlords: 50% of landlords say that they do not rely on rental income to cover living expenses.
I note that in any investments that I have made, there is a very cleverly worded phrase at the bottom: “Investments can go down as well as up”—except if you are a landlord, it would seem; even more so as you are left with a capital asset that, in this country, largely increases in value. That is my rant. If the noble Baroness, Lady Jones of Moulsecoomb, were in her place, she would probably be quite proud of me for it.
I turn to the amendments in this group tabled by the noble Baroness, Lady Scott, regarding notice periods for rent increases. When the Bill was introduced in the Commons it proposed a standard one-month period. The Government’s decision to extend this to two months represents a welcome improvement that better balances the interests of landlords and tenants. This evolution demonstrates a willingness to listen and to respond to concerns about tenant security, for which I sincerely thank the Minister and her team.
Amendment 73 seeks to revert the notice period to just one month and Amendment 81 questions the differential treatment between standard and low-cost tenancies. These amendments, particularly Amendment 81, raise fair questions, which I too would like an answer to, as I have not been able to find a reason for that differentiation. A two-month notice period for rent increases represents a reasonable middle ground that acknowledges landlords’ legitimate need to adjust rents while giving tenants adequate time to prepare financially.
For many working families, a rent increase actually requires careful budgeting. I have not got the figures to hand but we know that a significant number—into the many thousands—of moves and evictions last year were due to the inability of the tenant to pay the new rent rise. One month is simply inefficient to work a decision to relocate and make those adjustments.
I commend the Government for finding a balanced approach. This middle ground solution may not be perfect from any single perspective, but it demonstrates what good legislation can achieve when all voices are genuinely heard during the parliamentary process. With these factors in mind, I look forward to the Minister’s response.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank the noble Baroness, Lady Scott, for her amendments relating to notice periods for rent increases, and the noble Lord, Lord Jamieson, for moving Amendment 72.
I thank the noble Lord, Lord Marlesford, for his comments about the balance between landlord and tenant. We are aiming to get that balance in this Bill. He is right to point to the ratio of rent to income, but that is why tenants need longer to consider the impact on their family budget. Increasingly, the proportion of income that is taken up by rent is going up and up, particularly in certain parts of the country, making it very difficult for tenants to manage increases at short notice and without adequate notice to plan their family budgets.
The noble Lord, Lord Jamieson, talked about consultation with landlords on the impact of rent increases. Because of a question during the debate on a previous day, I undertook to give a written response on the consultation that has been carried out before and during the course of this Bill. I will provide that response in writing to noble Lords; it is being prepared at the moment, and I will get back to them with a summary of that.
I thank the noble Baroness, Lady Thornhill, for her comments. She is quite right to refer to issues of rental income and capital assets. As I have said many times, we must make this fair for everybody, and make sure that everybody gets what they want. Landlords want a tenant who will look after the property and pay their rent, and tenants want a landlord who will make sure the property is available, looked after and in good condition—that is what we are all after.
Amendment 72 would reduce the amount of notice of a rent increase that a landlord will have to give a tenant from two months to a period equal to a rental period. For example, where the rent is paid monthly, this would reduce the notice period from two months to one month. I appreciate, as the noble Lord, Lord Jamieson, said, that these are probing amendments.
Together with Amendment 72, Amendment 74 would remove the requirement for landlords to serve a rent increase notice two months before the rent increase comes into effect. We do not agree with this position. The Renters’ Rights Bill will deliver our manifesto commitment to empower private rented sector tenants to challenge unreasonable rent increases. This includes by requiring landlords to give two months’ notice of a change, rather than one. This was, as the noble Baroness, Lady Thornhill, pointed out, the result of debates in the other place and of lobbying from a number of groups that have been speaking to us. This will ensure that tenants who may struggle to pay a rent increase will have time to consider their options, seek advice and, where necessary, take steps to challenge the rent increase at a tribunal.
Receiving a rent increase can be distressing for many tenants. We want to give tenants time to reassess their budgets and consider their options. It is unfortunate that the noble Baroness, Lady Scott, and the noble Lord, Lord Jamieson, do not agree that tenants should have this protection.
Amendment 73 seeks to decrease in the Bill the notice period for a landlord to serve a rent increase from two months to one month. Similarly to Amendment 72, we do not agree with this position. A two-month notice period will give tenants time to review their budgets before the rent increase takes effect and to take advice, if necessary or appropriate, from advice agencies such as Citizens Advice.
It is regrettable that the Opposition have tabled this amendment, because they supported this position on the matter. Their original White Paper, in 2022, promised to
“increase the minimum notice landlords must provide of any change in rent to two months”.
It is disappointing that they have changed their minds on this, and now wish for tenants to have less time to consider their options when receiving a rent increase.
Amendment 81 seeks to increase from one month to two months the amount of notice of a rent increase that landlords of relevant low-cost tenancies need to provide. Social landlords that fall under a new definition of a relevant low-cost tenancy in the Bill will be exempted from most of the changes the Bill makes to rent increases. This means that landlords of relevant low-cost tenancies will be permitted to increase the rent via the Section 13 process at any point in the first 52 weeks of a tenancy, and then once every 52 weeks thereafter, and must give at least one month’s notice. The new amount may take effect after this notice period if it is not challenged by the tenant in the tribunal. These landlords will still be able to use review clauses within a tenancy to increase the rent, as they can at present.
Lord Jamieson (Con)
My Lords, I rise to conclude our discussion on this group of amendments, and I thank the noble Lord, Lord Marlesford, and the noble Baroness, Lady Thornhill, for their comments. The Bill is a complex and far-reaching piece of legislation, and this group has sought to address the issue of notice period for rent increases. I still question in my own mind why low-rent tenants should be treated differently from those in the private rented sector. I appreciate that the Minister has said she will write to us on the various consultations, which addresses some of the issues I have raised. In particular, the point for us is an understanding of the need to go to two months. I also raise the clear understanding of how the whole sector functions and the practical consequences of operating in it, which are some of the issues that the noble Lord, Lord Marlesford, raised.
Savills, a leading authority in the sector, has warned that these reforms may deter investment in the private rented sector. It raises concerns about increased administrative overhead, reduced flexibility and potential delays to rent adjustments. Similarly, the National Residential Landlords Association has been vocal about the unintended consequences of these measures, warning that more regulation without proportional support risks undermining the viability of the sector. To address the point that the noble Baroness, Lady Thornhill, raised, it is not an issue of whether a landlord may or may not be able to afford the impact of this. It may be that they decide their investment is better placed elsewhere and they sell the property or do something else with it, therefore making it no longer available to the private rental sector. The issue that we face is whether this will harm the private rental sector.
These are not fringe voices that talk about this. They represent the heart of the industry, the landlords who provide the homes that tenants live in, so I ask the Minister again: what consultation has been undertaken? I appreciate that she will come back to us on this, but will the Government publish those findings? If that consultation has not yet taken place, will the Minister confirm when it will happen and whether it will inform the final shape of the Bill? Furthermore, have the Government conducted a formal impact assessment on the changes to rent notice periods? If so, when will it be made available to the House? If not, how can we legislate in good conscience without seeing the projected outcomes of these?
I return to the broader context, which we must not lose sight of. The fundamental issue facing the rental housing market is one of supply. There are simply not enough homes to meet demand. If we make it more difficult for landlords, particularly smaller ones who make up a significant share of the sector, we risk worsening the very crisis we are trying to address—a situation we have already seen demonstrated in Scotland. We support measures that improve fairness and predictability for tenants. If the outcome of the Bill is a smaller, more risk-averse rental market with fewer homes available at higher rents, we will have failed in our aims.
In closing, I reiterate the importance of these probing amendments. They are not about resisting reform; they are about getting it right. We have asked responsible questions and the Committee deserves answers. I look forward to hearing from the Minister, not only to clarify the Government’s thinking but to offer assurance that these concerns are taken seriously, that evidence will guide policy and that fairness will be applied consistently across the sector. The success of the legislation depends not just on good intentions but on practical deliverability, balanced implementation and trust from those who must operate within it. With that, I withdraw the amendment.
Baroness Scott of Bybrook
Member’s explanatory statement
This amendment questions the Government's reasons for preventing the tenant and landlord from agreeing a rent value that is higher than the rent set by the Tribunal under Section 14.
Baroness Scott of Bybrook (Con)
My Lords, in my response to all amendments in this group, I will be guided by a principle of stability and fairness—fairness for both tenants and landlords. This is not a debate about unchecked gain, and nor should it result in the erosion of property rights. It is about balance, responsibility and securing a system that works for everyone.
Amendment 75 in my name probes the Government’s reasons for preventing the tenant and landlord agreeing a rent value that is higher than the rent set by the tribunal. Just consider this scenario: the tribunal makes a determination, but then the landlord embarks on a renovation, which includes new appliances and upgrades throughout the property. Under this legislation, even if a tenant voluntarily wishes to pay a higher rent to reflect improvements made to the property, they would be prohibited from doing so. Two consenting adults, tenant and landlord, may well agree that the enhanced value of the home warrants a modest increase in rent. A mutual agreement will exist and yet the Bill would override that agreement. Why should the Government intervene to prevent it? That is one example, but it is, in truth, superfluous to the broader point I wish to make. If a mutual will exists—if two adults come to an agreement, regardless of whether we personally deem their reasons rational—why should any Government say no? Why should this Bill override that choice? We must be careful not to legislate away agency in the pursuit of protection, and I hope the Minister will reflect on that.
Amendment 78 in my name seeks to prevent the Secretary of State expanding the definition of low-cost tenancy by regulation. This definition is important: it is not a technicality but fundamental. It determines not only how a property is treated under the law but how the relationship between the tenant and the landlord is structured. I understand that this is a significant power. Does the Minister agree? Anyone familiar with detail in the implications of this Bill will surely recognise that the power of a Minister to alter the foundations of an existing contract is unacceptable. Therefore, can the Minister commit to removing this regulatory power ahead of Report? If not, can she please set out in writing why she believes the Government should be afforded this power?
Finally, Amendment 86, in my name, probes the Government’s reasons for allowing a six-month period in which an application may be made to the tribunal under the newly constructed Section 14(A1). Six months could lead to a significant increase in claims being directed towards an already overburdened tribunal service. Have the Government properly considered multiple timescales and modelled the impact each would have on the tribunal system? If this vital work has been overlooked, will the Minister commit to reviewing the impact of the chosen timescale on the total claims and return to the Dispatch Box with this at a later time? This is not an unreasonable request, and I hope the Minister agrees.
Many of the amendments in this group are intended to probe the Government’s thinking and understand how they have arrived at the current text of the Bill. Unsurprisingly, given the importance of these matters, this group contains numerous amendments; I hope the Minister listens carefully to the views expressed across the Committee and is not too ready to dismiss them all in her reply. I beg to move.
Baroness Warwick of Undercliffe (Lab)
My Lords, I will speak to Amendments 80, 80A, 82 and 83 in my name. Each relates to the potential unintended consequences of Clause 7 for registered providers of social housing. I am grateful to the noble Lord, Lord Best, for his support.
Before turning to my amendments, I express my strong support for the Government’s ambition to give greater rights and protections to people renting their home. Since the previous Conservative Government first promised to end no-fault evictions in 2019, almost a million renters have received a Section 21 eviction, which is a leading cause of homelessness. It is right that the Government have acted decisively to end this unacceptable situation for good.
While most of the Bill is focused on reforming the private rented sector, some reforms will affect housing associations because the majority of homes that they provide use assured tenancies. This includes housing for people on low incomes, people needing high levels of support, people in crisis and people in need of short-term and emergency accommodation.
I understand that significant progress has been made to amend the Bill to negate any unintended consequences for social landlords. This has been strongly welcomed by the National Housing Federation and others that support this legislation. There have been welcome changes to ground 1B and ground 6, as well as the introduction of ground 6ZA, which will allow social landlords to gain access to properties both to meet housing need and to deliver essential redevelopment and improvement works. However, housing associations would still very much like to see further clarity in the Bill on proposed changes to the process for rent increases.
Housing associations are not-for-profit social landlords: they invest any income back into the development and maintenance of the homes they provide and into supporting residents and communities. To maintain fairness for tenants, to ensure administrative efficiency and alignment with benefits and utility rates increases, and to provide business certainty for repairs, maintenance and services, housing associations increase all tenants’ rent on the same day, usually in April. The Bill helpfully acknowledges this and attempts to provide a mechanism by which social landlords can still administer annual rent increases in the form of contractual clauses instead of Section 13A notices.
Retaining registered providers’ ability to use clauses in tenancy agreements to increase rents is positive, as it provides them with a practical method for increasing rents on the same day for all tenants. The loss of this rent-harmonisation mechanism would have been a significant disruption—and, indeed, unnecessary, given how heavily regulated this sector is compared with the private rented sector.
However, the ability to use contractual clauses instead of Section 13A notices could be clearer than is stated in the Bill currently. The Explanatory Notes clarify that contractual clause increases can be used, but the Bill says:
“For the purpose of securing an increase in the rent under a tenancy … the landlord may serve on the tenant a notice”.
It goes on. This reflects the wording applying to PRS tenancies, where the word “may” is used in a mandatory sense, as the only way that the landlord can increase the rent is through the process in Section 13 of the 1988 Act. In contrast, where it applies to relevant registered provider tenancies, “may” is used in a permissive sense: the landlord can use a Section 13A notice, but they also have the option to increase by a clause in the tenancy agreement.
The Bill provides for this method of increase by agreement between the landlord and the tenant. However, it does not make it clear whether each increase must be agreed or whether a mechanism for increase in the tenancy agreement covers all increases.
Baroness Wolf of Dulwich (CB)
My Lords, Amendment 87 in my name proposes that the Government adopt a screening procedure for rent appeals. It draws on and is prompted by current Scottish practice. The approach works well there and could make a substantial contribution to addressing the growing pressure on court capacity, which we have been discussing.
My amendment does not, in any way, reduce the right of tenants to appeal against a rent increase. I am not sure that it even reduces the incentive to appeal on the off chance, but it certainly reduces the likelihood that the courts will be overwhelmed by appeals and, in particular, appeals that do not succeed and therefore swamp the courts, to the detriment of important and merit-worthy cases.
Under the Government’s current proposals, tenants will enjoy a number of new and important rights: rents cannot be increased as often as at present, for example, and the notice period is increased. Most importantly in the context of this group of amendments, all tenants who wish to challenge what they see as an excessive rent increase have access to an independent tribunal. The tribunal cannot propose an increase that is any higher than the one initially proposed by the landlord; it can endorse the landlord’s proposal, in effect, or rule that a lower rent should be charged. Obviously, these changes will be of great assistance to tenants whose landlords are proposing major increases that are out of line with inflation or the market.
The problem is that, from most tenants’ point of view, appealing against an increase becomes something of a no-brainer. Why on earth would you not? What would you lose? At worst, you get a delay in the date when the increase takes effect. In that situation, the courts are bound to be faced with a tsunami of appeals with which they cannot possibly cope.
As many noble Lords are aware, Scotland reformed its rental legislation quite recently and it therefore provides us with useful indications of how contemporary rental markets respond to various types of change. Some Scottish developments are not very encouraging, as we have heard: there seems to be an ongoing decline in the number of rental properties and a sharp fall in the construction of properties for rent. However, one aspect of the current Scottish regime seems extremely sensible and successful. It does not reduce Scottish tenants’ rights but it does protect their court system.
The first stage in an appeal against a proposed rent increase goes to Rent Service Scotland. Apparently, it takes Rent Service Scotland, on average, just five days to respond. In almost every case, things stop there; very few cases then go on to a tribunal hearing.
The National Residential Landlords Association obtained information under a freedom of information request, which showed that, in the four months from April to July 2024, 928 applications were made to Rent Service Scotland to appeal a proposed rent increase. While there do not seem to be any summary statistics available that show exactly how numbers have evolved and changed over time, the Scottish tribunal is certainly not dealing with anything approaching that number. In fact, only about 30 decisions relating to rent increases were published between August 2024 and March 2025. The full 2023-24 Scottish tribunals report also shows that, while private rental sector cases were the large majority of property cases, they were overwhelmingly to do with evictions, deposits and repairs and not rent appeals.
Obviously, the Scottish situation is very different from ours, notably in adopting rent caps, but it is also obvious that that system is effective in giving tenants and landlords very quick feedback rather than months in limbo. It is also obvious, given the volume of appeals, that without this system the Scottish tribunal would be spending a lot of time and resource on a very large number of cases that were, in effect, a waste of its time.
It would be very easy for us to introduce a similar first-stage process in England. There is a large amount of expertise on rents outside the tribunals and courts. The Valuation Office Agency already gives the Government the valuations and property advice they need to support taxation and benefits. Rent officers set rents for the remaining group of protected tenancies. So, all the basic infrastructure we need is in place.
My amendment therefore proposes that all appeals against rent increases should go in the first instance to the Valuation Office Agency and progress to the First-tier Tribunal only if there is a clear case to answer. Obviously, if the Government chose to embrace the general idea, as I very much hope they will, the details would be in their hands—this is a probing amendment.
To see how important such a screening process could be in protecting our court system from near-complete collapse, it is worth doing a little bit of back-of-the-envelope arithmetic. If appeal rates from private sector tenants in England were at the same level as we currently see in Scotland and they all proceeded to the tribunal, we would end up in England with over 40,000 cases a year. That compares with 909 rent increase cases heard in the year 2023-24. We would be looking at an increase that is more than fortyfold, or 4,000%. As we have heard from noble Lords, it can already take months for the First-tier Tribunal to rule, so how can it possibly respond to this sort of increase? Of course, under the Bill’s provisions, the longer the delays, the greater the incentive is to appeal, so I am afraid that fortyfold might just be the start.
It is no wonder that even very strong supporters of the Bill, such as the Local Government Association, are expressing concerns about the potential impact of the new appeal rights on the capacity of the First-tier Tribunal to make decisions in a timely fashion. This timeliness matters not just because of the direct impact on changes in rents but because our judicial system also needs to deal with other property issues, including anti-social behaviour. It is worth emphasising that anti-social behaviour is not just an issue for landlords; it is at least as much of an issue for surrounding residents, many of whom will be tenants. If you live next to a property which is being used for intensive drug dealing, it is not much consolation to be told that this occurs only with a tiny minority of properties.
We already have very long delays in the court system, as other Lords have pointed out. Those delays seem to be growing and not reducing and we as a Chamber must, for the sake of tenants just as much as landlords, take the potential impact on the courts into account in scrutinising the Bill.
I therefore urge the Government to consider following and learning from the Scottish example and introducing a first-stage screening of rent appeals outside the court system. Is the Minister willing to meet me to discuss that suggestion?
Lord Hacking (Lab)
My Lords, my Amendments 88, 91, 94, 97, 100 and 101 appear in this group. Before I speak to the individual amendments, my general observation is that I do not have great enthusiasm about several of them, but they have been put to me and I thought it necessary to have them aired in this Committee.
Amendment 88 would enable landlords to claim costs against the tenant when the landlord succeeded after the tribunal confirmed the rent increase. This follows the normal rule in front of all tribunals and courts in our land of costs following the event, the event being who won the dispute, and the costs therefore have to be picked up by the loser. Having said that, I have a reservation about this amendment, because it could be a deterrent against tenants challenging an increase in rent, which is undesirable.
In speaking to Amendment 91, I will speak also to Amendments 94, 97 and 100. All these amendments seek to establish that the increase in rent should be calculated from the expiry of the landlord’s notice for the increase rather than the date of the tribunal’s decision. I tabled this amendment because there is quite a noticeable delay in decisions of tribunals, which means the landlord does not get his increase in rent until several months later.
Amendment 101 moves to a different subject: that the rent payable on the decision of the tribunal should be paid in equal monthly instalments within six months of the tribunal’s determination—that speaks for itself.
I am just looking at my list of amendments to speak to and I think I have got there; I have completed my comments on all of them. I say again that I do not speak to them with great enthusiasm. I spoke with great enthusiasm on Thursday in supporting Amendment 60 from the noble Lord, Lord Carter of Haslemere, and my own Amendments 165 and 166. Unfortunately, my enthusiasm for these amendments has not so far permeated to my noble friend on the Front Bench, but I hope that they will do later.
Baroness Jones of Moulsecoomb (GP)
My Lords, I rise with huge enthusiasm for my amendments. Amendment 90 in this group relates to Amendment 89 in the following group, so I will speak just once. I have been told to call them probing amendments; really, I would like to push them to a vote. In fact, I would like the Minister to accept them because I think they are very good. They are similar to probing amendments put down by my colleague Carla Denyer in the other place and aim to ensure that tenants have a way of benefiting from energy efficiency improvements where the Government have given landlords the money to make them.
I would like the Minister to think about who profits from the government subsidy. Are the Government interested only in increasing the profits of landlords or should tenants benefit as well? Triple-glazed windows and wall insulation mean lower energy bills for the tenant, but that makes absolutely no difference to them if the saving is cancelled out by higher rents.
Take, for example, this case study provided by Generation Rent: Maya lives with her husband and children in a home they rent from a private landlord. They had a lot of energy efficiency work done, which was paid for by a government grant. They were eligible for it because they received benefits. However, Maya came to Citizens Advice for help when the landlord asked for a £500 rent increase after her family had been through all the disruption of getting their home upgraded. You can imagine the dust, the dirt, the noise and the general disruption of having workers around all the time.
This increase would have left Maya’s family facing a £900 shortfall between their local housing allowance and their rent, making it absolutely unaffordable for them to stay in their home. Maya tried to negotiate the rent with the landlord but has now been issued with a Section 21 eviction notice. Maya and her husband believe that now the property is in an improved condition, thanks to the grant funding they secured, the landlord wants to find more affluent tenants who will pay a higher rent.
Lord Carrington (CB)
My Lords, I declare my interests in the private rented sector, with residential lettings in Buckinghamshire and Lincolnshire.
I have tabled Amendments 96, 98, 99, 103 and 104 to Clause 8, in which the Government seek to create a new right for renters to challenge their annual rent increases. I am most grateful for the support of the noble Lords, Lord Young of Cookham and Lord Howard of Rising, in this group.
I believe there is a strong consensus across your Lordships’ Committee that stands alongside the Government in wishing to prevent unreasonable rent increases being used as a means of eviction through the backdoor. However, I also believe there is a strong consensus that the Government’s drafting of Clause 8 will not work. Indeed, I am deeply concerned that providing a universal right for all renters to challenge all rent increases, in all circumstances and without qualification, will undermine the supply of rental homes and overwhelm our courts.
The Bill seeks to provide renters with mechanisms to ensure redress where their landlord behaves inappropriately, irresponsibly or exploitatively—yet I fear that the current drafting will undermine that intention in practice. At Second Reading we heard examples of poor behaviour by a small minority of landlords, but the response delivered by the Government will impact the whole private rental market, including the great majority of responsible landlords.
The effect of Clause 8 will be to create a right for all 4.5 million of England’s private rental households to challenge their rent increases annually, via the Section 13 process, at no cost and at zero risk. Every single renter will have a right to take their landlord to the First-tier Tribunal if they perceive their rent increase to be “disproportionate” or unreasonably above market rates.
The Government believe that tenants should apply to the tribunal only if they believe a rent increase is above market rents, but I am afraid that will not be the result of this legislation. The legal text of the Bill sets out that a rent increase could not come into force until after the tribunal rules, and explicitly prohibits the court from determining real market rent to be higher than the landlord’s proposal, even if that is a judge’s evidenced assessment.
The result of this drafting is to create an artificial incentive for all 4.5 million renters to submit a challenge to their rent rise, however legitimate, because this would prevent the increase coming into force until the tribunal decides. There is no risk to the tenant in this and it provides a guaranteed delay in when the increase comes into force. Once this is widely understood, renters will exercise their right as a matter of course.
This incentive risks overwhelming our First-tier Tribunal, burdening an already struggling court with hundreds of thousands of cases. This has already been referred to by the noble Baroness, Lady Wolf, who has come up with a sensible solution. The Government want renters in genuine need of redress to have access to the courts, but the queue for justice will be too long for this to prove possible.
Moreover, the risk of this backlog in cases is causing serious concern among professional and responsible landlords in the sector. The prospect of extended delays to increasing rent would make it more difficult for investment institutions and build-to-rent developers to invest in new, high-quality rental homes, undermining the rental housing supply that we want to see. The reality of this backlog would be upward pressure on rents—the opposite of what the Government want to achieve.
The Government themselves have acknowledged their desire to ensure that responsible landlords can increase their rents in line with the market annually, and the Government have rightly ruled out rent controls. However, the system proposed under this Bill will in practice undermine landlords’ ability to secure market rents annually.
The Guardian newspaper recently revealed that a King’s Counsel has assessed the Bill to determine the likelihood of a legal challenge in the European Court of Human Rights. Subsequently, the newspaper City AM published an article outlining this legal opinion, which determined that the Government stand a greater than 50% chance of losing in the ECHR on this aspect of the Bill. I implore the Government to look into this further as a matter of urgency.
My amendments would mitigate the very serious legal risk with the current proposals on rent challenges. It is all very well for the Minister to repeat, as she has in the past, that the Bill is compatible with the ECHR, but that judgment was made before our amendments were tabled and discussions ensued. As a matter of grave responsibility, the Government should consult again with their lawyers now that these issues have been raised.
The amendments to Clause 8 in my name offer a common-sense solution that should reassure all parties. In my amendments, I propose that if a renter’s challenge is unsuccessful, rents should take effect from the date of the Section 13 notice rather than the tribunal’s determination date. I further propose that the court should be able to follow the evidence, empowering the tribunal to raise rents to what it deems to be market rates, even if this is potentially higher than what a landlord originally proposed.
I believe that, taken together, the amendments would deliver a fair result—technical changes that would keep the right to challenge while reducing the artificial jeopardy-free incentive to take landlords to court. These reasonable amendments would also give institutional investors and build-to-rent landlords the confidence to invest in the high-quality new rental homes that our country needs. To address concerns raised by a number of noble Lords at Second Reading about unsuccessful challenges leaving renters with a large bill, my amendment is drafted to mandate landlords to spread any backdating over a 12-month period.
The number of amendments proposed to Clause 8 speak to the widespread concern in this House about the risks of the Government’s current drafting. Whether colleagues support my amendments or those of my colleagues, I believe the Government’s position is unsustainable. A credible plan is needed to address the artificial incentive for every renter to challenge their rent. Otherwise, I fear for serious investment in new rental homes and the functioning of our courts system.
Lord Cromwell (CB)
My Lords, I have some sympathy with Amendment 99, concerning the rent rise challenges under Section 13 of the Bill. It is essential that tenants can properly challenge excessive rent increases—but, once again, a fair balance is what we seek.
I slightly take the noble Baroness, Lady Scott, to task for her reference to “consenting adults”. The reason for the Bill arises precisely because of the power differential between landlords and tenants. Some adults are more consenting than others, if I may use that phrase. I am not quite sure that works, but noble Lords will know what I mean.
I support the proposal in Amendment 99 in the name of the noble Lord, Lord Carrington, that the rental increase—only, of course, if agreed by the tribunal—should take effect from the date of a Section 13 notice rather than the date of the tribunal decision. I also agree that, where this creates a rent backlog, you would need a payment plan to set it off over time. I note, however, that there would still be a risk to the landlord in those circumstances: if a tenant uses the tribunal as a speculative delaying tactic, and then if the rent increase is finally approved by the tribunal but the tenant does a flit with the rent arrears unpaid, this will leave the landlord with the unenviable prospect of trying to recover the money due to them from the departed tenant.
In short, the Bill enables—perhaps even invites—speculative challenges to any rent increase requests. I think the noble Lord, Lord Carrington, slightly overeggs it when he says that everyone in the entire country will do that, but perhaps he is doing that to illustrate his point. Either way, as my grandfather used to say, “Don’t complain if people fall for a temptation that you have created”. For the tenant it would make rational, self-interested economic sense to automatically challenge any rent increase, and this abuse of the tribunal process would add to its existing overload of cases and therefore discourage supply. I therefore support the amendment containing provisions in this regard.
There has also been a suggestion, I think in Amendment 98, that the tribunal might set a rent above what was requested by the landlord. I do not support that, for two reasons. First, if a landlord proposes a rent increase, it must be assumed that they consider it to be a satisfactory increase. Secondly, the danger of having the rent set higher than the landlord has requested is often mentioned by tenant groups that I have spoken to as a significant cause for tenants to feel intimidated, thereby preventing challenges to rent increases. The Bill does a lot to rebalance the power in the landlord/tenant relationship, but the issue needs to be re-examined. Making a revised rent payable from the notice date, if necessary with a payment plan for arrears, while at the same time not allowing rent to be increased beyond the landlord’s requested level, would achieve a better balance of rights between landlord and tenant and would prevent abuse of the tribunal system. I therefore hope the Minister will pay heed to this proposal and I look forward to hearing what she has to say.
Lord Howard of Rising (Con)
My Lords, I declare my interest as an owner of a rental property. I shall speak to Amendments 99 and 103 in this group, both of which would go towards preventing the situation where it has become almost mandatory for a tenant to take any increase to a tribunal. As that has been pointed out by the noble Lords, Lord Carrington and Lord Cromwell, I will spare your Lordships the repetition of those arguments, but it would be silly for a tenant not to take any proposed increase to a tribunal. Under present proposals, there is no risk or disadvantage to the tenant. The very worst that can happen to the tenant is that an increase, if agreed, is postponed until such time as it has been dealt with by the tribunal.
Amendment 99 proposes that any increase agreed by the tribunal could be implemented from the date when the increase was due to take effect. That would remove some of the incentive to automatically apply for reviews.
As has been mentioned, according to government statistics, there are 4.9 million private rented homes in England. Some of those will have an annual rent review, for some it will be less frequent, but, if one takes a conservative average of, say, three-year rent reviews for each dwelling, that would mean over 1.6 million possible applications to the rent tribunal per annum. I think every three years is an exaggeration—it is much more likely to be more frequent—but let us assume that we take the three years, and that one-third of the people who have received increases in rent do not apply to the tribunal. By my conservative calculation, that leaves 1 million applicants to the tribunal. How are His Majesty’s Government planning to deal with that? Could the Minister tell the Committee the number of challenges taken to the tribunal in the last period for which the information is available? What is the present delay or wait time for applications to the tribunal being heard?
Lord Young of Cookham (Con)
My Lords, I have added my name to Amendment 99 in the name of the noble Lord, Lord Carrington, which, as my noble friend Lord Howard of Rising explained, would ensure that, if there was an unsuccessful challenge to a rent tribunal on a rent increase, the increased rent would become payable on the date proposed by the landlord.
Before turning to that amendment, I will say that I have some sympathy with Amendment 87 in the name of the noble Baroness, Lady Wolf, which proposes an alternative means of filtering appeals before they reach the tribunal by enabling the tenants first to check with the VOA whether their challenge has any prospect of success. However, many of the arguments that the noble Baroness used are equally applicable to Amendment 99.
Turning to Amendment 99, what Clause 8 proposes is exactly the opposite of what happens at the moment, and what indeed has been the case since the Housing Act 1988. At the moment, if a landlord serves a Section 13 increase on the tenant, giving a month’s notice, the tenant can appeal. But, if the tribunal decides the rent should be increased, the increase is payable from the date given on the Section 13 notice. That is the position at the moment, which the Government propose to overturn. The CAB website gives advice to a tenant on this subject, saying that
“it’s probably best to save money towards your rent increase if it’s due to start before the tribunal makes a decision. That way, you won’t have to find a large sum of money if your rent is increased”.
It goes on to make the point that it can take up to 10 weeks for the tribunal to make a decision.
I agree with what has been said. I do not see how this proposal, as it stands, can possibly survive. As many noble Lords have pointed out, from the tenant’s point of view they have nothing to lose by appealing against any increase. The rent cannot be put up, and the increase is not effective until it has been endorsed by the courts.
No satisfactory reasons have been given for this, so I looked in Hansard to see what happened in the other place. The Minister, Matthew Pennycook, said on 29 October last year:
“Tenants should not be thrust into debt simply for enforcing their rights”.
But the relevant right of the tenant is to appeal against an unfair rent increase. There should be no additional right to the tenant if that appeal is subsequently lost, but that is what is proposed.
My honourable friend Jerome Mayhew intervened in the Minister’s speech. He said:
“The Minister says that it would be unfair on the tenant to have a significant increase in rent and a backlog after the determination of the tribunal, but that is rent that ought properly to have belonged to the landlord and has been unjustifiably denied them for the period of the process. Why is it fair for the landlord to be denied a just rent as a result of the delay in the process, yet it is for some reason not fair for the tenant?”
The Minister then in effect conceded the case:
“The hon. Gentleman is right that if the tribunal determines that the rent increase is reasonable, a landlord may have missed out on a short period of the rent increase—not the whole rent, but the rent increase”.
It is not “may have missed out” but will have missed out and, as we have heard, not for “a short period” but potentially for a very long period.
The Minister then sought to defend the position:
“I will be very clear about this: we took the view that it was better that tenants were not, by facing the prospect of significant arrears, disincentivised from taking any cases to tribunal to challenge what could be, on a number of occasions, completely unreasonable within-tenancy rent increases”.
But what the Minister described as “significant arrears” were sums which actually a tribunal will have deemed to be fair, and which current advice from the CAB is that tenants should make provision for. The argument the Minister uses is at odds, as I have said, with the position at the moment.
The Minister’s case was further weakened by a subsequent intervention. Again, my colleague Jerome Mayhew asked:
“I understand that the Government’s intention is that tenants should not go to the tribunal unless they are clear that the asked-for rent is too high, but what prevents them from gaming the system, as we discussed?”
In reply, the Minister said:
“What I would say to the hon. Gentleman—I will expand upon my argument in due course—is that I think he underestimates how difficult it is to take a case to the tribunal”.
In a spare moment over the weekend, I put into Google, “How do I appeal against my rent increase?”. Up came the answer: use form Rents 1 on the GOV.UK website. I downloaded the form. You can appeal, free and online. All credit to the noble Lord, Lord Maude of Horsham, and others for simplifying and digitising government forms. You fill in your name, address and contact details, the name and address of the landlord or agent, the amount of rent you are paying, when the tenancy began and the details of the property. You add a copy of the Section 13 notice from the landlord increasing the rent and a copy of the tenancy agreement, and send it off online to the nearest tribunal regional office. I estimate that it would take about 10 minutes. The tribunal will then ask you what type of hearing you want. Most tribunals for rent increases are based on the evidence you send—they are paper hearings—so there is no need for an appellant to do anything more than I have described.
I hope the Minister will not repeat what her colleague said in another place:
“However, I think the hon. Gentleman underestimates the onerous nature of taking a case to tribunal. It will not be as simple as the tenant deciding on a whim one day that they can do that, and that it is a no-lose situation, but I recognise the incentives at play on both sides”.—[Official Report, Commons, Renters’ Rights Bill Committee, 29/10/24; cols. 145-46.]
It is not onerous, and it is no lose. What is onerous is the pressure on the tribunals. I urge the Minister to reflect on the many amendments to this clause and, in her reply, indicate a willingness to think again.
Lord Marlesford (Con)
The points earlier expanded on the point about affordable rent. Is the Government’s policy still that affordable rent means that it should be no more than 30% of total household income? That immediately implies—it is a glimpse of the obvious—that for one tenant a property is affordable and for another tenant with fewer assets it is not affordable.
Secondly, where I support my noble friend’s entry into the argument is on this business of the fixing of rent by the tribunal. How long does that continue? Could that be spelled out clearly? Does it apply merely for the length of time that particular tenant is there? Would it be continued if there were to be a change of tenant and the next tenant said that was the rent the tribunal had set? If we are to have tribunal-set rents, we must be told exactly how they operate.
Finally, unless the Government can answer fully and confidently the points made by the noble Lord, Lord Carrington, this Bill will certainly fail in its objective.
Lord Best (CB)
My Lords, in the next group of amendments there are some excellent amendments in my name and those of others that seek to resolve some of the issues raised by the noble Lord, Lord Carrington, and many other Peers on this issue. However, in this group I have a rather more pedantic set of amendments to support. I am supporting Amendments 80, 82 and 83 in the name of the noble Baroness, Lady Warwick of Undercliffe.
The Bill is, of course, concerned with the private rented sector and not social housing, where tenants’ rights are already far stronger. But housing associations, often now known as registered providers, are drawn in to some of the Bill’s measures because these bodies use assured tenancies. This means that some ingredients in the Bill do not work for them, in particular the requirement for rent increases just once a year, as the noble Baroness, Lady Warwick, has explained.
The common practice in the social housing sector is to raise the rents for all tenants on one specific date, usually in the first week of April. Many housing associations provide several thousand tenancies, and it is far more efficient to have one rent increase day for everyone annually.
The Government have accepted the need for different treatment for housing associations, and Clause 7 contains measures to handle the problem. But the National Housing Federation, which brings specialist knowledge to bear on the formulation of these amendments after discussion with lawyers, feels the position would be more clearly dealt with by the wording in Amendments 80, 82 and 83.
This is indeed a rather dull set of amendments, but they would make for clarity, administrative simplicity, cost savings and fairness, and I am pleased to support these amendments.
Lord Hardie (CB)
My Lords, I support Amendment 90 in the name of the noble Baroness, Lady Jones of Moulsecoomb. The point made by the noble Baroness and by this amendment is not academic. Recently there was a newspaper report of a case in Scotland where an elderly, vulnerable tenant was persuaded by her landlord to apply for a grant for housing improvements. The grant was available only because of the vulnerability of the tenant. She lived through the upheaval of the work and when the improvements were completed she was then faced with a demand for increased rent.
There is considerable force in this amendment. Landlords should not deny the entire benefit of improvements funded by government grants, and I urge the Minister to accept this amendment or to come forward with a government amendment to a similar effect.
Baroness Kennedy of Cradley (Lab)
My Lords, I support Amendment 90 in the name of the noble Baroness, Lady Jones of Moulsecoomb. Many housing and tenant-focused organisations, such as Generation Rent, and organisations on the Renters’ Reform Coalition support this amendment. Put simply, it seeks to ensure that public funds cannot be used to justify a rent hike.
I am sure all noble Lords will agree that government grants are for a public good. They are funded by the taxpayer with a clear purpose. This amendment refers to grants for making homes warmer, safer, more energy efficient and, in essence, cheaper for the tenants who live in them, many of whom live in fuel poverty. It cannot be right that a landlord receives public money to upgrade a property—money received largely because the tenant within the property, as we have just heard from the noble Lord, is on a low income—and is then allowed to raise the rent because of the same improvements. It is not fair and I believe it betrays the very spirit of public support.
With this amendment, the Government could stop that situation occurring, as well as provide better protection for tenants so that they can enjoy the benefit of the improvement, which potentially would have been secured because of their personal circumstances in the first place. So I ask my noble friend the Minister whether she will consider Amendment 90 carefully and come back to noble Lords on the government position on the amendment before Report.
I would also like to ask whether current schemes, such as the Great British Insulation Scheme, have grant conditions that explicitly prohibit rent increases following property improvements funded by public money. If not, will the Government consider amending those conditions so that they do, and agree that this condition should be added to all future schemes? I appreciate that my noble friend may not have the answers to hand, but perhaps she could write to me and all noble Lords with the details and intention with reference to Amendment 90?
Baroness Thornhill (LD)
My Lords, there are a lot of issues in this group, but the bottom line, again and again, is the imbalance of supply and demand, and the imbalance of power between tenant and landlord. Demand significantly outstrips supply. The landlord/tenant balance is surely like a see-saw, with one fairly heavy person on one end and a nice sylph-like person on the other end. I believe this legislation just wants to even it up a little bit.
There are those of us who feel that, in this kind of market, landlords can and do charge what they want. Rents have been going up significantly, driving more people out of the private rented sector and—I think this is a point on which we have so far not joined the dots—into the arms of their local authorities under the homelessness and temporary accommodation route. We need only look at the rising figures to know that this is happening and happening at scale. We have debated it regularly in your Lordships’ House over several years.
I was not surprised to read on the front page of the Guardian this morning that one of its surveys found that private rented sector landlords are fleecing taxpayers as a direct result of the temporary accommodation crisis. The Guardian found:
“Local authorities in England are paying 60% more for rooms in … bed and breakfasts and hostels than it would cost to rent similar-sized accommodation”
in the private rented sector. There are far more details in the front-page article, but it is irrefutable that some private landlords and hotels are cashing in on England’s hidden homelessness crisis. The lack of supply creates a vicious cycle that is costing the country an enormous amount of money. Thus, we support all the measures the Government are taking in the Bill to try to curb unreasonable rent increases and prevent economic evictions. We will discuss this more in the next group.
We are also concerned about market rents being the deciding factor for the tribunal, given a market that is significantly undersupplied, especially in areas of the country with high housing prices. If market rents are used, they should be based on existing equivalent rental properties in the area and not just new builds, which are usually more expensive and can be overpriced. I look forward to debating the amendments in the next group, which are trying to bring some resolution to this.
I will dispatch positively and succinctly all the amendments tabled by the noble Baroness, Lady Warwick. Her commitment to the social housing sector and her work with registered providers is well known. It is no surprise that she was supported by the noble Lord, Lord Best, to whom the same accolades could apply. Such providers are in a dilemma over rents and at the mercy of the Government as to when and by how much they can increase rents, as the noble Baroness outlined very well. We are concerned that there is increasing evidence that a significant number are cutting back on their future development plans to build social and affordable homes at a time when we all want the opposite.
On the First-tier Tribunal, there seems to be a real fear around the Committee that renters will all rush to challenge their annual rent rise, as has been said by many. I am pragmatic about this. I think it is probably wise to expect an increase, which is why we wholeheartedly support Amendment 87, from the noble Baroness, Lady Wolf. I was a little too late to put my name to it—the nominations had closed, so to speak—but I would have. If there can be a simple mechanism to weed out claims that have absolutely no chance of success, as has happened in Scotland, it must be worth considering.
We can clearly see from recent tribunal hearings that cases are often contradictory and inconsistent, and seem to rely on different sources to make a judgment, which means they are often based on an incomplete picture. This is why I have submitted Amendment 106, supported by the noble Lords, Lord Carter and Lord Howard, for which I thank them. We are simply seeking assurances that the tribunal is fit for purpose and ready to go, and that adequate consultations have been carried out.
What is worrying is a recent survey by Generation Rent, which I too thank for its work all year round and in particular with this Bill. The survey found that less than one-third of renters had actually heard of the tribunal, with fewer than 10% claiming to know a lot about it. There is clearly a lot more work to do before we even get a trickle of people, let alone a tsunami of people or everyone, making an appeal against their rent. Thus, we could not support any amendments that involve tenants paying landlords’ costs, or allowing the tribunal to award higher rents, as these are new barriers to renters exercising their rights.
However, I have a degree of sympathy with Amendment 99, tabled by the noble Lord, Lord Carrington, and very ably supported by the noble Lord, Lord Cromwell. The rent should be backdated to when it would have been legally allowed to be raised, otherwise there really is an incentive to appeal: “What have we got to lose?”. To me, it does not seem fair.
Finally, it feels wrong, as has been said by several noble Lords, that a landlord should add value to their capital asset and then use that immediately to hike the rent—a financial win-win for the landlord. Likewise, Amendment 70 in the name of the noble Baroness, Lady Jones, has some merit.
Lord Carter of Haslemere (CB)
My Lords, I support Amendment 106 from the noble Baroness, Lady Thornhill. I declare an interest as a former landlord.
Clause 8 of the Bill amends Section 14 of the 1988 Act to allow any tenant to challenge a rent rise in the First-tier Tribunal. It will be free of charge. No tribunal ruling will be able to increase the rent proposed by the landlord. By challenging the rent rise, as we have heard, the tenant will automatically delay any rent rise by several months, however modest and justified it may be.
This will obviously create an incentive for tenants to challenge single rent rises, regardless of the merits, and without any risk to them doing so. As we have heard, if their appeal is unsuccessful, they will then be liable to pay the increase in rent only from the date of the tribunal’s determination. That is incredibly unfair on landlords, for the reasons the noble Lord, Lord Young, and my noble friends Lord Carrington and Lord Cromwell have given. What have tenants got to lose? My focus is to express strong support for seeking to ensure that the tribunal has adequate resources to cope with the likely increase in the number of rent rise challenges it will face. Okay, not 100% of tenants are going to challenge rent rises, but there will be a significant increase unless changes are made to the Bill to remove the incentive to do so, because they have nothing to lose.
Given that the tenant will hold all the aces in the pack, the tribunal floodgates are likely to be, or are at risk of being, opened. Without more tribunal resources, this will greatly increase delays and create even more incentives to challenge rent rises. The Government need to get this right or the system will grind to a halt, landlords will leave the sector in droves and tenants will be at risk of homelessness. As I said at Second Reading, there needs to be balance in the very welcome improvements that the Bill makes as a whole. The relationship between landlord and tenant has to be a two-way street to maximise the effectiveness of the Bill.
As this amendment proposes, there needs to be a proper consultation, including with the senior judiciary, before these provisions are commenced, to ensure that the tribunal system is adequately resourced to cope with the increased demand—what on earth could there be against that? This is such a sensible and unobjectionable amendment, and I am looking forward to seeing it accepted by the Minister and appearing in the next proof of the Bill.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank the noble Baronesses, Lady Scott of Bybrook, Lady Thornhill, Lady Wolf of Dulwich and Lady Jones of Moulsecoomb, and the noble Lord, Lord Carrington, as well as my noble friends Lady Warwick of Undercliffe and Lord Hacking, for their amendments on rent increases, and all noble Lords who have spoken, including the noble Lords, Lord Cromwell, Lord Howard, Lord Young, Lord Marlesford and Lord Carter of Haslemere, and my noble friend Lady Kennedy of Cradley.
I will start with the comments from the noble Lord, Lord Marlesford, on the challenge to rent levels. He asked whether that concerned a permanent change to the rent. When a tenant challenges their rent, it will be that challenge that is decided upon by the tribunal. Each time the Section 13 notice is issued, presumably the tenant will be able to go back again and challenge that rent. It is unlikely that they will do that, because if a landlord gets taken through the tribunal for an increase in rent, he or she is unlikely to go back and do that again.
The point the noble Lord made about the lack of affordability in housing sits at the heart of the Bill, to some extent. However, this Bill is only part of the Government’s response to the housing market’s lack of affordability, and not the totality of it. I point to the increase in supply that we are trying to drive forward and the reforms we have made to planning, which will, I hope, increase the supply of housing. There is also the £2 billion we are investing in social and affordable housing, which I genuinely think will help to change things, and the £633 million we have put into relieving homelessness, which I hope will help.
The noble Baroness, Lady Thornhill, referred to the cost of temporary and emergency accommodation. Not only is temporary and emergency accommodation devastating for families—it is just awful for them, and we have heard so many terrible stories about that—it has seriously exacerbated the dire financial situation that our councils find themselves in, which is not helped by profiteering. Of course, not all landlords do that, but there is no doubt that some profiteering is going on, as has been reported in the press today.
We have a significant number of amendments in this group; in the interests of time, I will attempt to address each of them thematically. First, Amendment 75, tabled by the noble Baroness, Lady Scott, would allow landlords and tenants to agree a higher rent than the tribunal’s determination. We have been clear that, after the Bill’s implementation, the only way that parties will be able to agree a higher rent is via the Section 13 process.
I am not sure why the noble Baroness, Lady Scott, feels that a tenant would object to and challenge a rent increase that they had agreed to. If a tenant and a landlord come to an agreement on a rent increase, presumably there would be no need for the tenant to challenge that at the tribunal. If the rent is challenged, then the tribunal can determine it. This amendment would leave a gaping loophole for unscrupulous landlords to force tenants to accept a higher rent, even after they have challenged it at the tribunal. Clearly, no tenant would agree to this unless they were under pressure, and it is for that reason that I ask the noble Baroness, Lady Scott, to withdraw her amendment.
Lord Cromwell (CB)
Very briefly, if I may, I rather like this idea—it is great. In the Government’s consideration, will they include where the grant covers only part of the cost and how that can be treated?
Baroness Taylor of Stevenage (Lab)
The noble Lord, Lord Cromwell, makes a very relevant point—we will have a look at both things.
Although I appreciate the intention behind Amendment 90, I have concerns about whether it would be practical to attribute a portion of the market rent to energy improvements. We need to think about how we might do this. I hope that the alternative approaches I have outlined and the steps we have taken to allow tenants to challenge egregious rents, for whatever reason the increase has been put on, provide some reassurance. I therefore respectfully ask the noble Baroness, Lady Jones, not to press the amendment.
Amendments 91, 94, 96, 97, 98, 99, 101 and 104 all deal with the backdating of rent increases. I do not agree that tenants should be forced to pay backdated rent. To ensure that tenants are not unexpectedly thrown into debt that could cause further difficulty, the Bill provides that the new rent will apply from the date the tribunal directs, not earlier than the date of determination. We are clear that tenants should submit an application to the tribunal only where they believe that a rent increase is above market rates, and all parties should communicate about the level of rent increases that would be sustainable.
One noble Lord mentioned 1.6 million tenants taking landlords to court. I find that unlikely, to say the least, but we would quickly know. I have already undertaken to noble Lords that we will monitor this very carefully. If that did start to happen, we would certainly know that it was happening and would deal with it immediately. Allowing the backdating of rents risks disadvantaging the most vulnerable tenants—those who may forego challenging a rent increase that is designed purely to force them out of their home.
I turn briefly to each amendment in turn. My noble friend Lord Hacking has spoken to his Amendments 91, 94, and 97. Amendment 91 aims to backdate a rent increase to the date specified in the Section 13 notice. Amendment 94 seeks to backdate a rent increase where the tenant has challenged the relevant notice at tribunal. Amendment 97 is a consequential amendment linked to Amendment 94, which aims to ensure that, where a tenant challenges a rent increase notice at tribunal, any rent increase determined by the tribunal will be backdated to the date on the Section 13 notice. I have already set out why the Government do not agree that tenants should be forced to pay backdated rent. I therefore ask my noble friend not to press these three amendments.
The noble Lord, Lord Young, set out the process as it is now. If it really is as straightforward and simple as he said—I am not arguing with him, and I am sure he has been as diligent as he always is in looking up the facts—surely we would already be swamped with tenants appealing their rent increases, and that is not the case.
Lord Young of Cookham (Con)
The key difference is that it is backdated at the moment. The Bill changes that, which provides the incentive that is not there at the moment.
Baroness Taylor of Stevenage (Lab)
I understand what the noble Lord is saying, but putting a backdated rent increase burden on people who are challenging the rent because they cannot afford it in the first place would just exacerbate the problem, rather than make the proper ability to challenge their rent increase available and accessible to them, which is part of the aim of the Bill.
Lord Carter of Haslemere (CB)
If you take a civil case to the court and you win your appeal, the appeal court grants you your rights from the date they arose. Your rights are always backdated to the date the rights arose, so this is a dramatic departure from normal court procedure.
Baroness Taylor of Stevenage (Lab)
I accept that it is a dramatic departure, but it is done for a good purpose. We put the provision in the Bill to prevent tenants being penalised for challenging their rent at tribunal by having a backdated increase.
Lord Cromwell (CB)
Is the Minister saying that a tribunal that sets a rent at a level which it considers to be right is setting a penal level of rent? She is saying that tenants would be penalised if rent is backdated to the date when it should have occurred. The implication, therefore, is that the tribunal is setting a penal rent. I cannot think that that is what is intended.
Baroness Taylor of Stevenage (Lab)
I am not saying that; I am saying that the penalty for the person challenging their rent would be in the debt that accrued from the backdating. That is the point I was trying to make.
Amendment 97 is a consequential amendment linked to Amendment 94 which aims to ensure that, where a tenant challenges a rent increase notice at the tribunal, any rent increase determined by the tribunal would be backdated to the date on a Section 13 notice. I have already set out why the Government do not agree tenants should be forced to pay backdated rent.
Amendments 96 and 98, in the name of the noble Lord, Lord Carrington, should be considered in the light of his Amendment 103. Amendment 96 would allow a rent increase to be backdated to the date of the notice. It would, however, limit this to cases where the tribunal has determined that the rent increase proposed by the landlord is the same as or lower than the market rate.
Amendment 98 would similarly change when the rent increases apply after the tribunal determines a rent. It would mean that, if the tribunal finds that a landlord’s proposed rent is lower than the market rate, the rent increase would take effect from the date the landlord originally intended. However, where a landlord has proposed a rent above the open market rate, it would apply from a date on or after the date of the tribunal hearing. I understand the noble Lord’s concerns about the potential for the courts to be overwhelmed. We have had extensive discussions on this capacity issue.
I believe I answered his points around the ECHR in response to the noble Lord, Lord Pannick, last week, but I am happy to take that back to the department’s lawyers again. I have also responded previously to the noble Lord’s points about the impact on build-to-rent investment. The Government do not agree that tenants should be forced to pay backdated rent.
I have more amendments to get through, but I see that I am out of time. If noble Lords are happy for me to carry on, I will.
Amendment 99, also tabled by the noble Lord, Lord Carrington, seeks to backdate a rent increase to the date of the notice. It provides that tenants may either pay the backdated rent in one payment or in 12 equal instalments. Amendment 104 is consequential to Amendment 99 and seeks to define the terms “the uplifted rent” and “the rent difference”. Amendment 101, tabled by my noble friend Lord Hacking, similarly proposes that tenants pay a backdated rent increase in equal instalments for a period of up to six months after the date of the tribunal’s determination. I am sympathetic to the underlying premise of these amendments, which is that tenants might face financial problems in paying a rent increase approved by the tribunal. Although these amendments seek to smooth out the impact of an increase, it is much better to remove the cause of the problem, which our current policy achieves by ruling out backdating in the first place. I therefore ask noble Lords not to press these amendments.
Amendment 100, tabled by my noble friend Lord Hacking, seeks to remove the tribunal’s ability to delay a rent increase for up to two months after the date of determination in cases of undue hardship. The Government strongly believe that being able to defer rent increases for a short period is a necessary protection for renters. This will give them time to adjust and consider their options, while ensuring that the landlord can achieve market rent. I therefore ask my noble friend not to press his amendment.
Finally—noble Lords will be pleased to hear that—Amendment 106, tabled by the noble Baroness, Lady Thornhill, would require the Secretary of State to carry out a consultation on the resources available to the First-tier Tribunal (Property Chamber). My department has worked closely with His Majesty’s Courts & Tribunals Service and the Ministry of Justice throughout the formulation of this Bill. This collaboration has carefully considered implementation and resourcing issues. Our shared aim is that the tribunals are well equipped to implement our reforms effectively, as I have repeated a number of times during our debates. Work is progressing in the First-tier Tribunal (Property Chamber) to increase capacity, as well as to review resource and working practices. The noble Baroness’s amendment understandably reflects the need to ensure the tribunals are equipped to implement these reforms, but the proposed consultation would not provide any new information beyond the work that is already under way. I therefore respectfully ask the noble Baroness not to press this amendment.
Baroness Scott of Bybrook (Con)
My Lords, as expected, this has been a technical and densely packed group of amendments, with numerous contributions from noble Lords who clearly possess deep knowledge of this Bill. I have found their insights invaluable, and I trust the Government will reflect seriously on the points raised today.
I thank the noble Baroness, Lady Warwick of Undercliffe, for rightly seeking clarification on the mechanism available to social housing providers to increase rents. Amendments 80, 80A, 82 and 83 are thoughtful probing amendments and we thank the noble Baroness for bringing these to the attention of everyone in the Committee today. This is an important issue for both social housing providers and for tenants living in social housing. Clear rules and understandable mechanisms build trust and transparency. Furthermore, a standardised approach, underpinned by clear and consistent rules, ensures confidence in the process that governs rent and tenancy management. The Government have a duty to communicate these mechanisms, not only to this House but to those forced to respond to this incoming legislation. In fact, I would argue that the latter is much more important. As we have repeatedly noted throughout Committee, this legislation is technical and detailed, and so the Minister has an obligation to clarify. I trust she will welcome any further amendments brought forward with the purpose of testing and probing the Government’s rationale and decision-making process.
I now turn to Amendment 87, tabled by the noble Baroness, Lady Wolf of Dulwich. Any amendment brought to the attention of this Committee which seeks to alleviate the pressures on the tribunal process must be considered by the Government. This is an important area, and the noble Baroness should be commended for putting forward ideas to help filter out appeals which simply do not have any prospect of success. Prolonged uncertainty is not good for the landlord or the tenant. Delays in resolving disputes will keep both parties up at night and add to the pressures of everyday life. Additionally, backlogs will reduce confidence in the system and many will lose faith with that service as a legitimate protector of their interests. This is not an exhaustive description of all the issues arising from an overburdened system, but it highlights the serious risks we face if these concerns are not addressed.
The noble Baroness, Lady Thornhill, rightly highlighted the critical issue of resourcing within the tribunal system. This is a thoughtful amendment which clearly commands support. Ensuring that the tribunal system is adequately resourced is vital. The Secretary of State must take responsibility for ensuring that their own policies do not undermine or overwhelm the very system intended to deliver justice and security for tenants and landlords alike. My noble friend Lord Howard of Rising, among many others, spoke with his usual vigour and clarity on this issue. On many issues in Committee he has shown his understanding that it is only by striking the right balance in this legislation—I will say it again—that we can we hope to achieve an efficient and effective rental market for the future.
Amendment 88, tabled by the noble Lord, Lord Hacking, seeks to reduce the backlog by adding a drawback or consequence of taking a case to tribunal if unsuccessful. I recognise the determination of the noble Lord to take the pressure off the tribunal system.
Amendment 90, tabled by the noble Baroness, Lady Jones of Moulsecoomb, raises an interesting probing issue in relation to government grants. I was interested to hear that the Minister is going to look into this further. I welcome that and will be interested in what she comes forward with.
I turn to Amendments 91, 94, 97 and 100, tabled by the noble Lord, Lord Hacking. The Committee is right to consider amendments that tighten up and clarify the timing of when a rent increase or notice becomes effective. The Committee is also right to explore options that ensure a predictable timeline for this process, and I thank the noble Lord, Lord Hacking, for tabling these amendments.
Lastly, I briefly allude to the contribution of the noble Lord, Lord Carrington. Amendment 104 highlights the importance of clear, conscious definitions within law. Definitions provide certainty and consistency in application, and every Bill should have well-defined terms. Our courts rely on this, our public bodies rely on it and those who are expected to follow the law deserve it. I hope that the Minister agrees with this principle.
Next, Amendment 99, tabled by the noble Lord, Lord Carrington, is a useful probe into rent tribunals. To remind the Committee, this amendment would ensure that, if a rent challenge were unsuccessful, the reviewed rent would apply from the date that the increase was due to take effect, rather than the end of the legal process. We must consider the incentives and signals that the legislation sends to tenants, but additionally we must seek to protect landlords from financial losses caused by legal delays firmly out of their own control. I listened to what the Minister said on this, but we will be bringing this back for further discussion in the future. Across the Committee, we must consider proposals that ensure that tenants are not hit with sudden, unaffordable lump sums, but also ensure that landlords are properly compensated for a lawful rent increase. This amendment would bring this consideration front and centre, and I thank the noble Lord, Lord Carrington, for speaking to it today.
Briefly, Amendments 96, 98 and 103, tabled by the noble Lord, Lord Carrington, are interesting and quite thoughtful proposals. Where it is possible to do so fairly, rent should indeed be determined at the open market rate. Ensuring that rents reflect genuine market conditions helps to maintain balance and fairness in the market, for both tenants and landlords.
This was a packed and detailed group, with numerous proposals from across the Committee. Not only did I find it a fascinating debate, but once again it highlighted noble Lords’ understanding of the key issues facing the sector. I hope the Minister is listening carefully to the knowledge and expertise across this Chamber and can therefore help the Government make this a successful Bill at the end of the process. We have to ensure that we can enhance the availability of houses, alleviate the burden of unaffordable rents and really deliver security for tenants. Right across the Committee, we agree that renters need a better deal, but I fear that this group is yet another part of the story and, as it stands, the Bill is not quite the answer. However, at this time, I wish to withdraw my amendment.
Lord Hacking
“(d) a lease clause prescribing a rent increase in line with the Retail Price Index or the Consumer Price Index two months prior to the date of the rent increase coming into effect, subject to a minimum of 3% and a maximum of 8%;”
Lord Hacking (Lab)
My Lords, we are moving to a new subject in the taking of the Bill through Committee. This amendment concerns the process of assessment. I am sorry that so many noble Lords are leaving at this juncture, but I will go on, on the basis that I have been asked to move the amendment. It is directed towards the assessment of rent increases under the open market rent test. What I am seeking to do in this amendment is to limit these rent increases to the retail prices index and the consumer prices index. That merely provides, I suggest, a brake on the assessment of rent, which I hope the noble Baroness, Lady Thornhill, will like—she is nodding, which is very nice to notice—because she was concerned about moving into the open market rent and the unfair impact that could have on tenants’ rents.
Baroness Janke (LD)
My Lords, as colleagues have already said, the Liberal Democrats have long campaigned to abolish no-fault evictions. We support the measures in this Bill, particularly the provisions by which tenants can challenge rent increases. We support amendments in this group that seek to establish a fairer basis for rent increases and would prevent excessive and unpredictable increases, the severe impact of which may cause eviction and homelessness. We also support the amendments in this group that will reduce the need for tribunals to hear challenges from tenants. We feel that there is a fundamental problem with the concept of market rents, which are currently calculated by looking at a range of advertisements. This does not provide an accurate assessment of the actual rents that people are paying.
One-third of private renters are already paying half or more of their income on rent, well above the commonly accepted affordability threshold of 30%. Measures to stabilise rents within tenancies are essential to ensure that the Bill delivers the secure, stable system it promises, as well as empowering tenants to challenge unfair rent increases that result in unwanted moves.
For many renters, though, a rent increase is as good as an eviction notice. Without an established index that outlines what a fair increase looks like, the First-tier Tribunal will remain effective in supporting renters.
Rent increases must not become the new no-fault eviction. Over 300,000 renters moved last year because of a rent increase they could not afford; that is more than 900 renters a day. Market rent is an artificially high indicator for judging what an appropriate rent should be. The database proposed in the Bill, once established, would be able to capture what rents are actually being paid. This could then establish benchmarking for an appropriate rent, rather than having the traditional understanding of market rent.
Amendment 77 in my name reflects Liberal Democrat policy, which would limit any in-tenancy increase in rent to a percentage of the Bank of England base rate. This is different from inflation and other indicators that are often used. Landlords do face increasing costs from time to time, but the increases they face and want to pass on to tenants are generally more likely to be related to the cost of interest on their borrowing. Therefore, that is the appropriate measure for landlords to look to and should be considered appropriate for a rental increase. It is also often much less than the much more volatile changes in the market rent that are related to inflation.
We would relate rent increases to much more realistic, modest and accurate reflection of what landlords’ expenses are and use the Bank of England base rate as an appropriate limit on the amount of rent increase and any in-tenancy rent increase. That is the rationale behind this amendment.
Lord Best (CB)
My Lords, I rise to speak to Amendment 79 and the related Amendments 84 and 85 in my name and the names of the noble Lord, Lord Young of Cookham, and the noble Baronesses, Lady Grender and Lady Thornhill. I believe these amendments would overcome an inherent defect in the Bill, both for renters and landlords, making this a rare opportunity for amendments with appeal across the piece.
The amendments seek to protect tenants from unpredictable and unaffordable in-tenancy rent increases, but they also have distinct benefits for landlords. Together, the amendments would establish a fair basis for in-tenancy rent increases for a fixed period. As with the earlier amendments in this group from the noble Lord, Lord Hacking, and the noble Baroness, Lady Janke, the amendment would restrict rent increases to an index of inflation: in this case, either the consumer price index or an earnings index. However, in these amendments, the indexation is limited to four years, countering the concern that rents will be controlled. After four years, a market rent—if necessary decided by the First-tier Tribunal—would be allowed.
These amendments address the central issue of renters’ security, which lies at the heart of the Bill. Tenants need to know that their rented property is their home and they cannot be forced to move out by a massive rent increase. As the Housing Minister in the other place, Matthew Pennycook, said at the Bill’s Report stage in the Commons:
“Once section 21 evictions are done away with, unscrupulous landlords will no doubt attempt to evict tenants who assert their rights by means of extortionate rent rises”.—[Official Report, 14/1/25; col. 259.]
The Renters’ Reform Coalition and Shelter have campaigned assiduously for in-tenancy rent increases not to become a means of eviction by price.
The Bill’s remedy is to place a requirement on tenants to take their case to the First-tier Tribunal to set a market rent that cannot be exceeded. I argue that this whole First-tier Tribunal arrangement is a highly unsatisfactory mechanism for settling on appropriate rent levels. For a start, the outcome of tribunal hearings is unpredictable and sometimes arbitrary. Deciding on a market rent is an art, not a science. Sometimes the tribunal has accepted a case made on the basis of the asking rents advertised on Rightmove and Zoopla. Sometimes, however, the tribunal has explicitly dismissed the use of these asking rents, since there is no knowing what relationship actual rents have to the initial asking rent. Moreover, it is common practice for in-tenancy rent increases to be at lower levels than the open market rents for new tenants because landlords sensibly wish to keep their existing tenants.
There are other drawbacks to the Bill’s use of the tribunal route to determine a reasonable rent increase. First, this mechanism depends upon the renter actually taking their in-tenancy rent increase to the tribunal. This can be a daunting requirement for the renter. As Generation Rent has pointed out, very few tenants have any knowledge of the FTT. Even where renters are fully cognisant of their legal rights, many will be reluctant to go down this road, as doing so is likely to mean falling out with the landlord and negatively affecting the relationship. Taking their case to the tribunal will often involve hassle and expense, particularly if they are to present their case in person. It may require travelling a considerable distance and taking time off work, and the process itself may be intimidating. The whole business is fraught with uncertainty and anxiety.
Secondly, assuming the process is followed, the market rent determined by the tribunal may still mean that the renter faces an alarming increase. A recent Zoopla report shows market rents for new lets are 27% higher—£270 per month—than three years ago, which is an increase well above earnings growth. Many commentators are suggesting that shortages may push market rents much higher in the years to come.
The noble Lord, Lord Marlesford, mentioned the guideline of an affordable rent being 30% of take-home pay, but this is only a guideline and not a requirement of any kind on landlords. Sadly, a lot of tenants are paying over 40% of income on rent as the Affordable Housing Commission, which I had the pleasure of chairing, has shown. At that level of income-to-rent ratio, there is always the danger of arrears, let alone hardship to the renter.
From the landlord’s perspective, I suggest that the proposed regime based on appeals to the First-tier Tribunal is highly unsatisfactory. Those representing landlords have argued that large numbers of tenants could be tempted, as we have heard today, to take proposed rent increases to the FTT in the knowledge that they, the renters, have nothing to lose. They cannot be asked to pay more than the level the landlord proposes and they might be successful in arguing that the rent should be less. In any case, the process would save them money by delaying any increase until after the tribunal hearing, as we have heard, which could be months ahead.
A number of your Lordships have made the point that the number of cases referred to the tribunal could clog up the system and delay any decision being taken, at an ongoing cost to the landlord. Another way of looking at this, among the many that have been suggested, is that even if 99% of tenants accepted their landlord’s proposed rent increase, that would leave 50,000 cases still going to appeal. There is no way the FTT could deal with these numbers.
This overwhelming of the system seems more likely if rumours are true that specialist firms are planning to offer a no-win no-fee service, paid for by sharing the rental savings, to handle cases at tribunal hearings on behalf of renters. So, for both landlord and tenant, the dependency on securing a decision from the First-tier Tribunal—theoretically every year for every tenancy—is fraught with danger and potentially undermines the whole Bill.
I know the Government are rightly worried that introducing any form of rent control would have a significant detrimental impact, as history and international comparisons suggest. These Amendments 79, 84 and 85 do not undermine the overriding market principle; instead, they introduce a mechanism that removes the hazards of appeals to the First-tier Tribunal and provides the certainty of indexation for in-tenancy rent increases. After four years of occupation, the rent can be reset at the market level, determined by appeal to the FTT if necessary. Since most renters move within a five-year period, the amendment would ensure that rents are predictable throughout the great majority of tenancies.
The amendment adopts the same rent stabilisation proposition and indexing of increases devised by the Renters’ Reform Coalition, but the amendment limits this inflation indexing to a four-year period. There may be exceptional circumstances in which indexing a rent, rather than going for a market rent, could cause hardship or financial difficulty for the landlord. A case might be where the landlord spends substantial sums on upgrading the property and needs compensation from higher rents, or has borrowed heavily—probably with a buy-to-let mortgage—and needs to increase rents by a bigger margin to satisfy the lender’s requirements, driven in part by the rules of the Prudential Regulation Authority. To cover these relatively rare cases, an additional amendment could place the obligation on the landlord to go to the tribunal, rather than the tenant, to seek a setting of a market rent, instead of applying the usual indexation.
Lord Wilson of Sedgefield (Lab)
Can I ask the noble Lord to bring his remarks to an end? He has spoken for well over 10 minutes.
Lord Best (CB)
They introduce an arrangement that all parties could accept as a distinct improvement on the Bill’s reliance on appeals to the tribunal.
Baroness Jones of Moulsecoomb (GP)
My Lords, I signed Amendment 77 because it is a really sensible amendment. My Amendment 275 goes a little further. If I was enthusiastic about my Amendment 90, I am delirious about my Amendment 275.
Back in 2001, I was the Green Party member of the London Assembly. Our group persuaded the Mayor, Ken Livingstone, to set up a Living Wage Commission. It looked at what it really cost to live in London, rather than what the minimum wage paid. The commission then went about the work of persuading employers to sign up to a living wage, rather than the inadequate minimum wage. It was a real success, one that Tory and Labour mayors have kept going. It used common sense and facts instead of relying on market forces, and many people had easier lives as a result.
I now suggest a living rent commission to do a similar job, with local mayors given the power and discretion to bring in rent controls that match the conditions in their area. We need this simply because the privatisation of the rental market since the 1980s, with a decline in social housing and the right to buy, has a been a disaster for poorer people and, of course, young people. We have a two-tier economy in which the rich get richer and the rest of us barely manage to tread water. Because the rich can buy only so many yachts and overpriced handbags, they spend their money on buying assets, which often means properties. When BlackRock buys thousands of properties for rent in the UK and another US investment firm, Blackstone, spends £1.4 billion doing much the same, what chance do a couple earning an average income have of getting on the property ladder? We have a younger generation working hard but being sucked dry every month by a rental system that benefits the rich and big corporations.
The Resolution Foundation found that private renters were spending on average a third of their income on housing costs. This is getting worse rather than better, and it is not just a London problem. Rightmove reports that asking rents outside London have risen 60% since 2020, far outstripping inflation and wage growth.
Rent control is an established part of private renting in 16 European countries, so why not here? If the Government want to save money, bring in rent controls. Between 2021 and 2025, the Government are set to spend £70 billion of taxpayers’ money on housing benefit, with an additional £1.74 billion annual spend on temporary accommodation. Why not save money on housing benefit and use that to build more social housing, and reduce the millions of pounds spent every month on temporary accommodation? I have heard a lot from this Government about affordable housing; I have not heard quite so much about social housing. We need to bring it back into use.
Creating a living wage in London made sense because people in low-income jobs spend nearly all they have on just getting by, and by giving them more money you benefit the local economy because they go out and spend it. By contrast, the more money that goes to rich people and corporations, the more that money forces up the price of homes as they outbid everyone to buy more assets.
The Government can break that cycle by establishing a living rent. When one in five private tenants are spending half their wages on rent, our economy is not working for everyone. The Government are doing their best with this legislation, but if you want real change then we need big ideas—like a living rent.
Lord Young of Cookham (Con)
My Lords, I do not share the delirium of the noble Baroness, Lady Jones, for the reintroduction of rent controls, not least because I was a Housing Minister in the 1979-83 Parliament, which dismantled the rent controls that had strangulated the private market.
I want to add a brief footnote to the excellent speech made by the noble Lord, Lord Best, on Amendments 79, 84 and 85. Of the many reasons he gave, the last one attracted me. I see it as avoiding all the problems that arose in the last debate on the Government’s proposals for dealing with rent increases, in which there is no incentive for the tenant not to appeal. We all listened to the Minister’s defence of what is proposed. I may have misread the mood of the Committee, but I am not sure she carried the Committee with her.
The noble Lord, Lord Best, set out the reasons for avoiding overloading tribunals with appeals by inserting a formula for rent increases for four years. Other amendments propose different formulae. In the other place, the Minister explained that he wanted to avoid rent controls. I fully understand that institutional investment will be deterred by the reintroduction of rent control, which effectively nearly ended the private rented sector. The proposals in the amendment from the noble Lord, Lord Best, to restrict increases to RPI to four years, strikes the balance between rents falling out of line with market rents and the regime proposed in the Bill, with all the risks that were referred to in the last debate. Over four years, it is unlikely that there will be a serious deviation between RPI and rents.
I did a little research on this; the average annual rent inflation in the UK from 1989 to 2023 was 3.71%. I recognise that figure may have been depressed by rents in the public sector. The long-run average in RPI is 3.6%, so there is not a lot of difference between those two figures.
My final point, which was touched on by the noble Lord, Lord Best, is that the Minister and I are at one in wanting long-term institutional investment in rented accommodation. In our last two exchanges at Oral Questions, she has confirmed that we are at one on this. The institutions want the rent to go up each year, either in line with RPI, as proposed in the amendment, or in line with market rents, as in the Bill. They do not want reasonable increases to be regularly challenged by tenants who can simply defer any increase by appealing. What consultations has the Minister had with the pension funds, insurance companies and long-term institutional investors about whether they prefer the proposal from the noble Lord, Lord Best, or want to live with all the risks in the Bill? She may not have the answer at the moment, but I hope she will consult with those people, whom we want to invest in housing, and see which of these alternative measures they are in favour of.
Baroness Grender (LD)
I am delighted to be supporting the noble Lord, Lord Best, and I wholeheartedly agree with his perceptive analysis of this Bill. We on these Benches enthusiastically support the fundamental principles of the Bill and the Government’s commitment to redress the imbalance between landlords and tenants. I welcome the elegant bridge the noble Lord has built between landlords and tenants on the issue of rent.
I share the disappointment of the noble Lord, Lord Hacking, that there was an emptying of the Chamber. I see this group of amendments as a critical part of the discussion about what can help—in particular, with the tribunals. I look forward to us welcoming back shortly the people who are very interested in pets.
As the noble Lords, Lord Best and Lord Hacking, and my noble friend Lady Janke have so clearly articulated, there is a fundamental challenge that the Bill in its current form does not adequately address: the profound and escalating crisis of rent affordability. While the Bill introduces welcome measures on security and standards, it risks falling short of its aims unless the issue of rent is resolved. Rent inflation continues to far outstrip both wage growth and inflation, and pushes millions of renters into precarious situations, as described by my noble friend Lady Thornhill, because the highest cause of homelessness is eviction from the PRS. According to the Joseph Rowntree Foundation, more than a third of private renters are in poverty after housing costs, and according to Generation Rent, half of all private renters have no savings at all. We are talking about people who can ill-afford any shift, however small a percentage.
The Bill commendably aims to abolish Section 21 no-fault evictions. This is a crucial step towards greater security, but, as the Renters’ Reform Coalition—I thank it for its briefings—and others have rightly highlighted, without adequate protection against excessive rent increases, landlords can still force tenants out through eviction by price. This is effectively creating a Section 21 process by the back door. The amendments in this group are reasonable and measured in their aim to resolve this issue.
I am afraid that we do not go as far rent control on this—with apologies to the noble Baroness, Lady Jones. It would be a shame if this is perceived as a shift in that direction and that becomes the focus of the debate right now, because I genuinely believe that, with the amendments in this group, we are moving towards a solution—whether it is the Bank of England base rate or by the CPI—by attaching some kind of mechanism that helps to ensure that rents go up proportionately but fairly for everyone. By all means, we can discuss the Scotland experience yet again, but I feel it is not necessarily relevant to what is trying to be achieved here.
The primary mechanism in the Bill for tenants to challenge what they perceive as unreasonable rent increases is through application to the First-tier Tribunal. While the intention behind this is sound, the approach places the onus squarely on the tenant. I recognise that the highly competent noble Lord, Lord Young, is able to fill in a form at speed and be extremely muscular and assertive in riding the waves of any opposition. However, for countless renters—I think of a friend who is a renter who is holding down three very low-income jobs, does not have a smartphone and is trying to maintain a rent to keep her two children at primary school—the very concept of them feeling that they can assert themselves thanks to the changes made by the noble Lord, Lord Maude, to what is on a website is for the birds. Navigating a tribunal process is, for many, a daunting prospect—not for the people here who have described it in the last group of amendments but for the people out there who are renting and who are on the lowest incomes and often at the lowest ebb in their lives. They may lack the necessary means, confidence, awareness of their rights or resilience to engage with what is potentially—and feels to them—a very complex and time-consuming legal mechanism, however speedy it was for the noble Lord, Lord Young.
The Earl of Lytton (CB)
My Lords, as this is the first time I have spoken at this stage of the Bill, I ought to declare an interest. I am a landlord of private rented residential property, but I think that all—both—the renters concerned would agree that I am not somebody who sets out to extract the last penny from them; in fact, quite the opposite. More particularly, I stand here with some 50 years’ professional experience of property, not least of the private rented sector.
The noble Baroness, Lady Grender, is the cause of me getting to my feet—I give her that credit. She referred to rent affordability as security. Although I get that particular line of argument, the two things differ somewhat. All the amendments in this group relate in some way to control of rent, something the Government have always said they would not do. I listened very carefully to my colleague, the noble Lord, Lord Best, but say to him that a deferral or reduction in the receipts on a like-for-like basis is, none the less, a form of rent control. I do not think I can make any concession on that point. The noble Lord, Lord Young of Cookham, said that the amendment of the noble Lord, Lord Best, was less bad than what might be in the Bill. I am not sure that that particular line of argument commends the broader principle to me in general.
A recurring theme is this business of the affordability of rent to renters, but that actually is not the purpose of the private rented sector; that is the purpose of the social rented sector. If we are somehow transferring something which occurs in and is a feature of the social rented sector to the private rented sector, then a much bigger debate needs to take place—apart from this Bill—on precisely what that means. I do not believe that that debate has been entered into, nor do I believe that there is any substantial investigation or research into what that might mean in practice.
If we are in fact faced with that change, I predict the same outcome as occurred after 1965. The noble Lord, Lord Young of Cookham, referred to the rent control of the 1960s and his role in undoing that. I mentioned at Second Reading that the combined effects of security of tenure and rent control in the 1960s caused a fall from 30% of housing being in the private rented sector in 1961 to about 10% some 30 years later. Even after that freeing-up process which the noble Lord referred to, it was still under 10% in the year 2000. That is how durable the process is. It is very difficult to get confidence back once it has been severely damaged.
We must also bear in mind the progressive changes in the tax treatment of private rented sector landlords and what that has meant. It may be different when it is being dealt with at corporate level, when all sorts of things can be offset against a larger pool of property. For the 80% of private rented sector landlords who have five or fewer residential units, that does not look like the same thing at all. Ultimately, the test will be whether we generate competition in the market through an increase in supply. However, everything I have heard this afternoon, particularly from those who tabled the amendments in this group, has been about guarding against precisely that outcome that would be a failure of the intentions that sit behind this Bill. So we have to be very careful.
I do not take a moral stance of any sort on this. I stand before your Lordships as a technician, not a politician. I come with an economic view. However, if we are making a transfer of liabilities from one sector that has a considerable amount of government, financial and in many cases registered provider charitable support, to the private rented sector, which does not have that support, I predict a very significant failure in the outcomes of this Bill.
That would be a tragedy, because this Bill contains an awful lot of stuff that is very good indeed, I would like to see a successful private rented sector. I would like to see renters treated with humanity and civility and not exploited endlessly in the way that they have been. However, if we end up with reduced supply, and with those who show no civility or common decency towards their renters somehow still there, operating in some subculture or other, we will not have succeeded in dealing with this matter at all.
I wrote to the Minister recently. She has not had a moment to reply. I cast no aspersions at all, because she is extremely busy with this Bill. However, there is a need to look closely at the probable outcomes. If we do not, we will walk blindly into something that we would rather had not happened.
Lord Marlesford (Con)
I speak on this Bill from the rural perspective, which is very different from the urban perspective. The rural perspective is much more concerned with communities. In the fixing of rents, this is very much taken into account by most rural landlords. Affordability is one method: the 30%. Some return on capital is needed to keep the show on the road. However, taking account of individual circumstances is crucial.
Where there is talk about tying rents to inflation, it is very sensible that all leases make clear that, when rents are assessed annually—which seems to me a reasonable level—that should be on the basis of taking account of inflation. When the inflation is very high, it would be quite wrong to impose a full level of inflation on a tenant. We have had double-digit inflation in the last three years and those of us who were alive then will never forget 1975-76, when we had inflation of 25% per year, for goodness’ sake. Inflation is a dangerous animal. You should use it as a guide, but over a period. Also, you take account of individuals and their contribution to the community in which they live. After all, a rural community is about people in a much greater way than an urban community can be. I do not know whether the Minister has thought about this, but I would hope that she would make reference to what might work better in a rural community than in an urban community.
I very much agreed with my noble friend Lord Young, one of the liberators from a system which had almost destroyed the private rented sector. The other person who I have huge respect for is the noble Lord, Lord Best, who I have known for a very long time and whose judgment, knowledge and experience provide a very useful guide. I recommend that the Minister should have quiet, private discussions with people like that on the practicalities, because this Bill is getting knotted up in practicalities. It is easy to write it all down in clauses and subsections, but how it works will depend on human beings. Governments have a role. As a Burkean Conservative, I believe that the role of a Government is to hold the ring, to prevent people from being ill-treated in the community. It is people who matter.
Lord Thurlow (CB)
My Lords, this is my first contribution in Committee, so I declare my interests as the owner of a residential property in receipt of rent and as a practising chartered surveyor for some 35 years. I would like to stop for a moment and consider why rents are so high. Well, it is simple. It is supply and demand; we have not got enough, because there has not been sufficient building since the evolution of the AST regime that we heard about, which began to encourage investors back into the market.
British institutions—life companies, pension funds, insurance companies—used to own millions of pounds-worth of private rented accommodation in the UK. The post-war rent restrictions made it uneconomical and they dumped it, as we have heard from the noble Lord, Lord Young. It took many years for that to come back. The investors returned slowly with the AST and now we are interfering with it all again.
I am not objecting to that interference; I think ASTs needs updating. But the important thing to remember, or point out to the Committee, is that there is a vast amount of institutional money lying in the wings waiting to invest in private rented property. It is there, it is identified, some of it has been spent, and it is going to create tens of thousands of units of private rented accommodation. We are talking not about tens of millions but billions of pounds, and a lot of it is foreign investment. Institutional investment is the holy grail of generating high-volume addition to the inventory.
Lord Jamieson (Con)
My Lords, this has been a good debate. Rental costs are a serious problem, and we know that the high cost of housing, coupled with other pressures, poses real challenges for hard-working families across the UK. The Ministry of Housing, Communities and Local Government’s English Housing Survey 2022-23 found approximately 1.2 million private rented households reporting it difficult to pay their rent. That represented 29% of private rented households when the survey was conducted. When nearly a third of tenants find it difficult to pay their rent, there is clearly a problem. When we were in government, we took decisive action on the cost pressures faced by hard-working families across the country, and we zeroed in on the most important issue of all for households: inflation. By the time this Government took office, inflation was back below target. However, following the Chancellor’s Budget last year, inflation is, concerningly, now above target.
It is against that backdrop of cost pressures that these amendments have been tabled, and while we do not agree that rent controls are the solution to the problem, we do, however, share the concerns many noble Lords have raised about the cost of renting. As the noble Lord, Lord Thurlow, and the noble Earl, Lord Lytton, raised in the debate, supply is a fundamental part of the issue. We believe an adequate supply of rented accommodation is the way to address the cost of renting but, as we have warned in previous debates, the Bill risks driving landlords out of the sector and not attracting some of those institutional investors that could make a real difference if the quanta were increased. Decreasing the supply of rented accommodation at a time when demand is already high and rising will lead only to higher rents.
We also know that where rent controls have been tried, they have failed; and even the Minister has previously raised in Committee the impact of rent controls in Scotland, although, to be clear, we believe that rent controls are just part of the problem in Scotland. The SNP’s failed experiment with unbalanced renters’ reforms and rent controls in Scotland is a case worth dwelling on; there we have seen stifled supply and higher rents. That said, the Government must address the serious concerns raised by noble Lords across the Committee and listen to those tenants who are struggling with the cost of renting.
Last month, the Lord Chancellor warned that despite further court sitting days being announced by the Ministry of Justice, the sad reality is that the backlog of cases will still go up. It is right that we ask questions about the additional burdens that Clause 8 will place on our already overloaded courts and tribunal system. Can the Minister confirm what additional resources will be provided to the appropriate tribunals, so they have the means to cope with the increased number of cases brought before them under Clause 8?
Amendments 76 and 77 seek to introduce a cap on the increases in rent that can be brought forward by landlords, and we will listen carefully to the Minister’s response to those proposals. I know that the Deputy Prime Minister, the Secretary of State, has put her opposition to rent controls on the record, saying that they
“restrict housing supply, which does not help anyone”.—[Official Report, Commons, 9/10/24; col. 335.]
We agree with the Government that restricting housing supply does not help anyone. Ministers should listen carefully to the concerns we have raised throughout the debates on the Bill.
Amendment 275, in the name of the noble Baroness, Lady Jones of Moulsecoomb, would deliver an entirely separate body to set rules for rent increases. Leaving aside the fact that the noble Baroness’s amendment fails to provide parliamentary oversight, or that there are no clear objectives for the set of rules set by the independent living rent body which she is seeking to establish, and the lack of clarity on the governance of the proposed body, we do not feel that establishing what is, in effect, an additional regulator is the right approach. Our rental sector is already subject to heavy regulation and the Bill places additional burdens on the sector. As the noble Lord, Lord Young, said, we do not wish to strangle the market. For that reason, I am afraid we cannot support this even more onerous measure which the noble Baroness is proposing.
Amendments 79, 84 and 85, in the name of the noble Lord, Lord Best, are perhaps the most pragmatic of the amendments in this group, and I understand why he has tabled them. We will listen carefully to the Government’s response to his amendments and continue to work on this part of the Bill before we proceed to Report. It seems clear to us that now is not the time to impose additional burdens on our tribunals—when, by the Government’s own admission, backlogs are already rising. Ministers need to take a long, hard look at this part of the Bill, if we are to deliver a Bill that strikes the right balance on the rights of tenants and landlords without adding to the growing backlog and without discouraging investment in the sector. There are serious questions for Ministers to answer in all these areas, and we look forward to hearing the Minister’s reply to this group.
Baroness Taylor of Stevenage (Lab)
I am very grateful to all noble Lords. I agree that this is a very important group, and I was sorry to see other noble Lords leaving the Chamber, because this was a very important discussion.
I thank the noble Baronesses, Lady Janke and Lady Jones, and the noble Lords, Lord Hacking and Lord Best, for their amendments, and thank all noble Lords who have spoken: the noble Lords, Lord Thurlow, Lord Marlesford, Lord Jamieson and Lord Young, the noble Baroness, Lady Grender, and the noble Earl, Lord Lytton, to whose letter I have replied. It is in the post, so I have signed it off, and the noble Earl should receive it shortly.
As I have stated previously, and I am going to restate it, and the Deputy Prime Minister, as the noble Lord, Lord Jamieson, said, has been very clear about this, our Government do not support rent controls. We have considered rent regulation within the broader context of the private rented sector, and we do not believe that limiting rents in this way leads to positive outcomes. Evidence suggests that so-called first- and second-generation rent controls may disadvantage tenants as well as landlords. They can have a long-term negative impact on housing supply and discourage investment in the sector, leading to declining property standards. Subtler forms of rent control—second- or third-generation rent controls—have differential impacts on different groups, typically benefiting settled and better-off tenants more than those looking for a home or needing to move.
Academic studies from countries such as Sweden and Germany, and from places such as San Francisco and Ontario, show that rent controls can limit supply, discourage investment and lead to declining property standards. The noble Earl, Lord Lytton, referred to early attempts at rent controls and their impact on supply. We simply think that the answer to this is supply generally, and supply of social and affordable housing in particular, rather than putting controls on rents.
The noble Lord, Lord Thurlow, was right to say that my interactions with the financial sector indicate that institutional finance is available for rental property. The noble Lord, Lord Carrington, has spoken about build to rent very powerfully; the finance is there for that. That has the potential to drive the supply that will stabilise rents over time. That is why we do not want to introduce rent controls.
I will start with my noble friend Lord Hacking’s amendments—perhaps he could ask the two tenants to whom he referred to come up with a solution to the Arctic temperature in your Lordships’ Chamber this afternoon. The weather forecasts of a heatwave have been grossly exaggerated in this part of London. On Amendment 76, the Bill as presented to the Committee today seeks to remove the ability of landlords to place rent review clauses in tenancy agreements. The effect of the amendment tabled by my noble friend would be to reintroduce into the Bill a measure allowing landlords to make use of such a clause. To be specific, Amendment 76 would amend Clause 7 to allow for rent review clauses linking rent increases to inflation to be included in tenancy agreements so long as such an increase fell between 3% and 8%. Rent increases made under a rent review clause cannot be challenged at the tribunal. As such, the approach put forward by my noble friend Lord Hacking risks a significant reduction in the protection for tenants, who may not understand the effects of the rent review clause and could have limited power to negotiate these even if clearly articulated. It is likely that the use of such clauses would become standard, in effect taking us back to the status quo, where the protection the tribunal offers is available only to a small number of tenancies.
Furthermore, if the use of standardised rent review clauses became commonplace, there is a risk that this would, in effect, result in a system of de facto rent control. I will not repeat again our position on rent control, but it is worth while, if the Committee will allow me, to elaborate further on why any attempt to use a single metric for calculating rent increases risks unintended consequences. The danger of such an approach is that arbitrary increases prescribed in tenancy agreements could artificially inflate the rent for some locations. For example, in Leeds, rents increased by 2% between January 2024 and January 2025, whereas in Oxford, rents increased by 12% in the same period. CPI for this 12-month period was 3%. The measures contained within the amendment would therefore likely have led to rent increases in Leeds above the market rate, to the detriment of tenants there, and the controlling of rents in Oxford, with all the associated wider issues which we have already discussed. Therefore, I am sure my noble friend can understand why the Government cannot accept an amendment which would remove the right of tenants to appeal rent increases above market rate, risk some tenants being trapped in above-market-rate rent rises, and risk the implementation of de facto rent controls.
Turning to Amendments 79, 84 and 85, I join others in commending the noble Lord, Lord Best, for the clarity of his explanation and for all the work he has done as chair of the Affordable Housing Commission. This is vital work, and I sincerely understand the motivation behind his amendments: that these would limit annual rent increases during the first four years of a tenancy to a percentage calculated by reference to CPI or median national earnings over a three-year period—the noble Lord articulated his amendments much clearly than I could. If either of those things happened, a challenge to the tribunal by the tenant would not be possible.
The first of the amendments from the noble Lord, Lord Best, Amendment 79, would introduce measures into Clause 7 of the Bill which, as I have just set out, would separate the setting of rents from the market rate. As such, the amendment would introduce a form of rent control, and I have already explained our position in the Government towards rent control. The regulation of rents in the form proposed by the noble Lord could have a long-term negative impact on housing supply, discourage investment and lead to declining property standards.
In fact, the introduction of an in-tenancy rent control would create the risk of tenants in this country experiencing what has been seen in Ontario in Canada, where a similar form of regulation has limited the amount by which rents could increase each year for existing tenancies. For example, rental price growth in 2023 was capped at 2.5%, based on the Ontario consumer price index. Analysis suggests that the result of this measure has been higher rents for new tenants, with the impact felt by more mobile groups such as younger people, who are often new arrivals to the rental market. There is also evidence from Ontario that landlords have sought to evict tenants so that controlled rents can be reset at the market level. The risk, therefore, of causing unintended harm to tenants as well as landlords is too large for our Government to accept, even in an amendment as well-intentioned, as I know it is, as that put forward today by the noble Lord, Lord Best. Instead, as the Committee is already aware, our approach is to allow landlords to increase rents annually to the market rate, which represents a strengthening of rent regulation in the broader context of the entire system, including security of tenure, better enforcement and quality standards.
Lord Hacking (Lab)
My Lords, I am about to beg leave to withdraw my amendment, but I would like to reply to my noble friend the Minister and thank her very much for her detailed reply. I did not know about the experience in Ottawa, and I would like to consider that further.
I say quite plainly that I was not seeking to set up a rent control; I was seeking to set up guidance on rent increases associated with the RPI or another financial index. The reason for that was expressed well by the noble Lord, Lord Best, who detailed the problems for the renter in having to go through the process of making an appeal to the First-tier Tribunal and all the difficulties in that. If that can be relieved, we would be doing renters a service. I beg leave to withdraw the amendment.
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
My Lords, on Amendment 89 there is an error in the Marshalled List, which says
“leave out from beginning to end of line 8”.
It should instead say
“leave out from beginning to end of line 7”.
Baroness Scott of Bybrook
Member’s explanatory statement
This amendment would remove the requirement that agreed tenancy rents can only be decreased by the Tribunal, therefore removing the potential incentive for tenants to appeal all rent increases when they would only go down or stay the same.
Baroness Scott of Bybrook (Con)
My Lords, I will speak to Amendments 92, 93, 95, 102 and 105 in my name, which relate to rent controls and caps. I apologise if I repeat quite a bit that other noble Lords have been debating, but I think this is an important issue and I would like to give my own explanation of my amendments in this group.
Amendment 92 in my name addresses an issue of critical concern both to landlords and to the overall functioning of the rental market. The current provision limits the ability of tribunals to increase rent, allowing only for reductions. Let us pause for a moment to consider what such a provision creates. In practice, what incentive does it give to tenants? In essence, this provision incentivises a clear motivation for tenants to appeal all rent increases, as we heard earlier, regardless of whether the increases are reasonable, aligned with market value or necessary. Why? Because they know that the worst outcome for them will be that their rent is either frozen or reduced.
I have tried over the course of our debates on this Bill to understand the Government’s position on many of its provisions. On this provision, I find myself asking who exactly came up with this. Who thought it was fair or reasonable to restrict the ability of tribunals to increase rents while leaving only the option for reductions?
Under this existing framework, tribunals can never increase rents, regardless of the circumstances. Not only does this create a totally imbalanced system within the rental market: more pressingly, how will the tribunals cope? How can we expect the tribunals to fairly adjudicate cases when the scope of their decision-making is so narrowly constrained?
On the issue of tribunal capacity, I once again ask the Minister to assure the House that tribunals will have the necessary resources and capacity to manage the inevitable increase in the number of cases under this new system. If the Minister does not have the figures on this available today, can she commit to writing to me with the details in full? It is essential that we understand how the Government intend to support the tribunals, given the increasing workload and the very real risk of backlogs that this Bill may introduce. I do not believe that it is sufficient simply to introduce this provision without a clear plan for ensuring that tribunals can operate efficiently and without significant delays.
I must ask: is this what we really want? Are we truly creating a fair system if landlords are unable to maintain rents that reflect the realities of the market? At what point do we risk undermining the rental market altogether? If landlords begin to feel that any rent increase, no matter how justified, will result in a tribunal-imposed reduction or freeze, will they not simply choose to exit the market—and what will this do to the rental supply?
To put it plainly, this provision will lead to fewer rental properties, fewer long-term stable tenancies and, ultimately, higher rents for tenants. We cannot ignore the wider consequences of this approach. Amendment 92 seeks to correct this imbalance by giving tribunals the discretion to make a neutral decision based on the facts before them. It would allow the tribunal to increase rents if justified, just as it could reduce rents when necessary. In doing this, we would be creating a balanced system that reflects the realities of the housing market and treats both landlords and tenants fairly.
Amendment 93 addresses another fundamental issue: the ability of tribunals to backdate rent reductions. How can it be fair to require landlords to repay rent that they agreed to in good faith at the start of the tenancy? If a rent increase has been agreed to, how can we justify forcing landlords to pay back significant sums retrospectively? The provision does not just destabilise the relationship between the landlord and the tenant; it undermines the entire principle of contractual fairness. If landlords face the risk of backdating payments, why would they agree to any rent increases at all? And what happens to trust between landlords and tenants when rents can be altered retrospectively? The solution is simple. Amendment 93 would ensure that rent reductions cannot be backdated, promoting stability and fairness.
Amendment 95 ties directly into this. It addresses the delay of rent increases by tribunals. How can we justify automatic delays to rent increases when those increases are fair, reasonable and in line with market conditions? This provision creates an incentive for tenants to appeal rent increases simply to delay them. Of course tenants would do this—if they know that they can delay rent increases for months or even longer, regardless of whether the increase is justified, why would they not do that?
The reality is that the current system encourages tenants to use the tribunal process as a delaying tactic, even when there is no real case against the rent increase. What does this do to landlords, who rely on these rent increases to cover rising costs, maintain their properties and meet their financial obligations? What happens to them when the tribunal can, at any time, delay a rent increase without a justifiable reason?
I therefore ask the Minister how the Government expect landlords to respond to this. Can she explain why we are encouraging tenants to delay rent increases when the increases are reasonable and necessary? Does she not see that this provision disincentivises landlords from entering or remaining in the rental market at all? If we allow this to continue, the only winners will be tenants who exploit the system. Landlords will be left with fewer options and fewer incentives to maintain or improve their properties. At what point do we risk irreparable damage to the rental market?
Amendment 95 seeks to correct this imbalance by ensuring that rent increases are delayed only where there is clear evidence of undue hardship for the tenant. This would prevent tenants delaying rent increases simply for convenience and would provide landlords with the certainty they need to operate within a fair system.
Why is the Renters’ Rights Bill so intent on restricting rent increases, when in many cases increases are entirely justified by market conditions? The provision that rents can only be decreased creates an artificial cap that disregards the economic reality of the rental market.
Moreover, by limiting rents to reductions, we are effectively disincentivising landlords from maintaining or improving their properties. Is the Minister aware of the potential long-term consequences of this? Amendment 102 seeks to address this by replacing the requirement for rents to be decreased with a possibility for rents to be adjusted according to the circumstances. This would create a more flexible and fair approach, one that allows the tribunal to consider the economic reality of the rental market without imposing artificial restrictions.
Lord Howard of Rising (Con)
My Lords, I support the amendments in this group in the name of the noble Baroness, Lady Scott, to which I have added my name. I endorse what she said just now when she spoke to the amendments.
When I spoke to the fourth group, I pointed out that, as presently drafted, the Bill will, at a conservative estimate, give rise to 1 million applications per annum to the rent tribunals. Other noble Lords have commented on the problems which will occur. The rent tribunals will be overwhelmed. With the delay for any rent increase, this will amount to a de facto rent control, with a corresponding and inevitable loss of rental accommodation when landlords disappear from the market as they cease to be able to cope with the ever-rising costs, not least the cost of increasing regulation.
I spoke at Second Reading to the problems in Berlin, where rent controls had to be abandoned owing to the lack of rental accommodation. These amendments would help introduce some realism into the system, so that applications to the rent tribunals are for genuine reasons and not merely because it would be silly not to go to the rent tribunal when there is no risk and a possible gain.
Baroness Thornhill (LD)
I had thought that there would be a few more speakers than that, but hey.
I wish I could be half as certain about what is going to happen in the future as some noble Lords here—they must have a crystal ball hidden somewhere. I feel this Bill is almost an act of faith. It is quite obvious that we believe that it is going to do good things and that Armageddon will not happen. However, the noble Baroness, Lady Scott, argued her case very well and sincerely, and likewise she believes that. At the moment, neither side really knows what is going to happen. To use the cliché: only time will tell.
The problem with so many amendments being regrouped is that we are into groundhog day, so I will be brief. As previously stated, we do not support amendments that would disincentivise tenants challenging rent rises and feel that most of these amendments fall into that category. The Bill is about a power balance between the tenant and the landlord, and is a genuine attempt to redress that balance. A lot of the amendments and statements made by some noble Lords want to maintain the status quo; for us on these Benches, that is an imbalance. We are just going to have to disagree about that.
The noble Baroness referred to the realities of the housing market. Our interpretation is that landlords can charge whatever they want—whatever the market will sustain—and we do not believe that that is right. In doing so, I genuinely believe we are creating an underclass of people who will never be able to fit into the private rented sector. That is perhaps an argument for another day.
The Minister has perhaps already answered Amendment 105, but I am quite happy to hear it again, given that I agree with the noble Baroness that such a review is important and necessary.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank the noble Baroness, Lady Scott, for her amendments on rent regulation. I thank the noble Lord, Lord Howard, and the noble Baroness, Lady Thornhill, for their comments.
As I set out earlier, the Bill will empower private rented sector tenants to challenge unreasonable rent amounts. This is a central aim of the Government’s reform agenda and reflects our manifesto commitment. The tribunal will not be able to increase rent beyond what the landlord initially proposed. This will prevent unscrupulous landlords—let us face it, most of them are good, but there are some unscrupulous ones—using rent increases as a back door means of eviction, while ensuring rents can be increased to reflect market rates.
We are clear that tenants should submit an application to the tribunal only where they believe a rent increase is above market rates. In the first instance, we strongly encourage landlords and tenants to communicate early about what adjustments to rent are sustainable for both parties. We need to think about possible triage arrangements if there is no agreement between them.
We anticipate that our reforms will lead to some increases in cases, but, as I have already stated, we are working closely with the judiciary to ensure the tribunal has the capacity to deal with cases. In the First-tier Tribunal (Property Chamber), work is progressing to increase capacity, as well as on reviewing resourcing and working practices in readiness for any increase in demand. I am not sure if it will be 1 million applications, as the noble Lord, Lord Howard, said, but we anticipate that there will be some increase initially, until the way that this works drives down demand in the future—which I think it will. This is part of our wider work to make sure the justice system is prepared for the changes to case loads and procedures which will be required for our reforms.
As now, tenants will be able to challenge the rent payable in the first six months of a tenancy if it is above market rate at the First-tier Tribunal. The tribunal can determine the open market rent only to be lower than or the same as the tenancy rent itself. The tribunal will not be able to increase the rent above the amount originally proposed by the landlord. We see this as a rebalancing mechanism, as the noble Baroness, Lady Thornhill, said.
Amendment 92 seeks to allow the tribunal to determine the open market rent to be higher than that originally proposed by the landlord. We believe that limiting the tribunal to determine a rent to be either the same as the landlord themselves proposes or an amount lower than this is fair to both parties. If landlords have agreed a rent that they consider to be acceptable at the beginning of the tenancy, they should have no fear of a challenge at tribunal.
I turn to Amendment 93. This Bill enables a tenant during the first six months of a tenancy to challenge the rent payable. It is an important provision that should stop a minority of unscrupulous landlords exploiting tenants desperate to find a new home. It strengthens our ban on rental bidding, ensuring that any landlords who seek to charge over the odds can be challenged. When a tenant challenges their rent, the Bill states that the start date of the new rent determined by the tribunal
“must not be earlier than the date of the application”.
This reflects Section 22 of the Housing Act 1988, where a similar provision already exists to allow backdating of a determination where a tenant has challenged an excessive rent.
Amendment 93 would prevent a tribunal backdating the determination of the new rent payable to the date of the tenant’s application. It would mean that the new rent could take effect only from the date of the tribunal’s determination. I understand that the purpose of this is to ensure that the landlord will not have to repay the difference in rents back to the tenant. The Government encourage landlords and tenants to communicate early about what rents are sustainable for both parties. The Bill levels the playing field to enable a more equitable discussion about levels of rent before anything comes to the tribunal. To be clear, the aim of this is to prevent as many cases as possible ending up in court action.
In our view, the noble Baroness’s amendment would limit the ability of tenants in the first six months of an above-market tenancy to get justice for the period that the case is in the courts. It would also increase the risk that landlords would seek to exploit desperate tenants by extracting above-market rents. I am really concerned about that, because one of the key principles of the Bill is to stop that happening.
Lord Howard of Rising (Con)
Perhaps the Minister can help me: if you can never put the rent above market rates, how does it ever change? You can never put it up—you can only ever put it down—so it can never go up and will only ever drop. That seems a bit of a conundrum.
Baroness Taylor of Stevenage (Lab)
No—you can put the rent up to market rates.
Lord Howard of Rising (Con)
That is the point. If you put it up to market rates, it can never go above market rates, so market rates can never increase. They will always stay static, and in 10 years they will be exactly the same.
Baroness Taylor of Stevenage (Lab)
Market rates are usually driven by demand, not by what happens in the courts, so I do not think that will be the case.
On Amendment 95, for too long tenants have been afraid to challenge an unreasonable rent increase for the fear that the rent can be raised beyond what the landlord has asked for. The Bill will reform how the tribunal works to ensure that tenants feel confident in challenging poor practice and can enforce their rights. The tribunal will not be able to increase rent beyond what the landlord initially proposed. That strikes the right balance between empowering tenants to challenge unreasonable rent increases and ensuring that landlords can increase to the market rent.
Amendment 95 would require the tribunal to backdate a rent increase to the date of the rent increase notice, except where this is likely to cause undue hardship to the tenant. This amendment would punish the most vulnerable tenants who may already be struggling financially. Therefore, to ensure tenants are not unexpectedly thrust into debt, it is right that the new rent amount would take effect no earlier than the date of the tribunal determination. This will give tenants the time to prepare for any changes to their rent and seek independent advice on how best to manage their finances. For the sake of clarity, I repeat that the tenant will continue to pay the rent that they were paying before—it is the increase in the rent that is being challenged through this process.
Turning to Amendment 102, I reiterate that applying to the tribunal should be a last resort for a tenant. Good landlords and tenants will discuss what rent is sustainable for both parties but, if they cannot come to an agreement, a tenant has the right to challenge a rent increase at tribunal. As I have said, for too long tenants have been afraid to do that. I note, too, that the Opposition once supported our position on this matter. Their original White Paper said the tribunal will no longer have the power to increase the rent above the amount the landlord asked for. It is regrettable that they now disagree with themselves and want to make it easier for tenants to be evicted by the backdoor.
Baroness Scott of Bybrook (Con)
Can the Minister explain this? If a tribunal is taking quite a long time, then the decision is made and any increase happens from the date of that tribunal’s decision, and the landlord can go to a tribunal only every 12 months, does that 12 months start from the date of the tribunal’s decision, or can it go back six, seven or eight months prior, so that it could be nearly two years rather than one year?
Baroness Taylor of Stevenage (Lab)
I understand the noble Baroness’s question. My understanding is that the year starts from the date the tribunal decisions are made, but I will check that and write to her.
Baroness Scott of Bybrook (Con)
So you could lose six or eight months—it could be nearly two years. If the Minister could confirm that, it would be useful.
Baroness Taylor of Stevenage (Lab)
I will clarify that in the letter.
Amendment 105 would require the Secretary of State to carry out a review of the impact of Clause 8 on the First-tier Tribunal, and to consult the Competition and Markets Authority on whether further measures are needed to prevent distortion of the rental market by the tribunal’s determinations on rent. As I have made clear on similar amendments, the department is already collaborating extensively with His Majesty’s Courts & Tribunals Service, as well as the Ministry of Justice, to ensure that the property chamber of the First-tier Tribunal is prepared for the implementation of the Bill, including any changes to its role in determining rent.
Baroness Scott of Bybrook (Con)
My Lords, on the Minister’s last point on scaremongering, I do not think we are. I suggest that she might like to look at the latest weekend Bloomberg report on the rental sector in London. The number of landlords going out of the rental market is quite scary. It is said very clearly that they are going out because of further regulation of the sector. I will send the report to her if she would like; it is interesting.
I thank noble Lords who contributed on this group. In closing, I will return to our central concern, which runs through the whole group of amendments: the balance between landlord and tenant, between fairness and workability, and between principle and practical consequences. At the heart of this is the fundamental question about whether we believe in a truly impartial rent tribunal system. As the Bill stands, it allows only downward rent adjustments. Amendment 92 would correct that. It would give a tribunal the discretion to assess the facts and adjust rents up or down, depending on the evidence. That is the essence, we suggest, of a fair system that reflects market realities, not just one side of them. This imbalance is deepened further by the proposal to allow rent reductions to be backdated. Amendment 93 addresses this. Landlords who have acted in good faith, charging an agreed rent, should not be faced with demands to return funds months after the fact. That is not stability but uncertainty, and it undermines trust in the system.
That uncertainty only grows with the automatic delay of rent increases. Amendment 95 brings much-needed clarity to this. It ensures that rent increases are pushed back not simply as a matter of course but only when there is clear evidence of undue hardship. Without this, we risk creating a system where delay becomes the default tactic and landlords bear the cost. These problems are compounded by the Bill’s insistence that proposed rents can only be reduced. Amendment 102 introduces necessary flexibility. If we are asking tribunals to assess fairness, we must let them consider the full picture, not force them into decisions that ignore inflation, market trends or rising costs.
This brings us to the question of implementation. The tribunal system is already under enormous strain. Amendment 105 makes a straightforward, sensible request that the Secretary of State reviews the capacity of the system to manage what this Bill will ask of it. Without that, we are setting it up to fail. I urge the Government to consider the cumulative effect of these provisions. On paper, they may appear technical; in practice, they will drive landlords from the market, reduce housing supply and increase pressures on rents. This is not what this Bill should achieve, but at this stage tonight I wish to withdraw my amendment.
Lord Jamieson
Member’s explanatory statement
This amendment would allow a person to mutually agree a tenancy with a landlord which requires them to pay up to six months of rent in advance.
Lord Jamieson (Con)
My Lords, I will speak to the group of amendments in the name of my noble friend Lady Scott, relating to payments of rent in advance. The payment of rent in advance can provide a number of significant benefits to tenants. These go beyond avoiding late fees and the demonstration of financial security. Tenants may wish to pay rent in advance for financial planning or even to avoid the worry of monthly payments. Amendments 108, 109, 110, 112, 113 and 114 recognise and affirm the legitimate choice of a tenant to pay rent in advance. I emphasise that this is rooted firmly in mutual agreement. If a tenant does not wish to pay in advance, they are under no obligation to do so, but if a tenant chooses to take this step, if they believe it is in their personal best interest, why should we stand in their way? If a tenant makes a judgment on the basis of their financial circumstances that this is in their best interest, why should it be for the Minister to say, “No, the Government know best”? If a tenant believes their ability to pay may be inhibited by a financial burden coming down the track, they could legitimately plan for the payment now. But, regardless of the reason or even the need, if there is mutual agreement, what is the problem?
I turn to the impact of this on two groups who will be particularly impacted by this change: overseas students and those with poor credit ratings. Tenants with a poor credit rating history will inevitably appear risky—this may be through no fault of their own; they may just not have a rating history—and often this risk is too insurmountable to ignore. By paying up front, tenants can demonstrate responsibility and ultimately improve their chances of securing a rental agreement and the security of a home. In many cases, this proactive step, choosing to pay in advance, is the only practical means by which tenants can build trust, enhance their credibility and demonstrate financial reliability. Will the Minister please set out the impact of this change on those with a less than optimal credit history?
Next, I wish to address the issue of overseas students with no local credit history. The Committee will know that the UK credit rating agencies do not hold information about a person’s financial affairs outside the country, or any foreign credit reports. Therefore, overseas students often require a UK-based guarantor to cover potential property damage or unpaid bills. Where this is not possible, payment in advance can be a solution, and payments are often made for the entire term, or even the entire academic year. Will the Minister set out the expected impact of this change on overseas students, and the number we anticipate losing due to difficulties in securing student accommodation? Alternatively, does she believe that landlords will still have a sufficient incentive to house overseas students, despite their limited credit history? Will she outline what steps the Government are taking to strengthen the enforcement around credit arrears where overseas students are unable to pay? Current mechanisms are often weak, but it is an issue that is far less prevalent when payment is made up front.
I also want to highlight the plight of some of the most vulnerable, where councils have a duty of homelessness prevention. Councils often work with landlords and tenants, offering advanced rental payments, larger deposits and guarantees, which would be hampered by these proposals. Are councils to be banned from paying rent in advance to support some of the most vulnerable in our society? As has been raised earlier, the Home Office plans to offer landlords five-year tenancies to house asylum seekers. Will this involve rent being paid more than one month in advance? I invite the Minister to explain and I appreciate that she has offered to write to noble Lords regarding this. I look forward to that, and to any additional information that she is able to provide.
Finally, I draw the Committee’s attention to Amendment 117 in the name of my noble friend Lady Scott. This amendment requires Ministers to ensure that changes being made to the Tenant Fees Act 2019 are clearly communicated to tenants, letting agents and landlords. These changes involve fines of up to £5,000 for new offences and it is essential that landlords and letting agencies are aware of their new responsibilities. We regard this as a technical but important amendment and I hope that the Minister will see it as a practical and necessary change that can be accepted. This group will consider whether mutually agreed or tenant-requested payment of rent in advance should be permitted to continue. On these Benches, we are clear that it should. Mutual agreement can foster a more stable housing situation, one that recognises the unique benefits that rent in advance may offer certain groups of tenants in securing a home. I hope that the Minister will take note.
Lord Hacking (Lab)
My Lords, I entirely support the noble Lord, Lord Jamieson, in his submissions just now. My Amendments 115 and 116 deal with the same problem but from a different perspective.
Lord Truscott (Non-Afl)
My Lords, before I speak to my Amendment 111, I declare an interest as a landlord of over two decades and a former renter in the private rented sector for some 16 years.
As I mentioned before in Committee, the Bill before us has much to commend it. I support ending arbitrary evictions under Section 21, the imposition of a decent homes standard and the imposition of Awaab’s law in the PRS. Renters should not be exploited by the minority of rogue landlords. However, the fact remains that over 80% of tenants have a satisfactory experience in the PRS, and, despite HMG’s unduly negative impact assessment, it is the most popular form of rental tenancy—more popular than council housing or other forms of social housing. Remember, Awaab’s law came about because of the shocking state of some of the social rented housing, and will now rightly be applied to the PRS.
We should not blame the PRS for the failure of housing policy over previous decades and under Governments of all hues. There is a chronic shortage of affordable rental stock, and, where demand exceeds supply, rents inevitably go up, as mentioned by the noble Lord, Lord Thurlow, in a previous group.
More rental homes are needed in the PRS—some estimates say another 50,000 a year, on top of an extra 90,000 social homes, are required, as was outlined previously by the noble Lord, Lord Best. Ministers should ask themselves whether there is anything in this Bill which will increase the supply of affordable rental homes, or whether the best we can hope for is treading water.
It is often quoted that the PRS has doubled in size since the early 2000s, yet it is also a fact that the PRS stopped growing in 2016 when tax changes shifted the business model, and has since been stuck at 5.5 million homes, with the number of landlords buying offset by the number of landlords selling. Now that half of the PRS is owned by 20% of the landlords with the largest portfolios, this trend is accelerating. Many of these larger corporates tend not to house families; they impose the highest rent increases in an inflexible manner and, because they tend to own large, purpose-built flats, are distinct from local communities and smaller properties.
It is the smaller landlord who often has more interest in their tenant and property, embedded in the local community—I think the noble Lord, Lord Hacking, is probably one of them. This may be their only investment, and so they look after it well. Many are known to subsidise or help out their tenants in difficult times—which would be unlikely from a large corporate.
Forget for a moment whether there will be a mass exodus from the PRS because of this Bill, as the effects bed down; according to the ONS, by 2050 there will be 78 million people in this country—some 8 million more than now. Are we ready for that? If we think we have a housing crisis now, in 25 years it could become a major catastrophe. Against that background, anything which makes the current housing crisis worse should be avoided at all costs.
My amendment provides for tenants to pay up to 12 months’ rent in advance, if mutually agreed with the landlord. It provides security for both the tenant and the landlord. As has been said before in your Lordships’ House, thousands of people will be deprived of the opportunity to rent a home if advance payments are banned. As the noble Lord, Lord Jamieson, mentioned just a few moments ago, that includes students—particularly foreign students, on whom our educational institutions rely—who have no credit or banking history in this country. It also includes self-employed people and downsizers, who may have cash but no proof of income. It includes vulnerable people with poor credit histories and county court judgments against them. All these groups often offer rent in advance to prove they can afford to stay in their homes.
If the option of rent in advance is denied, literally thousands of people will be excluded from the rental market, as landlords will feel unable to take the risk of accepting tenants with no apparent source of paying their rent. Guarantors will be unable to give unlimited guarantees under rolling periodic tenancies. Once again, Ministers have a line. The line is that advance rent payments will discriminate against those with limited means. First, most tenants are never asked for advance payments. Landlords frankly prefer longer-term, stable tenants who can prove they have enough to pay the monthly rent. Students, for example, are not always the first choice of landlords, advance payment or not. Secondly, I hate to say it, but we live in a capitalist society. Banning advance payments was also not mentioned in Labour’s election manifesto, so it is within the conventions of this House to ask the Government to think again.
We should allow rental payments in advance because, at the end of the day, this measure will help more tenants than it will hinder.
Lord de Clifford (CB)
I support Amendment 111 and thank the noble Lord, Lord Truscott, for leading on this amendment. I also agree with a lot that was in the speech of the noble Lord, Lord Jamieson. The removal of the right to payment of advance rent will cause more tenants with problems accessing housing to find it even more difficult to get access to their choice as tenants. Currently, 7% of tenants pay advance rent, according to several letting agencies and credit reference agencies. I thank the Minister for her time meeting me on this matter. We have not heard what percentage of landlords are asking for or demanding advance rent.
The Bill targets these rogue, or possibly bad, landlords who are looking for secure rental income from tenants in this high-demand rental market. During our meeting, the Minister suggested that the answer for tenants who currently need to pay advance rent was to seek out a guarantor. Most tenants would prefer not to pay in advance if a guarantor was available or could be found. In my personal experience of being a guarantor for student accommodation for both my children, guarantors are asked for not only rent but other liabilities. Therefore, finding guarantors who will be willing to cover both rent and other liabilities is difficult. Also, guarantors need to prove their income and their assets. For foreign tenants, it will be very difficult to find a guarantor with UK income or assets, and that is one reason that advance rent is needed.
For students who do not have a guarantor, so they need to pay in advance, the suggestion was that universities could provide guarantee services. This would add further burdens to many universities, which are financially under pressure. The final suggestion was to approach a local authority, to ask it to act as a guarantor. I certainly will not challenge the Minister on her knowledge of local authorities, as her service to Stevenage and Herefordshire Councils is outstanding. Sadly, from the comments made in this Chamber and the press, it would seem that local authority services are under severe pressure, so surely the addition of increased requests would be a further burden and demand on limited resources.
Therefore, if you allow advance rent, you will not add further burdens to both local authorities or universities. There are products and companies providing guaranteed services. These services are costly to tenants and a significant percentage of tenants paying in advance have a low income or a poor credit rating, as previously stated. Again, this is not a logical move. Individuals who cannot provide an income source for some reason or are unemployed, who have the funds to pay rent but do not want to access a guarantor, will be disadvantaged in the tenant selection process.
The removal of the payment of advanced rent has great merits, as it addresses a very unwelcome trend in the marketplace for the demanding of large amounts of money, which restricts the number of tenants who can access certain properties. With the Bill as it stands, more tenants will be affected and denied access to a full range of properties. This amendment keeps flexibility for tenants on how their rent is paid. Therefore, I ask the Government to consider this amendment, or have further discussions, before Report.
Baroness Thornhill (LD)
My Lords, most of the amendments in this group are disagreeing with the Government’s ban on being able to ask for rent in advance, and all basically say the same thing. While I am very supportive of the Government’s aims, there are legitimate questions to be answered in this area. By preventing tenants paying rent up front, will the Government potentially reduce the housing options available to financially vulnerable people? So says the letting and landlords’ association. Is it a way to crack down on discrimination against low-income renters by unscrupulous landlords? So say the Government and the lobby groups for renters.
Amendments 108 and 111, which would allow up to six months’ rent in advance or even 12 months, are troubling. Rogue landlords could pressure vulnerable tenants to mutually agree to these excessive payments, circumventing the very protections that the Bill seeks to establish. Furthermore, Amendment 112’s provision for tenants to specifically request such arrangements in writing could easily be manipulated. Landlords might simply make such requests a condition of securing the property, forcing tenants to choose between signing or losing their housing opportunity.
However, what we do know is that people on fixed incomes, such as pensioners, those with lower incomes, the self-employed, the overseas students, those with a bad credit history, those who fail referencing checks and those with no family member to act as a guarantor will all have challenges passing referencing and affordability checks. They are the risky renters. The Government’s amendments are clearly designed to protect these financially vulnerable people from exploitation, but the big question is: how will agents and landlords manage tenancy risk in the future? Tenancy risk is a reality. With over 20 tenants chasing each vacancy, landlords will, legitimately and legally, be able to pick the person who represents the lowest risk. The bottom line for them is economic reality. Your Lordships have all heard my views, but even I would say, “Who can blame them?”
There are many thousands in these various groups. How do the Government think that they will get housing in the future? How will landlords mitigate the risk of tenants who fail references and have no renting history in the UK or who have CCJs against their name? Millions of people fall into these categories. My deepest worry is that the rent in advance system will go underground and people will be asked to stuff cash into brown envelopes, while rental payments will be edited to make it seem that all is well. Desperate renters will do desperate things to put a roof over their heads. I hope that I am wrong and not being unduly harsh on landlords or tenants. It seems to me that such people are left with the sole option of a professional rent guarantor service. What else is there? I am quite sceptical of local authorities stepping into that role, although they do much already to make tenancies survive and to help tenants.
What are the Government doing to ensure that those services can operate legally and responsibly, and to help this group of people? Are they part of the solution? I look forward to the noble Baroness’s answers.
Finally, to reiterate the point, a market that is significantly undersupplied and where the market rules of supply and demand result in continually rising rents, impacting most on precisely this large group of risky renters, has already resulted in a whole cohort of renters who are forced into homelessness and overpriced temporary accommodation. These are the very people who would in the past have been in social housing, of which there is, as we know, a huge shortage. The free market, under the rules as they are now, has led us to this place—a broken system—and there is no one denying that. Continuing as we have thus far can lead only to more of the same.
The Bill is a brave attempt to recognise the current imbalance between tenant and landlord, but if we do what we always do, we will get what we always get, and that is not acceptable.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank the noble Baroness, Lady Scott, and the noble Lords, Lord Jamieson, Lord Truscott and Lord Hacking, for their amendments in relation to rent in advance, and the noble Lord, Lord de Clifford, and the noble Baroness, Lady Thornhill, for commenting on these amendments.
Taken together, Amendments 108 to 110 and 112 tabled by the noble Baroness, Lady Scott, would allow landlords or agents to charge rent in advance when this has been mutually agreed with the tenants in a tenancy agreement. This Government are clear that the practice of landlords or agents charging rent in advance is unfair. Many of us will have heard the stories, many of them of requests for large amounts of rent in advance that have pushed families into financial hardship or locked some out of the sector completely. In other cases, unscrupulous landlords use rent in advance to pit prospective tenants against each other and create these dreadful bidding wars to help people secure a property. That is why the Bill will prohibit a landlord or letting agent requiring or accepting any payment of rent before a tenancy has been entered into. In addition, a landlord will be able to require only up to one month’s rent in advance in the window between a tenancy being entered into and that tenancy beginning.
I want to be crystal clear on this point: once a tenancy has begun, tenants will remain free to pay their rent prior to the agreed due date should they wish to do so, although landlords will not be able to require this and any attempt to require it will be challengeable by the tenant.
Amendment 108 would allow landlords to include terms in a tenancy agreement that require rent in advance to be paid up to six months before it is due. It is the view of the Government that this amendment would fail to protect tenants from exploitative rent in advance practices. Landlords, being able to require up to six months’ rent in advance when this is agreed in a tenancy agreement, could, in a market where properties are hotly contested, push tenants into agreements that stretch their finances to breaking point to secure a tenancy.
Amendment 109 would limit rent in advance to four months when agreed in a tenancy agreement. This has the same effect, with the potential for tenants in hotly contested markets to feel compelled to agree to terms that require significant financial outlay. Even the limit of two months, as the noble Baroness, Lady Scott, proposes in Amendment 110, in our view does not go far enough to protect tenants. In a scenario where a landlord can request two months’ rent in advance, this is still a significant financial expectation of a tenant. Given that the tenant will also likely be required to pay a five-week tenancy deposit, they could face being asked to stump up more than three months’ rent to access a property.
Lord Jamieson (Con)
I would just like clarification for my understanding. It has been made clear by a number of noble Lords that our concern is that some of the most vulnerable would be able to even up the playing field by providing rent in advance. I understand what the Minister is saying, but that competition, in a competitive market where there is a shortage of supply, risks excluding some of the most vulnerable. I am keen to hear how the Minister will address that.
Baroness Taylor of Stevenage (Lab)
I am coming on to the impact on vulnerable tenants, but it makes tenants far more vulnerable where they are being pushed to take on financial commitments well beyond their means just to get access to a tenancy in the first place.
In effect, Amendment 112 would enable some unscrupulous landlords to continue to pit tenants against each other in de facto bidding wars. In this circumstance, tenants under pressure to secure a property could face being required to offer in writing even greater sums of rent in advance.
Any one of these amendments could allow landlords at the pre-letting stage to insist upon a term in the tenancy agreement which permits rent in advance. This would leave tenants with a potentially impossible choice of stretching their finances to the limit or facing homelessness.
I would like to address the concerns of some in the Committee that those landlords who rely on rent in advance could find themselves left out of the market. We are clear that landlords are free to undertake the referencing and affordability checks necessary to give both the landlord and the tenant the confidence that a tenancy is sustainable.
The noble Lords, Lord Jamieson and Lord de Clifford, and the noble Baroness, Lady Thornhill, mentioned foreign students. If landlords are not satisfied with the outcome of pre-tenancy checks, there remain a number of options available, including requiring a tenant to provide a guarantor or the use of professional guarantor products. If the tenant is unable to provide a UK-basedguarantor—I accept that that may be the case for international students—alternative options could be available, such as professional guarantor services.
We are committed to robustly monitoring and evaluating the impact of our reforms. We retain powers to amend these measures should the evidence arise that they are having a significant impact on a particular group. The noble Baroness, Lady Thornhill, mentioned self-employed people and those on limited-income pensions. We maintain the powers to amend, should we need to do so.
The noble Lord, Lord de Clifford, raised a point about local authorities. Some local authorities are very proactive. The reason they take on this role is to prevent homelessness, and they recognise the benefit to families and individuals of not having to go into temporary and emergency accommodation. In addition, it can reduce the cost to the local authority if it does not have to find that family temporary and emergency accommodation, so it will take on that role.
The power gives the Secretary of State the flexibility to adapt the constraints on rent in advance to respond to a changing private rented sector. Changes in the balance of supply and demand within the private rented sector—driven, for example, by our commitment to building 1.5 million homes over this Parliament—may change the extent to which affordability is a barrier for prospective tenants entering the sector. In this scenario, the Government may consider it appropriate to make changes to the constraints on rent in advance. Equally, changes in the market could be driven by currently unanticipated future legislative changes, such as the introduction of new types of tenancies. In this scenario, the power would allow the Secretary of State to maintain the application of these measures to the intended cohorts of landlords and tenants.
The introduction of the power therefore provides the Government, or any future Government, with the ability to make sure rent in advance measures continue to apply as intended in the face of any changes within the private rented sector. However, I reassure the Committee that regulations made under the power will be subject to the affirmative procedure, which will ensure that there is appropriate parliamentary scrutiny of any changes.
Amendment 117, also in the name of the noble Baroness, Lady Scott, would introduce the legal requirement for the Secretary of State to communicate to tenants, letting agents and landlords the changes made by the Renters’ Rights Bill to the Tenant Fees Act 2019, which prohibits certain payments of rent in advance. I know the Committee will share my view that the successful implementation of the Renter’ Rights Bill is firmly rooted in how widely its provisions are known and understood. I reassure the Committee that the Government are committed to raising awareness of the full range of Renters’ Rights Bill reforms across the private rented sector.
This amendment would require the Government to make stakeholders aware of one aspect of our rent in advance policy, which is given effect by amendments to the Tenant Fees Act—namely, the prohibition on landlords inviting, encouraging or accepting a payment of rent in advance before the tenancy agreement is signed by both the landlord and the tenant. However, it would not oblige the Government to communicate the details of the rest of the rent in advance policy.
Lord Hacking (Lab)
My noble friend has replied to my Amendments 115 and 116, but I would be grateful if she could agree to talk further on them, particularly Amendment 116. It is an extraordinary situation how a landlord is not permitted to prevent a tenant moving into a property even though the tenant has not done the basic thing of paying the rent in advance. It is not an excessive amount of rent; in my case, as I explained to my noble friend, it is the rent for the rest of the month—a modest payment. Why on earth can a landlord not say, “You can’t come into the property until you’ve paid your rent”? You always pay rent in advance.
Baroness Taylor of Stevenage (Lab)
I would just reiterate the comments I made to my noble friend that, having undertaken a tenancy, gone through the process of vetting and paid the deposit and the holding deposit, it will be a very rare case where the tenant proceeds not to pay their first month’s rent.
Lord Jamieson (Con)
Before the Minister sits down, I just want to follow up on the question I raised regarding the Home Office’s plans to offer landlords five-year tenancies and ask whether the Minister can confirm whether there will or will not be more than one month’s rent in advance?
Baroness Taylor of Stevenage (Lab)
I thank the noble Lord for his question. I did respond earlier to the points in relation to the Home Office position. Because it is the work of another department, it would be best, as I said earlier, if I clarify the situation in relation to the Home Office’s proposals and come back to noble Lords on that. It involves the contract between the Home Office and Serco and I do not want to comment on it without knowing the facts from the Home Office. So, I will come back to the noble Lord on that point.
Lord Jamieson (Con)
My Lords, I rise to close this group of amendments. It has been an excellent debate and I thank all noble Lords who have provided contributions to this debate.
The noble Lord, Lord Hacking, has demonstrated the case for his amendments. I thank him for the support he has given to our amendments, and I certainly support the intention of his amendments. We also share the concerns of the noble Lord, Lord Truscott, that the Bill will potentially exclude thousands of tenants from the rental market. The noble Lord, Lord de Clifford, raised the issue of the difficulties of getting guarantors, particularly if you are an overseas student.
I also thank the noble Baroness, Lady Thornhill, and others who raised the issue that there are 20 people seeking every tenancy and you cannot blame the landlord for seeking the most stable and secure tenant for their property, with the risk, as I said earlier, that the most vulnerable will lose out. We believe that this will have a negative impact on tenants who might otherwise struggle to find a tenancy. Amendments 108, 109 and 110 provide three options for how much rent could be paid in advance with the mutual agreement of the renter and the landlord. Amendment 114 would allow rent in advance at the discretion of the tenant.
The Minister has raised the prospect of guarantors and, for those people who are not able to provide a personal guarantor, using guarantor services. Many people who have used these services will well know that these can be substantially expensive, and frequently far more expensive and onerous than paying rent in advance. Therefore, it seems only logical that one should offer that option.
The Minister has rejected all three options and has not proposed an alternative. It is disappointing to see such a lack of engagement with these amendments when they are likely to have a negative impact on both international students and those with poor credit scores. This clause reduces their ability to prove their financial responsibility and, as such, reduces their likelihood of finding suitable rental property—and, as I highlighted earlier, reduces the ability of councils to secure accommodation for some of the most vulnerable in their communities.
We raised the issue of the five-year tenancies that the Home Office is using, and I am glad the Minister will come back to us. I look forward to being assured that there is no differential treatment of landlords and tenants depending on which part of government is dealing with them.
This clause removes a tenant’s ability to prove their financial responsibility. If a tenant and landlord agree to pay rent in advance, why are the Government standing in the way? I urge the Minister to consider these amendments. Noble Lords across the House have raised genuine and real concerns with this clause. Although we all want to see a better deal for tenants, removing their autonomy to pay in advance is not the best way to go about this. I hope that the Minister will consider this before the next stages of the Bill.
Baroness Taylor of Stevenage (Lab)
My Lords, I do not want to delay proceedings, and the noble Lord, Lord Jamieson, might not agree with me, but I did fully answer the question of why we consider that payment of rent in advance, even when agreed between two parties, can have a serious effect on other tenants in the rental market who are not able to make those very large payments in advance. He may not agree with me on that, but I did respond to the point.