Renters (Reform) Bill

Lord Cromwell Excerpts

2nd reading
Wednesday 15th May 2024 Lords Chamber

[Lord Cromwell (CB)]

My Lords, I am neither a landlord nor a tenant, I have managed properties in the past and I have a property qualification. All four of my children were tenants during their student days and remain as tenants at the start of their professional lives. I have also had extensive briefings from both landlords and tenants and their respective representative bodies, providing their perspectives and their chosen statistics.

As the last Back-Bench speaker today, I will not re-run all the statistics because most of them have already been cited, so I hope that will be appreciated. I am also not going to namecheck everybody, but we have had, I think we can agree, a diverse but fascinating set of speeches. I congratulate all those involved—forgive me if I do not namecheck them.

There are some emotive issues here. For a tenant, the property they rent may become emotionally their home. For the landlord, the property is often their most valuable asset—they paid for it and they maintain it. It is their source of income or pension, and renting it out also means taking on costs, regulations and the risks of placing it into the hands of strangers. Into this sensitive environment have come terms such as “no-fault evictions” and “kicking people out on the street”, even stating paradoxically that landlords actually create homelessness. There have been distressing anecdotes—and I underline this—from both tenants and landlords.

In recent days I have heard a good deal of pantomime stereotypes, and I really hope we can set these aside and address the underlying issues. There certainly are some rogue landlords—albeit that the Government assure us they are a small minority—who provide substandard accommodation and treat their tenants badly. I support those aspects of the Bill that are helpful in addressing that minority. But I add a note of caution, as others have, about enforcement.

The Bill will not touch the rogues unless it is enforced vigorously against some nasty, elusive and, in some cases, dangerous people. The Minister, in very kindly meeting me with her officials yesterday, for which I thank her again, advised that fines levied by local authorities would fund enforcement. I remain sceptical, not least because local authorities are already so strapped for cash. I welcome the requirement to have a written agreement; I suggest that it should automatically include, as an annexe, an inventory of contents and condition, as the lack of one of these frequently leads to disputes later on. I also support the register portal idea, provided that it is better than the Companies House register, which we discussed in some detail during the economic crime Bill and where there are many companies registered to an “M. Mouse”, et cetera.

In acknowledging that there are bad landlords, however, we should also accept that there are bad tenants who will play the system and abuse the landlord-tenant relationship. There are also market and other factors beyond the control of landlords and tenants. The underlying issue is a simple one that many speakers have addressed: lack of supply. A recent debate in this House referred to a shortfall of more than 1 million homes and many speakers have also touched on this today. Private landlords were encouraged, in particular under the Housing Act 1988, to reduce this gap between supply and demand but the difference between them remains stark. The Bill is presented as achieving a better deal for tenants, not through increasing the supply but rather by altering the landlord-tenant relationship, primarily perhaps by reducing the rights of landlords. It begs a simple but fundamental question to the Minister: will the Bill lead to an increase in the supply of rental accommodation?

Section 21 notices are at the heart of the debate around the Bill. Introduced as an incentive for the provision of accommodation by private landlords, they have enabled an increase in the private rented sector, as many speakers have covered. This is based largely on landlords having the confidence that they could recover their property when they required to do so. To lose sight of this confidence—the understanding that, even if they never use it, landlords know that they can get their property back through serving a notice—is to put the sustained supply of rental accommodation at risk.

Tenant representative bodies tag these notices as no-fault evictions, but we should also remember that tenants can and do—to coin a phrase—make no-fault departures should they, without needing to give any reason, decide to move out on just one or two months’ notice. This leaves the landlord with costs and no income until a new tenant is in place, and quite possibly a lengthy overhanging dispute; for example, about the deposits of tenants who are now departed and possibly even out of the country. The Bill would mean that tenants can leave on short notice and without a reason, while landlords would be able to recover what is, after all, their property only on limited and specific grounds. That does not feel equitable to me.

An underlying concern for tenant representatives about Section 21 is that once the initial tenancy period—a security that the Bill seeks to reduce or remove, as others have said—is over, a Section 21 notice can be used should the landlord want their property back. In some cases, it is to seek—or, if noble Lords wish to use emotive language, to extort—an increased level of rent. As regards wanting their property back, the landlord can do so, and the Bill reasonably supports this, if they wish to sell the property or make it available for a family member. As regards raising the rent, I believe there is a point here. I would support rental movements being limited to inflationary increases but, again, supply and demand are relevant. A landlord cannot expect to succeed in renting out a property for more than the market rent. To bring the rate down, we need more supply rather than fewer landlords.

The underlying concern for landlords, apart from the psychological aspect of restriction on their ownership rights, is that to recover their property is going to mean going to court. It has been put to me that a landlord would perhaps have to go to court anyway, if a tenant refused to leave under the current Section 21 notice provisions. I contest that: given the clear simplicity of the Section 21 notice, the great majority of tenants accept its validity.

Speaking to landlords in recent months, I have learned about a couple of reality checks that we need to think about. First, Section 21 notices are already being served by landlords who want to get their properties back and avoid the drawn-out, adversarial and expensive legal processes in due course to recover their property. Secondly, landlords are becoming far more risk averse, and tell me they will continue to be, as to which people they might rent to. As one landlord put it to me starkly, “After this Bill, I will never rent to a family again”.

Speaking to those who say that they represent tenants, I have been struck by how sanguine they seem to be about the impact of the Bill on rental accommodation. They tell me that they assume landlords will sell up, perhaps to a first-time buyer, a local authority or another private landlord—although that seems a circular expectation. Not only is this dismissive of those who provide rental accommodation, it is a pure gamble. Depending on which statistics you choose, some say that there will be a decrease in rental accommodation—this is borne out by the discussions I have just referred to—and others say that there will be no impact. I find that hard to believe. In any event, no one is saying that there will be any increase in the availability of rental property, which is what we are all seeking to achieve.

Given the risks and costs involved for landlords by the removal of Section 21, what mitigation does the Bill provide? It has a, yet to be created, swift and fair court system, which is perhaps even cost-free. There seems to be no objective metric, as many have mentioned, for the Lord Chancellor to deem that the county courts will be working sufficiently well. I hope that we can address this in later stages of the Bill. Court hearings on property matters are already increasing. By definition, a great increase in such cases will be inevitable as all tenancies are now being ended under Section 8. These will be cases brought by tenants and by landlords.

This swift judicial process is a fantasy, and it is strictly for the birds. Speaking of birds, it was the noble Lord, Lord Bird, who warned us some months ago that the last time the Government meddled with the rental sector the supply shrank. I think the noble Lord, Lord Bird, knows more than many in this House about homelessness. In short, making responsible landlords recover their property via legal action will reverse the expansion of rental accommodation, and rogue landlords will probably continue to enforce their will via less formal methods.

I turn to the question of initial fixed terms. We are told that tenants need security of tenure so that they can put their children into school, develop a sense of community and hold down a local job—all of which makes complete sense, at least in some cases. But its logic must surely therefore support long initial terms, and not their abandonment by making them legally void beyond six months, as the Bill does. Tenants and landlords can both benefit from longer fixed terms. Both get continuity, less frictional cost and less disruption. Tenants will also benefit where landlords offer rental discounts or property enhancements to tenants wishing to enter longer-term agreements. I have seen that in practice.

I was struck by the repeated comments on this from tenants. One simply said to me: “There is absolutely no way I would be willing to sign up for less than a one-year fixed initial term. I do not want the prospect of having at last found a place I can afford and having to move on in a shorter period than that”. A tenant such as this—there are many—who wants to be sure that they have security for longer than six months is prevented by the Bill from obtaining it. The circumstances in which the landlord can remove them—to sell the property or provide it to a family member—would be limited, but beyond six months the tenant has no protection should the landlord serve a notice to that effect. The problem presented to me is that a tenant may get “trapped”—this has been referred to by some speakers—for a fixed initial period in a property that is not what they were led to believe.

I do see that issue, but two points occur to me. First, this is a caveat to both parties when signing up. After all, the landlord may find themselves trapped with a bad tenant. Secondly, a correctly drafted tenancy document provides for either party to quit in the event of contract breaches by the other. A long agreed fixed term is still escapable—if that is the right word. A system where tenant and landlord lose the ability to agree a tenancy for any period over six months of secure occupancy seems perverse. It is a further disincentive to the supply of accommodation.

Landlords face the risk of tenants changing every few months, with the associated costs and delays of repair, redecoration, reletting and disputes over deposits. I have not mentioned tenants bringing in livestock, but this could also be a feature if they are seeking insurance payments for damage by the tenants’ assorted livestock, which landlords would not now be able to refuse to allow to be kept on the property. In that situation, landlords would probably have to seek higher rents to cover the associated costs of tenant turnover.

However superficially well intentioned the Bill is, it satisfies neither tenants nor landlords. Both need certainty —certainty of tenure balanced with certainty of recovery—but none of this is attainable without certainty of supply, which is the core issue that we must return to. Although the elements of the Bill that deal with standards of accommodation and portal registration are largely to be welcomed, its approach to landlord and tenant relationships will deplete supply and exacerbate the problems that it seeks to solve. I am most grateful for noble Lords’ indulging me going on at such length.

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[Lord Cromwell (CB)]

I would be happy to speak to the noble Baroness afterwards.

[Baroness Thornhill (LD)]

This will hopefully end that discrimination towards—yet again—the most vulnerable.

We would, however, urge the Government to look at several other practices where discrimination occurs. If a landlord insists on several months’ rent up front—and they do—that disadvantages many people for obvious reasons. Likewise, on the use of a guarantor, not everyone has family or friends willing or able to act as a guarantor. Both these measures in effect marginalise the less well off.

On rent rises, we feel that the Bill does not go far enough. The proposed annual limit of one rent rise is positive, but it still gives no guarantee as to how much the rent could rise, and the process to challenge an unfair rent rise is complex and lengthy. I was concerned by the statement that tenants could find themselves in a position where the First-tier Tribunal could say that the rent is worth more. That felt like a bit of a veiled threat that this would act as a deterrent to challenge a rent rise. Surely, to link increases to CPI or median wage growth would be fairer and transparent, and would obviate the need to appeal to the First-tier Tribunal at all.

We cannot escape the fact that the real issue is lack of supply. We know that much supply has been lost to short-term lets, which was expanded on very well by the noble Lord, Lord Truscott. There are no incentives in this Bill for landlords to return to long-term rentals—as opposed to the damaging overprovision, in some areas such as Cornwall, Cumbria and other tourist spots, of the more lucrative Airbnb. These should include making the playing field level between the two tenures using taxation, regulation and health and safety requirements.

There is much more to say and time to say it in detail at later stages, but I end by reinforcing the words from my noble friend Lady Pinnock and others regarding the role of local authorities in making this Bill work. As things stand now, they cannot do the job that we or they want them to do. These additional demands will only make things worse. The fact that the Bill—at last—expects the private rented sector to meet the decent homes standard and has given some additional powers to councils will come to nothing without the resources to do the job properly. Likewise, extending the homeless duty on councils sounds admirable, but some councils are barely coping now.

Finally, we do not feel that the Bill as it stands has rebalanced the relationship between landlord and tenant. It still feels to us like the landlords have the upper hand, which is perhaps why, in their briefing, they wish to see the Bill passed as soon as possible, and why the Renters Reform Coalition has branded it a failure.

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[Baroness Swinburne (Con)]

My Lords, it is a pleasure to close this debate and to reflect on the thoughtful contributions that we have heard. I should first perhaps disclose that I have been a very happy tenant for many years, with successive landlords who have welcomed my dog, cat and children—so, for me, the private rental sector plays a valuable role, and the Bill’s intention is to make the system work better for both landlords and tenants.

I am grateful for the diverse, wide-ranging and sometimes contradictory contributions that have been made today, and I will attempt to address the points raised in turn—although they may not be in order, because my papers seem to have got a little jumbled.

I turn first to the abolition of Section 21 and court reform, raised by the noble Baroness, Lady Taylor of Stevenage. She raised the issue of Section 21 being abolished immediately following Royal Assent. Our priority remains ending Section 21 as soon as reasonably possible. As these are the largest changes to the private rental sector in over 30 years, it is critical that we introduce them in a way that both protects tenants’ security and retains landlords’ confidence in the new system. As I stated in my opening remarks, there is a raft of secondary legislation that will be required to achieve that; therefore, it cannot be done at Royal Assent.

The reforms in the Bill will need to be supported by a robust and efficient court system for possession. While the vast majority of tenancies end without any need for court action, an effective and efficient court system must be available for landlords and tenants who need it. We are committed to ensuring that the reforms in the Bill are appropriately supported in the courts. We have already invested £1.2 million in the Courts and Tribunals Service to deliver a new end-to-end online possession process. On top of that, this financial year we are investing a further £11 million to deliver the digital architecture for a new, fully digitised system going forward.

The analogue system is being worked on now to help process the new Section 8 possessions on new contracts as soon as possible. The digitisation of the processes will follow as soon as possible for the existing contracts, provided that the Lord Chancellor’s court assessment suggests that the system can cope. The noble Lord, Lord Carrington, and other noble Lords asked about this; I will attempt to supply a visual chart for setting out indicative timelines for the Section 21 phases and the total abolition as we discuss this over the coming weeks.

With regard to abolishing the fixed terms, noble Lords raised concerns about the shift to periodic tenancies and the removal of bilaterally agreed fixed-term contracts, and we have had two sides of the House completely disagreeing on how this should be carried out. As noble Lords suggested, we have introduced a restriction on the tenant giving notice to leave within the first six months. That will ensure that landlords have a sufficient guarantee of rent and enough notice to find new tenants, and will stop tenants using rented properties as short-term lets. After six months, tenants will be able to serve two months’ notice at any point, which is a significant improvement in flexibility compared with the current system. Of course, we expect many to stay for the long term.

[Lord Cromwell (CB)]

I think the tenant can serve notice after four months but they leave after six months. Can the Minister confirm that that is correct?

[Baroness Swinburne (Con)]

I will check that but my notes tell me that it is six months before they can serve their notice.

I reassure the House that we are exploring potential exemptions to this six-month period in extreme circumstances, such as where there are serious health hazards, the death of a tenant, for victims of domestic abuse, and other such important issues. We will bring these forward as the Bill progresses.

With regard to domestic violence, as many noble Lords raised, we recognise that domestic abuse can be interpreted as anti-social behaviour by neighbours—for example, frequent shouting and intolerable noise. It would be wrong to evict victims, which is why it is important that the judicial discretion is used in ground 14 eviction cases. To consider eviction would be a reasonable step in these circumstances.

Many noble Lords raised the issue of a longer notice period for possession grounds, and powerful arguments for that have been made today. However, we believe that the notice periods for the grounds are set at a length which balances the needs of both tenants and landlords. They give tenants time to find a new home while ensuring that landlords can manage their assets when they need to.

Noble Lords have called specifically for tenants to be protected from the moving and selling ground for a longer period at the start of their tenancy, and we are already protecting tenants’ security by ensuring that landlords will not be able to use these grounds in the first six months of a tenancy. We believe that six months strikes the right balance between improving security and, of course, allowing landlords to continue to feel confident in the market.

The Government are committed to preventing homelessness before it occurs. The Bill will help to do that by abolishing Section 21 evictions, giving tenants greater security of tenure and, we hope, reducing the risk of homelessness. We are also providing total support of £108 billion over 2022-25—an average of £3,800 per UK household—to help households with the high cost of living. This includes increasing the local housing allowance to the 30th percentile of market rents from April, which will mean that 1.6 million low-income households will be around £800 a year better off on average in 2024-25, and over 740,000 have been prevented from becoming homeless or supported into settled accommodation since 2018 through the Homelessness Reduction Act. Between 2022 and 2025, we are investing over £1.2 billion into the homelessness prevention grant, which funds local authorities to work with landlords to prevent evictions and offer alternative sources of accommodation.

With regard to Awaab’s law, I am grateful for this being raised. We agree that no tenant should have to live in dangerous housing conditions. We are taking steps to ensure that hazards in rented homes are dealt with, but how we achieve this needs to take into account the differences between the private and social rented sectors.

Awaab’s law was developed for the social housing sector, in which landlords manage large portfolios of usually between 1,000 and 10,000 properties, and have dedicated repairs and maintenance teams. We believe that it is not the right approach for the private rental sector, in which 82% of landlords have fewer than five properties. Instead, we are strengthening enforcement against hazards in private rented homes. Local councils will be able to issue immediate fines of up to £5,000 if a dangerous hazard is present in a privately rented property and the landlord has failed to take reasonably practical steps to address it. We are also introducing the decent homes standard in the private rental sector for the first time, providing local councils with enforcement powers to require landlords to remedy failures to meet requirements.

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[Baroness Swinburne (Con)]

I will take that into account, but I also extend an invitation to the noble Baroness to meet my team to discuss this in more detail.

[Lord Cromwell (CB)]

Just before the Minister sits down, I have a very simple and short question; it is the one I raised right at the beginning of my contribution. Is it the Government’s view that this Bill will increase the availability of rental accommodation, or not?

[Baroness Swinburne (Con)]

As a quick answer, I cannot give the noble Lord that clarification. The intention here is to improve the quality of private rental sector stock, improve tenants’ rights and make sure that landlords have the ability to get back their property when they require it. With regard to the numbers, I will go back to officials in the department and ask for an assessment of whether they think that it will increase the supply. They tell me they do not think it will decrease the supply; I will now go back and ask whether it might increase it.

[Lord Cromwell (CB)]

I thank the Minister for that very worthy answer; these are very worthy objectives. I think the answer she is giving me is: “No, it’s not going to increase”, but I appreciate that she is not quite vocalising that. I think all the indications are that it will decrease it, but we shall see.