Renters’ Rights Bill [HL]

Debate between Lord Kennedy of Southwark and Lord Thurlow

Committee: 1st sitting (Hansard): House of Lords
Friday 18th November 2016 Lords Chamber

[Lord Thurlow (CB)]

My Lords, I thank the noble Baroness, Lady Grender, for tabling the Bill. I declare my property holdings as set out in the register of interests. As personal background, I have spent over 35 years working in the property market as a chartered surveyor, most of it on the commercial side, specifically in development letting, investment and funding. There is a close relationship between commercial and residential when dealt with in bulk.

Who is principally affected by the clauses of the Bill? It is the lowest earners—the most vulnerable, in that sense. It is no coincidence that Shelter has briefed on this, and I think it is tragic that that was necessary. It is students in higher education who have to go to their place of education. It is students who become jobseekers and have to move again. It is a transient group. It is immigrant labour that goes to wherever the work is; there is no shortage of that, apparently. And it is my daughter; in fact, this week both my daughters have applied to rent residential accommodation, and they are learning all about the bumps in the road that we are discussing.

This is the era of social mobility. The world has moved on and the working population is much more mobile. People may move several times, particularly in the early steps of their working lives. They are unlikely to buy, we know that; they rent, and the housing provision must respond. I am afraid the evidence suggests that dishonest or at the very least questionable practices are rife. I thoroughly endorse the list of the noble Baroness, Lady Grender, and in fact I think the list is considerably longer than we were given. Only regulation would prevent this.

The problem is that, as we have just heard, it is difficult to identify what might be fair and what is spurious. The list is growing. In fact, I have with me the small print from one of my daughters’ contracts with a national firm of estate agents. The small print, which is smaller than I can read with these new glasses of mine, identifies seven different specific items, several of which I as a practitioner in the marketplace think are spurious. It is shocking, with non-refundable payments and refundable payments that, as we know, are sometimes not refunded. The people affected by this have very little recourse—they do not have the wherewithal or the experience, and they are dealing with an institution. Every time they move, we have heard, they pay again: £1,500, a month’s gross salary for many people. For the dishonest agents, if I may be so bold, it is low-hanging fruit. It is an important revenue source. I am sorry to say that, but I am afraid it is probably true. Rents are not going to rise because these costs are transferred to landlords; that is not how economics works. Rent rises because of supply and demand. If there are not enough flats to go around, the rent goes up, and if there is a surplus, the rent comes down.

I am not one-sided on this. The list of fees is not all bad, as we have also heard. Landlords need deposits and references. However, the clever instrument in the Bill is that the Secretary of State is given the right to approve those fees that are considered fair. An adequate supply of housing would stifle spiralling costs, and competition for tenants would trim the fees. However, the shortage of government support for new rental development, particularly in the social housing sector, means that the private sector fills the gap. There is a new product in the parlance of property, the private rented sector. It does not sound very new but it is new in that context, and it refers specifically to the bulk development of residential property that is exclusively built to rent. It is designed to rent, not for sale. It is not for sale after two or three rental periods; it is designed for long-term renting. Services are engineered into the architecture.

This is a new product which some other countries already enjoy and have done for a long time, but our market has never embraced it in the private sector. There are tens of billions of pounds now looking at this market in the UK. It is happening. Sites have been acquired, developments are being processed and planning is being obtained. They are being built in bulk and they will deliver tens of thousands, at least, of new residential units.

I have spoken to Legal & General, a well-known and respected investment manager. It has allocated more than £100 million for this sector. It will finance and own it itself and wants to completely re-engineer the whole rental model. It wants it to be tenant-friendly, and thinks it can be done to provide it with a worthwhile return. It is possible, and the Government should applaud it.

Existing legislation is just not fit for purpose. It is creaking and, with the scale of new development on the horizon, must be updated. There is design of the highest standards, with the quality services I referred to and everything there for the tenant, but who will find the tenants? The letting agent, unless the organisation owning the property is big enough to run that in-house. It is tragic that this product, for want of a better description, could be brought to its knees in reputational terms by spurious fees and up-front costs frustrating the mobility of labour. The scale of this new prospect deserves our attention, and the Bill is a vital step in preparing for it.

To conclude, the Government have a choice: ignore it and play to the unscrupulous—I fear it is as simple as that—or support this initiative, update the law, give it teeth, stamp out unacceptable practices and protect the most vulnerable. Any Bill improving the lot of those in need is to be welcomed; this is one.

[Lord Kennedy of Southwark (Lab)]

My Lords, I should first declare that I am a councillor in the London Borough of Lewisham and a vice-president of the Local Government Association. I fully support Amendment 1, moved by the noble Baroness, Lady Grender. It replaces what is presently in the Bill with a more detailed provision to further protect tenants and, we hope, avoid a rogue letting agent getting around the Bill. I am particularly pleased to see the reference to deposits in subsection (3). As the noble Lord, Lord Thurlow, said, the amendment also gives flexibility on what should or should not be treated as a premium by giving the Secretary of State power to make regulations to set that out. Importantly, it also allows the Secretary of State to set by regulation the maximum amounts that tenants may be asked to pay; a welcome flexibility here.

I also endorse the general comments made by the noble Baroness, Lady Grender. As she said, housing is an issue that we have debated many times and will continue to do so: the cost of housing, up-front costs, fees, the lack of social housing, the cost of rent in the private sector, et cetera. The noble Lords, Lord Shipley, Lord Best and Lord Thurlow, all made contributions that I endorse. The noble Baroness, Lady Gardner of Parkes, expressed some concerns and reservations about the clause and the amendment in particular. I do not agree with her: these fees and charges can be abused and tenants taken advantage of; the amendment seeks to address that. I particularly endorse the comments of the noble Lord, Lord Thurlow, who spoke about the effect that supply and demand has on the housing market. As he also said, at present, the legislation is not fit for purpose. I fully endorse the amendment and hope that we get a positive response from the Minister.