Renters (Reform) Bill

Lord Marlesford Excerpts

2nd reading
Wednesday 15th May 2024 Lords Chamber

[Lord Marlesford (Con)]

My Lords, I declare my interests in the register as a Suffolk farmer with rented residential properties.

I will focus primarily on the rural implications of the Bill. I start from the premise that it is the role of the state to protect tenants—as it is to protect consumers, investors, savers, employees and everyone else—from abuse or exploitation. Of course, there are bad landlords, and they should be firmly and severely dealt with, but I am with the noble Earl, Lord Lytton, and the noble Lord, Lord Frost, in that I do not accept that to allow tenants and landlords to enter into mutually agreed contracts is wrong.

During the 1960s and right into the late 1980s, rural housing was subject to severe constraints on both tenancies and rents. Rents set by rent officers were extremely low, often providing zero return on capital, and cash flow was so fragile that there was no surplus to finance the proper maintenance—let alone improvement and modernisation—of rural dwellings. Farmers were advised to sell all the housing they did not need for their own employees. The supply of affordable housing accommodation withered and its condition deteriorated.

As mechanisation advanced, farmers found themselves with a surplus of housing. The big leap forward came with the introduction of the assured shorthold tenancy in 1988. John MacGregor was then the Secretary of State for Agriculture and Nick Ridley was the Secretary of State for the Environment. The AST gave security by mutual agreement to both tenants and landlords for initial fixed terms of six, 12 or 24 months, with annual rent reviews and the ability to continue leases on a rolling two-monthly basis. The AST has worked very well for 36 years. It has greatly reduced the proportion of inadequate rural housing, yet Clause 1 of the Bill abolishes AST. This is inexplicable. Section 21 of course needs reform—no legislation that could be described as no-fault eviction can survive—but that does not justify throwing the baby out with the bathwater.

Significantly, the Government seem to have recognised the folly by modifying the Bill in the Commons to allow a fixed term of six months. If that is legitimate, why not 12 months, with the continuation of a two-monthly basis? There are market forces the Government do not seem to understand. The long and troubled journey of the Bill through the other place has already become a deterrent to the supply of affordable housing. Supplying housing for rent is now a key diversification for farmers, at a time when agriculture in Britain and elsewhere is in crisis due to falling yields and prices; it is a very relevant factor.

Affordable housing needs a clear definition. Traditional government guidance that rents should be no higher than 30% of gross tenant income is a valid test. Wise landlords would apply clear financial tests in selecting tenants. Landlords cannot be expected to subsidise tenants whose job insecurity—of whom there are many—makes them vulnerable to being unable to fulfil their rental obligations. The Work Foundation at Lancaster University claims that in 2023 1.4 million people were in severely insecure work and were living in privately rented accommodation. This is why it is better to subsidise tenants rather than houses. That is the role of housing benefit. To subsidise rents would mean that changes in tenants’ circumstances would result in tenants getting either more or less than they needed. This has profound implications for public finances.

Rents are a return on capital. Housing supply in the private rented sector depends on adequate rents. It is unlikely that a gross rental return of much less than 3%, from which the costs of maintenance and administration have to be deducted before arriving at any taxable profit, will produce much more housing for letting.

The Bill proposes an ombudsman to adjudicate between tenants and landlords. This may be a sound idea, provided that it is not a signal for the return of the rent officer. There is no justification for also retaining the First-tier Tribunal system in addition to the ombudsman. Membership of the ombudsman scheme will be mandatory for private landlords; I hope the Minister will offer some guide on the expected cost to landlords. The ombudsman will collect a great deal of information about both landlords and tenants. Surprisingly, the privacy implications have not been spelled out, and this aspect does not seem to have been raised in another place. We will have to deal with this in Committee. It would be quite wrong to publicise details of all individual leases. There can be no obligation on landlords to make such information public. Provided market rents are not exceeded, landlords should be entitled, at their discretion, to offer lower rents to particular people for good reason.

My overall concern is that the Bill has not been properly prepared or fully debated before it came to your Lordships’ House. It is crucial that this important and potentially useful legislation should not be enacted with details of crucial aspects of its administration left to secondary legislation at a later date—we simply cannot legislate like that. That would mean regression from increasing private sector supply of good housing and fair rents to the bad old days of bureaucratic domination. An overall consequence could be the taxpayer having to finance an increasing supply of housing for rent, with little hope of the resources to do so. Frankly, the problem I see with the Bill is that it is a superficial political solution to a tough economic and migration challenge.

Neighbourhood Services: Government Support

Lord Marlesford Excerpts

Thursday 24th October 2019 Lords Chamber

[Lord Adonis]

The point is the same, my Lords. If we are to tackle this housing crisis, what is needed is a bold new programme led by district councils and lower-tier authorities—because they are housing authorities—of building new council housing. They should work in partnership with housing associations to improve dramatically the stock of social housing and affordable housing, which is a significant part of the social crisis that the country faces.

One of the biggest changes in public policy over the past 40 years has been that the provision of social and affordable housing, which was regarded as a core function of the state until the 1980s, has totally ceased to be. We need to be self-critical in this: I do not think that the Government of which I was a part did nearly enough. We thought that market-based solutions would meet needs for lower-cost housing; they manifestly have not.

I spent, for my sins, a large part of last night reading the third volume of Charles Moore’s biography of Margaret Thatcher, which I recommend to your Lordships—indeed, some of those whom I see here in the House today feature in it. It is an important contribution to political history. One of the most remarkable things about it is that council housing, which used to be one of the biggest political issues in the 1960s and 1970s, does not feature at all in that volume—it covers the years from 1987 to the end of Lady Thatcher’s career—except in one passing reference to council house sales, which was the only council house policy that Margaret Thatcher had in her 11 and a half years in Downing Street.

The facts are now the facts: the average home in England this year costs eight times more to buy than the average salary; the average share of income that young families spend on housing has trebled over the past 50 years; because of the shortage of social and affordable housing, the number of people living in the private rented sector has doubled in the past 20 years, and private renters spend on average 41%—nearly half—of their household income on rent. Surprise, surprise, a majority, 57%, of private renters are now struggling to pay housing costs, and one in three low-earning renters has to borrow money to pay their rent. Some 800,000 people who are renting cannot afford to save even £10 a month; 27% of private renters receive housing benefit or the housing element of universal credit, which is approximately 1.3 million households nationwide. Meanwhile, the Government spend £21 billion a year on housing benefit because of the very high level of rents, which they have jacked up by removing subsidy and not building more social homes. Last year, only 6,463 new social homes were built nationwide. There are about 1.5 million fewer social homes today than there were in 1980.

I do not want to do death by statistics, but I think that your Lordships get the picture. What has essentially happened in the last generation is that we totally stopped building new social homes publicly. Housing associations filled the gap to a very modest extent, but not nearly sufficiently. We have had significant population growth in that time, alongside the cessation of social home building; a substantial proportion of the country cannot get near the affordable housing ladder, let alone buy housing; and we have a private rented sector in which Rachmanite, disgraceful, slum-type conditions are increasingly common, with local authorities having neither the power nor the resources to deal with them.

What should be the policy? It is very clear to me, because to all big questions there is usually a simple and correct answer—there is often a simple and wrong answer, too. The simple and correct answer to this crisis is for local authorities to start building social housing again. They should do this in partnership with housing associations, but they should be the prime movers because they are the public authorities—and they should build social housing at the level at which they did in the 1960s and 1970s, to deal with the chronic housing crisis.

At the moment there is precious little movement towards this. It is true that councils are building houses again in a very modest way, compared to the period from the mid-1980s until a few years ago when they were building none at all. But it is very modest; it is scratching the surface, and we now need a revolution in policy. To give some idea, the London Borough of Lambeth, for which I was looking at the statistics recently, is building fewer than 100 new social homes a year; it needs to build 1,000-plus to deal with this issue. So we need about a tenfold increase in the rate of new building at the moment. To put that in context, in just that one London borough, Lambeth—I am sorry to keep referring to London and the south-east, which may offend the noble Lord, Lord Greaves, but there are big problems there, too—the council house waiting list is 28,000. That is in a London borough that is able to build fewer than 100 new homes a year. We need to move these two figures much, much closer to each other.

The noble Viscount, who always does his best to reply to our debates, will I hope be able to give us some facts, and I would like to put a few questions to him. The situation that we are in now, which I have seen very often in public policy, is that everyone admits there is a problem—I do not think that anyone who follows me in this debate will say that there is not a big problem—but the difficulty that we face is that the policies do not remotely match the scale of the problem that most people have identified. At the moment, the noble Viscount and his party are in government, so this is a charge which faces them as to what they are doing about it. They have accepted that there needs to be new social housebuilding, but they are doing precious little about it.

I have three specific questions about policy. First, if there is to be significant new housebuilding led by local authorities, it can come from only one of two sources: either grant funding from central government and/or the capacity of local authorities themselves to borrow in advance of the receipts that they will get from then renting out the social housing. Of course, it was a combination of the two that produced the scale of council and social housebuilding in the 1960s and 1970s. The Government have introduced two policies in this respect. They have restored some grant funding to local authorities in respect of housing, but the amount is pitifully small and typically provides only for less than one-third of the cost of new social units. So what is the Government’s policy going forward? Are they going to significantly increase grant funding in respect of new social housing provided by local authorities and, if so—since I am told that unless that grant funding is in excess of 50%, it is very difficult to get building at volume—will the Government be prepared to look at increasing the grant funding to 50% of the cost of providing new social housing?

In respect of borrowing, the situation is more urgent. What we are seeing at the moment is a serious regression in policy on the part of the Government. One of the most welcome things that Theresa May did in her time as Prime Minister was announce an end to the borrowing cap in respect of local authorities building new housing. This was a deeply felt restraint on local authorities that had applied for the best part of a generation. Even though they could borrow cheaply from the Public Works Loan Board—which was the way that local authorities borrowed—and were able to service debt from rents to build new social housing, they were banned from undertaking the borrowing. Theresa May lifted that borrowing cap, which was extremely welcome, but earlier this month the Government announced unilaterally, with no consultation—smuggled out in a Statement on one of those many days when there were many other Brexit-related announcements so that almost no one noticed—that the borrowing rate from the Public Works Loan Board was going to be increase overnight from 1.81% to 2.82%.

We should let that sink for a moment: an increase of nearly 50% overnight in the borrowing rate levied on local authorities in the only place that they can borrow— except at the going market rates, which of course would make all of this totally unaffordable. The word on the street, which I put to the noble Viscount so that he can deal with it when he replies, is that the reason this was done is that the Treasury, which never wanted the borrowing cap lifted in the first place, is now trying to sabotage the whole principle of public borrowing by local authorities by massively increasing the interest rate, hoping that no one will notice.

I was, until the Brexit crisis came along, chairing the National Infrastructure Commission, so I know only too well how the Treasury works in these matters. That interpretation of what is happening seems to me to be extremely plausible. Can the noble Viscount tell the House why the borrowing rate from the Public Works Loan Board for local authorities wanting to borrow to build new housing has been increased from 1.81% to 2.82%? Is this a fixed policy? Finally, because I am always trying to be constructive—and I know the noble Viscount is, too—will he consider reviewing that policy? Will he meet me and other noble Lords who are concerned about this issue to discuss public borrowing by local authorities to build new social housing and how it can be done on an affordable basis?

[Lord Marlesford (Con)]

Is the noble Lord satisfied that there is space in Lambeth to provide housing for 28,000 more people? It is all very well to say that we have to provide housing for people who need it, but if you are talking about a particular area they want to live in, there has to be the space for the housing.

[Lord Adonis]

Yes, I am satisfied, and I would be very glad to do a walking tour of the London Borough of Lambeth to explain to the noble Lord how it can be done, starting with the huge issue of the redevelopment of Waterloo station. It desperately needs redeveloping; Waterloo is the biggest terminus in Europe and if it were redeveloped it could provide huge opportunities for new social housing. If the noble Lord is up for it, we will do it and we will work out how we can provide that housing—and I would like the Minister to come along, too, because then something might actually happen.