Fire Safety and Cladding

Sarah Jones Excerpts

Wednesday 23rd January 2019 Commons Chamber

[Mr Steve Reed (Croydon North) (Lab/Co-op)]

I am grateful for the opportunity to raise the issue of fire safety, which is of great concern to many people in my constituency and throughout the country, particularly since the Grenfell Tower fire 19 months ago. The debate is happening somewhat earlier than we envisaged. I hope that means that there will be more opportunities for other Members to participate, because I know that the issue affects many constituencies.

I want to cover two areas: first, the major fire that happened at the Shurgard self-storage centre in my constituency on new year’s eve; and secondly, fire safety and the use of flammable cladding in residential and other buildings throughout the country, about which there has been great disquiet since the Grenfell Tower fire.

The fire at the Shurgard self-storage centre was massive. More than 1,200 people had stored their goods and possessions in that facility, which was one of the largest in London. When I was first alerted to what had happened, my first thought was, “I hope everybody is safe,” and it was reassuring to hear that there had been no loss of life. However, a couple of weeks later I had the opportunity to meet a group of Shurgard customers who had lost everything they had put in storage at that facility. The scale of loss, devastation and harm that that caused cannot be overstated. The losses were enormous.

As with all self-storage centres, the Shurgard facility was marketed as a safe place to store goods. It was even advertised as a place for those who had suffered a bereavement to store the belongings of a loved one.

[Sarah Jones (Croydon Central) (Lab)]

I thank my hon. Friend for bringing this important debate to the House. Constituents of mine had their goods burnt in the Shurgard fire. I am sure that hon. Members will be interested to know that, having advertised as “safe and secure”, since the fire the Shurgard website has removed 35 mentions of that phrase. Its use is nothing short of mis-selling.

[Mr Reed]

I am grateful to my hon. Friend and neighbour for her intervention. It is telling that Shurgard saw fit to remove all the language about safety from its website after the fire. I hope that, during the debate, we will expose the fact that the facility was far from being as safe as it was marketed to its customers.

--- Later in debate ---

[Mr Reed]

My hon. Friend makes an important point. I am also interested in the insurance aspects of this case, including whether people were wrongly advised by the self-storage company about the level of insurance that they should have taken out and, indeed, whether there was mis-selling of insurance. I have contacted the relevant authorities—the Financial Conduct Authority and others—to seek their advice. I hope we can bring that issue back to the Chamber at the appropriate time, and I would be delighted to work with my hon. Friend on that, since he has an interest in it.

I return to my attempt to establish the extent of the harm that has been caused to people’s lives by the fire. I met another woman—a customer—who had stored in the facility her mother’s and her grandmother’s ashes. One simply cannot imagine what it would feel like for an individual to lose something of such enormous human value to them.

[Sarah Jones]

My hon. Friend is giving way generously. On that terrible point, last weekend I met some people who were affected, and I have a constituent whose pictures of her deceased children were burned. These things are so irreplaceable and so sad. People really did believe that their things would be kept safe, and that everything would be okay. We cannot emphasise enough what a horror they have been going through.

[Mr Reed]

I am grateful again to my hon. Friend for her intervention. One really cannot exaggerate the pain that has been caused. When anybody puts their most beloved and treasured possessions in a facility and are assured that it is safe, they deserve to know that it actually is safe. I met an artist who had lost a lifetime’s artworks, which she had created. I met a DJ who collects first-edition reggae albums on vinyl. All of that is gone in the fire, all of it irreplaceable. No money can replace that.

Of course, many businesses today keep their stock in facilities like these, and many businesspeople have lost their stock. Even if it was properly insured, the short-term loss of that stock means that they have lost a whole quarter’s trading, which is enough to put many small businesses under. I really do think that the Minister needs to consider what emergency support is available for the people facing real hardship and crisis as a result of the fire.

Many colleagues have raised concerns about the level of fire safety at the Shurgard facility, and I share those concerns. When I met a group of customers, that was one of the biggest areas giving them cause for concern that they raised with me. A customer putting their possessions in a self-storage facility would assume that there had been some effort, when designing it, to prevent the spread of fire, should a fire take hold. In fact, the walls in the individual units in this facility did not go right up to the ceiling—there was a gap between the top of the unit and the ceiling—so a fire that started in one unit could quickly and easily move into the next, and then the next and beyond. It seems to me shocking that these facilities are built without designing in measures to prevent the rapid spread of fire.

Customers using that facility reasonably assumed that a sprinkler system was installed in case of fire. In fact, there is no sprinkler system in that facility, and there is no requirement for self-storage units to have sprinkler systems. Another point is that Shurgard did not ask their customers to report or keep a record of what they were storing in that self-storage facility. Someone could put all their most treasured possessions in the unit they were renting, but the next-door unit could be filled up with barrels of oil or something equally flammable, and nobody would ever know.

If we put all that together, there were in effect no fire safety measures whatsoever in this facility. It was advertising a service as safe and secure for people to keep their goods in, but it simply was not. It was taking money from people, and then not providing the service that people expected. If things go wrong—and on new year’s eve in Croydon they went severely wrong—everything people owned would have gone: it would have been taken away, and they would have lost it.

Shurgard has been very clear with me—I have met it to discuss this—that it has complied with all UK fire safety regulations. I do not know whether that is true, but that is the point it has made to me. If what it says is true and it was fully compliant, those regulations need to be reviewed and tightened as a matter of urgency.

[Sarah Jones]

At the meeting with customers last weekend, they made two really interesting points. One was that Shurgard in other European countries would have to have sprinklers, because in other European countries there are regulations requiring a building of a certain size to have sprinklers, so the same company would have sprinklers in another country but not here. They also made the point—I do not know whether this is 100% accurate—that, about 40% of Europe’s storage is in this country. There is something about the nature of the cost of housing and the fact that people have to put so much stuff into storage, perhaps because of the value of land, that means our country has a particular problem in this area and needs to look at the regulations for the storage sector in particular.

--- Later in debate ---

[Mr Reed]

I absolutely agree. The level of stress that this is causing is making some people so ill that they cannot continue to work. We cannot allow this to go on.

[Sarah Jones]

I am sorry to keep intervening—my hon. Friend is being incredibly generous—but I just want to make a point about waking watch. Having talked to the fire services, I know that it is not an ideal situation. The fire services are worried that companies have come out of the woodwork and started doing waking watch, but people are not always well-trained and there are not always enough of them on site. Waking watch is very much a temporary measure. To have 19 months of waking watch is expensive, but also not ideal, and we cannot be 100% sure that these people are trained and doing what they are supposed to be doing.

[Mr Reed]

I am grateful for my hon. Friend’s intervention. As the hon. Member for Bromley and Chislehurst (Robert Neill) will know, residents in Northpoint Tower in Bromley face bills of up to £70,000 each. People simply cannot afford that, and the stress they suffer from receiving that bill and knowing that, unless they find a way to pay it, they will be left living in a block with potentially flammable cladding on, is simply unacceptable.

Freehold Estate Fees

Sarah Jones Excerpts

Tuesday 22nd January 2019 Westminster Hall

[Sarah Jones (Croydon Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Bishop Auckland (Helen Goodman) on securing the debate and on her substantial work on the topic.

As we have heard, homeowners on private estates across the country are being fleeced through a system of spiralling fees, shoddy service, lack of choice and zero accountability. We know it is an issue that affects up to 1.3 million households and it is a problem that mirrors the exorbitant service charges and draconian standards facing leaseholders. It is a problem that the Government have had years to fix, but they have yet to do so.

We heard in colleagues’ eloquent speeches just how obscure some of the charges are. My right hon. Friend the Member for Alyn and Deeside (Mark Tami) told us about the fence that would be looked at but not actually fixed. My hon. Friend the Member for Sunderland Central (Julie Elliott) told us about the light that took six months to replace, but which was not replaced correctly. My hon. Friend the Member for Birmingham, Edgbaston (Preet Kaur Gill) spoke powerfully about people’s sense of feeling helpless and powerless. We heard from my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) about how developers are finding additional ways to fleece people and charge more and more. The Government have failed on a number of levels. I hope that today we can take a positive approach to the issues and take action on them.

My hon. Friend the Member for Bishop Auckland made some very good suggestions. Homeowners have been raising the issue for a while. In 2016, the HomeOwners Alliance said that

“this new model has crept in without democratic scrutiny or discussion and over the past 10 years or so has become the industry standard.”

Back in 2017, the Government said that this was a problem and that they would introduce changes to the law. It is not enough to accept that there is a problem—we need to act.

The second problem is that, as discussed, when the Government published proposals to fix the problem, they did not go far enough. The Government say that they will give freeholders the right to challenge the reasonableness of charges or appoint a new manager, via tribunal, in the same way as leaseholders currently can. We know from the Government’s own repeated consultations on fixing the leasehold sector that the system currently in place for leaseholders is not working. People are not going to trial because they fear the complexity and potential cost of the process. Property companies turning up with teams of lawyers make an imbalance and a mockery of the system.

My hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) has previously calculated that the overcharging of leaseholders through extortionate service charges is up to £1.4 billion per year. Why are the Government presenting access to tribunals as the solution when that has abjectly failed to stop abuses in the leasehold sector? The Government admit that failure and in April last year they accepted that managing agents needed independent regulations. I understand that a working group under Lord Best is designing the new regulatory regime to cover aspects such as leaseholder service charges. Will the Minister confirm whether freehold estate management will be covered by the new independent regulator, and if not, why not?

The proposals set out by my hon. Friend the Member for Bishop Auckland are much more likely to tackle the abuse of homeowners, with caps on estate charges, minimum standards and powers for residents to take over management of communal areas. That last proposal would mirror the system of commonhold for shared residential property. I hope the working group currently designing the regulatory system will consider those proposals.

The third failure of Government is that they have let a system develop whereby roads, green spaces and other public spaces are effectively privatised. Even those who are not being ripped off are effectively paying twice, as has been pointed out. They pay council tax, which contributes to maintaining communal areas under council control, and then they pay again for the private maintenance of their own areas. The Government could stop that all together—they should act. We have discussed who is at fault; I do not think we can blame councils, because of the 50% cuts in local authority funding under this Government and the £7.8 billion predicted black hole in local services by 2024-25.

Overall, the Government have been too slow, too weak and lacking in ambition. Today’s debate shows that the Opposition could do better across the board. The Government talk a lot about their credentials on home ownership, but today’s debate is just another example of their failing people who have worked hard to buy their own home. Eight years of Conservative failure on home ownership is exacerbated by this very contentious issue, which affects many people and on which the Government could act.

I want to end by quoting the hon. Member for Bishop Auckland, who said that housing is being seen as an abstract investment rather than as the foundation of our families and communities. Homeowners want action and they want it now, and I very much agree with them.

Oral Answers to Questions

Sarah Jones Excerpts

Monday 10th December 2018 Commons Chamber

[James Brokenshire]

The hon. Lady rightly challenges on behalf of her constituents. What I would say to her very clearly is that 201 households from Grenfell Tower and the Walk need rehousing; 193 have accepted permanent offers and seven have accepted temporary offers; and 179 households have moved in. I accept that there needs to be more effort in relation to emergency accommodation and getting people out of hotels. Progress is being made and we will continue to support the Royal Borough of Kensington and Chelsea to do that and get people into permanent homes.

[Sarah Jones (Croydon Central) (Lab)]

It is 18 months after Grenfell and a quarter of families are still not in permanent homes. The problem goes wider. We have found out that 16 out of the 20 tall tower blocks in Kensington, several within full view of Grenfell Tower, still do not have sprinklers, and only 4% of council blocks in London have sprinklers. Sprinklers are mandatory in new tall buildings because they keep people safe, but councils do not have the funds to retrofit social housing blocks. The Government have brushed away every single request for help as non-essential. Why do the Government continue to stigmatise and discriminate against social housing tenants?

[James Brokenshire]

The hon. Lady will know that one of the key elements of our social housing Green Paper was to break stigma, and I challenge very firmly to ensure that people in social housing are treated fairly and appropriately. She highlights the issue of sprinklers and is right that in relation to new builds, we have put firm requirements in place. We have said that if local councils require flexibilities to be able to assist with that and the management of those buildings, we will certainly consider that fairly, because our priority is to ensure that people living in high-rise blocks are safe.

Private Rented Sector

Sarah Jones Excerpts

Thursday 29th November 2018 Westminster Hall

[Sarah Jones (Croydon Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. This is an important debate, and we have heard some really helpful contributions. I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for securing it and for his leadership of the Select Committee, and I thank the other Committee members who are here. All have raised important points.

I should be clear at the outset that, as hon. Members might expect, the Opposition agree with the Committee’s assessment that the majority of landlords are good. I do not think anybody questions that. They play an important role in the housing system and in our society. However, as the Committee’s report illustrates, the situation faced by a growing number of private renters is intolerable. Most of us here today will see in our constituency surgeries—I certainly do—the horrible things that too many people have to endure. That includes the 800,000 privately rented homes with at least one category 1 hazard, landlords cutting off electricity to vulnerable tenants, and letting agents demanding hundreds of pounds to do things such as view a property.

We need to keep in mind all the time what private renters want, and that needs to be the test for policy makers. I think there are two things: first, people want to rent a property fit to be called a home; and, secondly, they want the same rights and redresses enjoyed by consumers in lots of other areas of society. For many, the private rented sector undoubtedly fails those two tests. Standards at the bottom end of the market are poor. As Opposition Members have said many times, people have more rights when buying a fridge-freezer than when renting a property.

The report identifies some important failings in Government policy that have led us to this point. I will look at two broad areas: the lack of intervention and enforcement, and the imbalance of power between tenants and landlords. On the first, as the report demonstrates, outdated legislation and a lack of enforcement mean that the current system of setting and enforcing standards does not work. We agree that the current legislation is overly complicated. It has built up over many years and has become somewhat hard to navigate and dated. Penalties are not strong enough to deter bad practice, and fines are too small to incentivise legal action in the first place.

We have already heard about the Homes (Fitness for Human Habitation) Bill introduced by my hon. Friend the Member for Westminster North (Ms Buck). However, the Government could have helped its provisions to become law years ago by accepting Labour amendments to the Housing and Planning Act 2016. The fact that so little enforcement action is taken is all the proof we should need that the system is broken. As we have heard, Advice4Renters estimates that just 0.1% of landlords letting non-decent homes are prosecuted each year.

The Guardian revealed today that nine out of 10 local authorities failed to issue a single civil penalty notice against a landlord or letting agent last year. It is impossible to deny that the billions of pounds of cuts faced by local authorities have affected their ability to enforce through environmental health and trading standards. I accept the argument that we also need leadership in local authorities, but the extent of the cuts has been very significant and must inhibit what local authorities can do. The fines being so low means that there is neither a deterrent for bad landlords nor an incentive for councils to take action. We share the disappointment expressed by the Local Government Association and others that the Government ignored the Select Committee’s recommendations to improve enforcement through increased fines and powers.

The report was right to express concerns about the situation with landlord licensing schemes. I have seen the positive impact of such schemes in my own borough, where Croydon Council has issued more than 30,000 licences. It is wrong for the Secretary of State to hold a veto over councils wanting to tackle rogue landlords. The Secretary of State has blocked councils such as Redbridge from introducing borough-wide licensing. There is a clear contradiction: Ministers talk about standing up for renters, but their actions prove otherwise.

Let me turn to the imbalance in the private rented sector. The report is clear about the things that need to be done to make the rules fit for purpose and to ensure that they are enforced more, but there are deeper structural issues in the private rented sector. The Committee rightly points out that we cannot draw a clear line and say that there is a small minority of rogue landlords and everyone else is perfect. That would oversimplify the issue and ignore the structural problems that mean that a landlord does not have to be rogue or even breaking the law in any way to make tenants’ lives difficult. There is an imbalance that no court or enforcement authority can solve, because it is part of a system that is fundamentally skewed against private renters.

The system is stacked most heavily against those at the very bottom—that is clear. Permitted development and abuse of the local housing allowance in lockdown properties make a mockery of planning and welfare rules. That is a symptom of a broken housing market. We are failing so badly to build the homes that the country needs that the Government are essentially saying, “Anything will do.” Tenants, left with little or no choice, pay the price, but yet again the Government ignore the Committee’s valid recommendations on this topic.

We could talk more about what needs to be done about landlords refusing to rent to people on benefits. That issue comes up repeatedly in my constituency. I know that Shelter is trying to take some legal cases through the courts to affect that. I will not talk more about that now, but it really is heart-wrenching in constituency surgeries.

Retaliatory evictions are a real concern. They have been talked about today and were rightly raised by the Committee. When 44% of renters say that they will not negotiate over disrepair for fear of eviction, and when charities are having to warn people that raising a complaint might get them evicted, that is a structural failure in the system. We agree that the current protections are nowhere near robust enough to avoid retaliatory evictions or punitive rent rises. I have seen this happen to my own constituents, as we all have. Labour would go further than the Committee’s suggestion of extending the time limit for protecting tenants from section 21, which the Government seem not to be observing anyway. If we say that section 21 is unfair for those who have made a complaint, why do we accept it for those who have not complained? No-fault evictions are at the heart of the imbalance between tenants and landlords and should be scrapped entirely.

The Government have admitted that they need to do more. They say that they want to rebalance the relationship in the rented sector and give tenants access to redress. But given the record of the Government in relation to renters, people would be right to be sceptical. Consultations, calls for evidence or plans to introduce measures such as a housing court, ombudsman schemes or letting agent regulation are worth very little if they do not result in action. The Department has a bad record in terms of turning consultations into legislation: 185 housing consultations have been launched by the Department since 2010. Too often, consultation fails to translate into anything substantial.

The Government recently announced plans to look at introducing three-year minimum tenancies, which then appeared to be quietly dropped. There is little point in a housing court or ombudsman if tenants do not have rights to protect in the first place. The Department’s record on private renting so far has been to talk tough but under-deliver. The Government have blocked Labour’s proposals to amend the Tenant Fees Bill so that deposits could be capped at three weeks’ rent. As we have discussed, that would mean an average saving of £575 for tenants across England and £928 in London. The current six-week cap has the potential to cost tenants more: we know that the majority—more than 50%—of landlords charge four weeks’ rent as standard, so it would end up increasing people’s deposits and not saving them money.

[Mr Prisk]

The hon. Lady is setting out her party’s views on various issues. A number of people who are good landlords are very anxious about future rents. Would it be Labour party policy in government to cap them or index them?

[Sarah Jones]

As I was about to say, we would introduce three-year tenancies, and it would not be possible to increase rents above inflation over that period. It is a matter not of setting what the rent would be, but of people having more security in a tenancy and more ability to understand the level at which the increase would happen over that longer period.

[Mr Prisk]

I take it from that that there could be no tenancy shorter than three years.

[Sarah Jones]

It is interesting that the hon. Gentleman should say that, because we are looking at developing our policies in this area and have also said that we want to scrap section 21. We need to look at how that would work and what the conditions would be. It is really important to stress, though, that we are not saying that people should have the right to remain in their home indefinitely if, for example, they are not paying their rent or are, in other ways, causing disruption or antisocial behaviour. That is absolutely not the point of what we want to do. There will always be a need for a landlord to be able to evict tenants who are not paying their rent or who, for whatever reason, should not be in the property.

We need to find the middle ground. At the moment, there is a problem, particularly in London, and I have seen it in Croydon. When we talk to renters organisations such as Generation Rent, they talk of a cycle whereby people are being evicted for no obvious reason. For example, a landlord might not be an expert landlord, as we have talked about. Someone may have inherited a property or have moved out of London. They might have a property and not really know what they are doing. They might decide to move back in or they might decide to do something else with the property. Then we have a group of people who are constantly having to move because they are being moved on through section 21 evictions, or we have people who cannot afford the rent increases, so they are also having to leave through section 21. An imbalance of power is our starting point when we are looking at policy development. I hope that that answers the hon. Gentleman’s question.

[Mr Betts]

Is my hon. Friend basically saying that the proposal will be very similar to one that I think Shelter put before the Select Committee in 2013-14, which was to introduce three-year tenancies, with the rent in that period linked to some inflation measure so that there was a clear understanding by both landlord and tenant of how it would progress in the course of the tenancy? The other issue that we raised, which brings us back to the housing court idea, is that if that tenancy proposal happens, landlords do need a way reasonably quickly to get out a tenant who is not paying their rent. Having a housing court might be one way to enable that process to happen and to make landlords more comfortable with longer-term tenancies.

[Sarah Jones]

I thank my hon. Friend: I did not see Shelter’s evidence in 2013, but, yes, that sounds a reasonable way forward. The absolute starting point, as I said at the start of my contribution, is that we know that most landlords are good landlords. We are not trying to create a system in which they cannot function and cannot evict people when they need to; we are trying to create a system that is fair. The Labour Front-Bench team were fortunate to go to Berlin recently to see, as many people have, the system of renting that people have there and to look at some of the other models. There are lots of lessons to be learned from other countries.

I should make progress. The Guardian and ITV investigation into the private rented sector, which has been talked about and has forced a U-turn from the Prime Minister, is worrying. Despite the Government estimating that there are 10,000 rogue landlords, not a single name, at the time of that investigation, had been added to the database; that was in October, which was more than six months after its launch. One wonders what the point of a rogue landlord database is if the rogue landlords have not been identified. The Mayor of London’s database has more than 1,000 entries. I hope that the Government, through the Minister, can update us on where the rogue landlord database has got to today.

The Government announced that they would give £2 million to local authorities to take action against bad landlords, but that amounts to £6,000 per council. Meanwhile, the trading standards teams expected to enforce new legislation such as the Tenant Fees Bill have seen enforcement officer numbers go down by 56% since 2009. These teams have faced funding cuts of almost £100 million since 2010. Local authorities overall have had billions of pounds taken away from their budgets. In that context, £6,000 does not feel like enough.

The Opposition recognise that the scale of the challenge means we need a more radical response—a consumer rights revolution. We have a commitment to end unfair evictions. I am proud that my local authority, Croydon Council, was the first to pass a motion calling on the Government to scrap section 21. We have committed to give renters greater security, as we have just discussed, with a three-year cap on rent rises. We want to name and shame rogue landlords and introduce tougher fines for those who fail to meet minimum standards, with those fines funding local authority enforcement work. We would properly support landlord licensing. We also want to see greater powers for Mayors across the country to control rents, if appropriate, in high-cost areas such as London.

Inspired by the system in Germany, we have committed to spend millions to kick-start renters’ unions. I spent time at the Labour party conference talking about that with London Renters Union, which has helped many renters out of situations in which they would have struggled on their own. We want root-and-branch reform of the private rented sector. It is too dysfunctional for us to tinker around the edges. The end result of insecure tenancies, unsafe homes or extortionate rents is staring us all in the face. The end of a private tenancy is the leading cause of homelessness today. There are 1.6 million people in chronic debt, and 120,000 children will wake up tomorrow without a home. That is not to mention the extra 1 million people under the age of 35 who are unable to buy their own home and are forced to rent in the private rented sector. For all of their sakes we should reform the private rented sector.

Oral Answers to Questions

Sarah Jones Excerpts

Monday 23rd July 2018 Commons Chamber

[Sarah Jones (Croydon Central) (Lab)]

At a time of national housing crisis, as developers continue to exploit the viability loophole, a staggeringly small 2.5% of homes completed last year were for social rent—the lowest number since the second world war. The Government continue to disregard this place, particularly on housing, in failing to deliver the revised NPPF, along with a raft of other documents promised before the recess. Thousands of people who desperately need social housing are being abandoned, as this Government entirely pull out of social housing, so will the Secretary of State tell us whether he will change his draft NPPF explicitly to include social rented homes in the official definition of affordable housing? If he will not, any warm words of support for social housing will ring hollow.

[James Brokenshire]

I entirely reject the hon. Lady’s characterisation of the Government’s approach to dealing with affordable homes and social housing. She will see that from the funds that we have committed to secure for the homes agenda. Under this Government, we have seen 1.1 million additional homes delivered since April 2010. Over 378,000 of those are affordable homes, including 273,000 affordable homes for rent. This Government are delivering and we will continue to do so.

Oral Answers to Questions

Sarah Jones Excerpts

Monday 18th June 2018 Commons Chamber

[James Brokenshire]

I absolutely do. I commend the work of my hon. Friend’s council. We are looking at how we can strengthen the housing revenue account further and see a new generation of council house builds. I commend his local authority for getting on with that.

[Sarah Jones (Croydon Central) (Lab)]

The Secretary of State has just talked of his affordable homes record, but we all know that this Government’s definition of affordable homes is a joke. It allows an illusion of genuinely affordable house building, which is simply not happening. Many of his own Back Benchers agree, and 10 of them are meeting the Prime Minister on Wednesday to call for more genuinely affordable homes. The number of new social rented homes funded by the Government is at its lowest ever level, with fewer than 1,000 started last year. Will the Secretary of State therefore match Labour’s commitment, in our social housing green paper, to scrap the bogus definition of affordable rent at up to 80% of market rents and to invest in genuinely affordable homes?

[James Brokenshire]

I hope that the hon. Lady will welcome the fall in housing waiting lists under this Government. I say to her very clearly that steps have been taken under this Government to respond to this challenge. I remind her again of the £9 billion that has been committed to affordable homes, with the change that that will bring to so many people in actually creating the vision of a home and making that a reality. That is this Government’s intent, and it is something that we will deliver.

Tenant Fees Bill (Fifth sitting)

Sarah Jones Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 12th June 2018 Public Bill Committees

[The Chair]

I remind the Committee that with this we are discussing the following:

Clause 23 and 24 stand part.

New clause 1—Enforcement: costs—

“The Secretary of State shall reimburse—

(a) a lead enforcement authority, where this is not the Secretary of State, for any costs incurred by the authority in the exercise of its duties under section 23 or section 24 of this Act, and

(b) an enforcement authority for any additional costs incurred by that authority in the exercise of its duties under section 1 or section 2 of this Act.”

[Sarah Jones (Croydon Central) (Lab)]

It is a relief to come back and see that the Minister has not resigned and followed the advice of his colleagues. I am reassured that he is still here.

As I was saying this morning, new clause 1 sets out that both the lead enforcement agency and local enforcement agencies will be reimbursed by the Government for costs incurred in enforcing the Bill. That is necessary because the Bill as it stands does not, in our view, provide adequate resource for enforcement.

We talked this morning about the scale of the challenge, with 56% of enforcement officers lost since 2009. In our evidence session, the Chartered Trading Standards Institute emphasised the scale of the problem that exists with enforcement, pointing out that more than 50% of the landlords and letting agents that it works with in London are still non-compliant with the rules. Shelter has highlighted the extreme difficulty in assessing the true number of rogue landlords, saying that the number is still underestimated. Another challenge for enforcement is collecting sufficient evidence to secure convictions. This morning, my hon. Friend the Member for Great Grimsby cited the Chartered Trading Standards Institute among others, which has worries about the burden of proof and said that it will scare people off, including trading standards.

The Minister might point to the provisions to stop retaliatory measures that were included in the Deregulation Act 2015, but the lack of progress on enforcing those provisions serves only to reinforce the point. Following scrutiny by the Housing, Communities and Local Government Committee, the Government were forced to admit that overstretched local authorities were not even collecting the data that would allow them to see whether the retaliatory eviction provisions in the 2015 Act have been used. The Government wrote:

“We are currently unable to provide this data as local authorities are not specifically obliged to provide it and the Department does not routinely collect it. However, we recognise that this is an area of concern and we are writing to request this information from local authorities to inform our understanding about the effectiveness of the provisions.”

On that topic, Shelter’s most recent survey of tenants found that a quarter of renters who had a problem serious enough to report failed to report it because they were worried about retaliatory measures from their landlord or letting agent. That clearly demonstrates a failure to give tenants confidence in the policy, and backs up the point that tenants may be too scared to engage properly with the enforcement process to build a strong enough case.

The challenges to enforcing the Bill will come from all directions. We know from evidence that was provided that local trading standards authorities may not have the capabilities or expertise. For example, Shelter has raised concerns about how effectively trading standards will be able to police the use of default payments. Shelter has asked the Committee to explore whether local authorities will have sufficient powers and resources to evaluate whether a default fee genuinely represents a landlord loss, and the kind of guidance that the Government propose to provide to assist authorities in making such determinations. The Residential Landlords Association has argued that trading standards should not enforce the Bill at all, and that the responsibility should rest with environmental health departments.

Three concerns have caused us to table the new clause. The first is about getting the numbers right. We have serious concerns about the numbers being thrown around by the Government about how much it will cost to enforce this at a local and national level, as well as the confusion over how financial penalties will be calculated by enforcement authorities.

We have significant doubts about the Government’s argument that the cost of enforcement will be fiscally neutral for local authorities by year 2. The Government have been forced to admit that that will not be the case for year one. The £500,000 allocated by the Government for enforcement in the first year feels as if it was plucked from the air, with similarly little thought. It is unclear whether that figure will change if authorities’ costs are higher than estimated.

The very thin detail on enforcement costs first provided to the Select Committee in November as part of an impact assessment argued that the cost to local enforcement authorities would be £150,000 per annum. The Government’s assumption that the enforcement would be self-funded from year one was rightly questioned by the Select Committee, and the Government duly committed to providing additional funding to local authorities. In the full impact assessment published last month, the Government amended their assessment of expected costs to local authorities in the first year to £300,000. That is a significant jump from their assessment in December. The impact assessment also states that the Government assume £200,000 in set-up costs for the court system, thus reaching the £500,000 figure. However, they appear to contradict themselves in the explanatory notes to the Bill:

“We estimate that local authorities will incur a new burden in respect of enforcement costs in year one of the policy only and we estimate this to be no more than £500,000.”

Assuming that the £200,000 earmarked for the courts in the impact assessment actually goes to the courts, will the Minister confirm whether local enforcement authorities will be getting £300,000 as indicated in the impact assessment, or £500,000, as indicated in the explanatory notes? There is also confusion over whether that money is the maximum authorities will receive or whether the Government will fund the actual costs, and we note the use of the word “estimate” in the explanatory notes.

We had concerns about how the Government arrived at the year one figure before the Committee sittings began. They increased during the evidence sessions last week, when the Minister asked outright for any analysis that the Local Government Association had done on how much funding should be allocated for year one. It then emerged that the LGA had been asked for that information, but had been given just one week to provide the figure. I have a great deal of respect for the ability of the LGA, so if it cannot turn that request around in a week, I doubt that many others could.

It seems astonishing that the Government could still be unclear as to how much this crucial part of the Bill is likely to cost, and I worry that they are pulling numbers out of the air. If the Minister will not accept our new clause, will he explain how the Government arrived at this figure—and, indeed, what the correct figure is? If he cannot share the evidence now, will he write to the Committee? The key point is that, whether it is £300,000 or £500,000, it is simply not enough. As the LGA has rightly pointed out, that amount split over 340 local authorities is a laughable sum of money when we consider that the average budget for one council trading standards team is more than £650,000.

The confusion over costs extends to what enforcement authorities can charge as penalties. As we discussed earlier, the Government have so far left that open, suggesting that local authorities can take into account the need to cover the costs of their enforcement functions when setting the level of the financial penalty. As the Select Committee pointed out, that is a departure from the usual principle that penalties should relate principally to the gravity of the wrongdoing. The decision to fund enforcement from year two solely by fines risks creating a bizarre situation where enforcement areas with a lower level of offences require higher fines to cover their authority’s costs. The same logic goes for areas where the most successful preventive enforcement is happening.

Our second concern is about the pressures on local trading standards authorities. The Chartered Trading Standards Institute rightly pointed out:

“Resource is, without question, the pervasive issue which will determine the efficacy of the Tenant Fees Bill.”

However, as we have already emphasised, the pressures on local enforcement authorities are increasing at a time when budgets are stretched to an unprecedented degree. Some of the new burdens taken on by trading standards include enforcement around, as my hon. Friend the Member for Great Grimsby mentioned, the sale of knives, as well as the use of wood burners, which is related to the Government’s clean air strategy. The effect of that pressure is being seen in the private rented sector. It was pointed out on Second Reading and since then by many organisations that there is already legislation that requires letting agents to advertise their fees, but it is simply not enforced.

The fact of the matter is that after the first year, and probably during that year too, the money recouped by fines will be completely insufficient to pay for any semblance of an effective enforcement system for the Bill. Trading standards authorities will be in a vicious circle, with an inability to enforce due to inadequate resources that then leads to the funding stream getting even worse that then leads to the enforcement getting thinner, and so on and so forth until nobody is bothering to enforce the measures at all.

There is much evidence from across the sector that that will be the case, and the Government are simply ignoring it. The London Borough of Newham says that it does not consider that moneys recovered through the civil penalties will adequately cover local authorities’ enforcement costs. The Chartered Institute of Housing points out the danger of a funding gap, as well as the risk that councils will need to invest in additional resources without being able to guarantee a particular level of financial return. The Association of Residential Letting Agents argues:

“Unless specific funding is set aside for the sole purpose of enforcing these new laws, we will see the same lack of effective enforcement of the ban on tenant fees as has been demonstrated on the transparency rules under the Consumer Rights Act 2015.”

Citizens Advice says:

“The legislation in its current form is reliant on Trading Standards, which we believe risks rogue agents continuing to charge fees. The lack of capacity facing local Trading Standards means many will struggle to take on additional enforcement duties without support.”

We ask the Minister the same thing on fiscal neutrality as we did on the figure for first-year costs: he must provide evidence, either today or in writing, on how the Government arrived at that assumption, or accept our new clause for the Government to reimburse the costs. To force local authorities to pick up the bill for something his Department has not costed properly would be unacceptable.

Thirdly, we are concerned about lead enforcement authority and the pressures around information. The Bill rightly allocates a lead enforcement authority to help streamline and co-ordinate enforcement work—something that has been pretty much universally supported. However, the same questions remain about the resourcing of that body. The Select Committee recommended that the lead enforcement authority should be tasked—and, importantly, given funding—to launch a nationwide awareness-raising campaign, to promote the legislation to tenants. In its oral evidence last week, the Local Government Association again pointed out the need for a high-profile, national campaign to remind tenants of their rights and remind the sector that fees are outlawed. The need for that is made much more pertinent by the fact that Shelter’s tenant survey, which I discussed earlier, found that more than 20% of renters who had a problem that was serious enough to report failed to do so because they were not aware that they could raise it with their local council.

Unlike their other financial estimates, the Government have at least been consistent in expecting the costs of the lead enforcement authority, in line with similar lead bodies, to be between £200,000 and £300,000 a year. It is unlikely, however, that that will be enough to ensure that any significant awareness campaign is run. There is a big question mark over the ability of the lead enforcement agency to do sufficient work to spread awareness of the changes made by the Bill—and awareness is crucial to its success. As with my previous points, I ask the Minister either to support our new clause or provide details about how such an awareness campaign would be funded, perhaps through his Department.

My final point is about the pervasive disincentive that the Bill as currently proposed would create. As I have set out in detail, experts from the Chartered Trading Standards Institute, the LGA and various local authorities agreed that funding through fines will not cover the cost of enforcement if it is done properly. One of the most frustrating aspects of the Bill is that that will ruin any chances of good preventive work being done. Initial fines of up to £5,000 will not give authorities the resources or incentive to do proper work to prevent breaches. As authorities themselves point out, if trading standards enforcement activities are effective, civil penalties will rarely be charged. That is because most intensive activities of council officers concern monitoring practices and working with letting agents to comply with the law. That creates what the Select Committee called a

“pervasive disincentive for authorities to engage proactively”.

I hope that the Minister can offer us something constructive on that point. He will admit that nobody wants this important piece of legislation not to deliver what we want it to deliver. If he will not support the new clause, will he agree to look at ways to finance activity where authorities can demonstrate that good preventive work is keeping convictions down, and come back to us with a proposal to that effect on Report?

I re-emphasise the scale of criticism about the provisions in the Bill for enforcement. The Chartered Trading Standards Institute said:

“The central concept that enforcement of the ban will be self-funded from the proceeds of civil penalties recovered by trading standards is completely erroneous.”

I urge the Minister to look again at this core part of the Bill and, if he will not support new clause 1, will he agree, at the very least, to provide the information we request and consider what else he could introduce on Report to improve the situation?

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

We believe that the new clause, which essentially provides a blank cheque to local authorities, is not the right approach. Given that my day job is Local Government Minister, of course I am minded to ensure that local authorities have the resources that they need to carry out their various functions adequately. That is what I spend most of my time doing. The provisions in the Bill are intended to be self-financing. Local authorities will be able to retain any moneys recovered through financial penalties for future housing enforcement. That ensures that they are better incentivised to undertake enforcement activity. We believe that that incentive impact and behavioural change is important and helpful.

I draw Committee members’ attention to the consultation, where it was generally agreed that ongoing costs would be met from enforcement. We heard from landlord and agent representatives last Tuesday that they, too, thought that would be sufficient, but that some initial funding as seed money is needed in year one for familiarisation and adjustment with the new regime. Indeed, the Government agree about that, which is why we intend to provide additional funding of up to £500,000 in year one of the policy, to support implementation and education. That figure has been arrived at through consultation and analysis together with several local authorities and officials in the Department to arrive at a bottom-up estimate of what overall costs might be. We are also committed to providing funding for the lead enforcement authority of up to £300,000 a year to support its important role of providing guidance and support to local enforcement authorities.

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Finally, I point out the comments of the panellist from OpenRent last week, who made it clear that as a result of the Bill and the simplicity of the ban that we propose self-enforcement will be considerably easier, which will lower the burden on all enforcement agencies and is a welcome approach. I also point out that there are other avenues for tenants to receive redress, namely their client redress schemes. As we have touched on, the Government are expanding the remit of those schemes and, more broadly, looking at redress in the round. In totality, we feel that we are in a good place, so I urge hon. Members not to press the new clause.

[Sarah Jones]

I have listened to the arguments and we will not press the new clause, although we reserve the right to return to this matter on Report.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Clauses 23 and 24 ordered to stand part of the Bill.

Clause 25

Meaning of “letting agent” and related expressions

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 26 stand part.

[Rishi Sunak]

The clause makes consequential amendments to the lead enforcement authority’s enforcement functions in respect of relevant letting agency legislation: section 87 of the Consumer Rights Act 2015; section 85 of the Enterprise and Regulatory Reform Act 2013; article 7 of the Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc.) (England) Order 2014; and section 135 of the Housing and Planning Act 2016. That legislation relates to transparency requirements, membership of a redress scheme and membership of client money protection schemes respectively. Its effect is to require the relevant enforcement authorities to have regard to any guidance issued by the lead enforcement authority. The duties of those authorities under the relevant letting agency legislation is to be subject to the provisions of clause 24, which provides for enforcement of the legislation by the lead enforcement authority.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28

Transitional provision

[Sarah Jones]

I beg to move amendment 16, in clause 28, page 19, line 33, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 17, in clause 28, page 19, line 37, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

Amendment 18, in clause 28, page 20, line 10, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

Amendment 19, in clause 28, page 20, line 14, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

[Sarah Jones]

Amendment 16 would deliver an important and achievable result for more than 4 million households currently in a private rental contract. Along with its consequential amendments 17 to 19, the amendment seeks simply to speed up the pace of the changes that the Bill will deliver. As we draw towards the end of this Committee sitting and prepare to discuss the European Union (Withdrawal) Bill, it is fitting perhaps that that we set about talking about the transitional period.

We believe that the transitional period set out in clause 28 is correct. Landlords and agents will need time to come up to speed with new rules and to review the elements in their agreements with tenants that will subsequently cease to have effect. Labour Members, however, argue that a year is an unnecessarily lengthy period. Among other issues, a lengthy transition period may see unscrupulous landlords and agents charging excessive fees through loopholes, such as default fees, in a rush to extract money as quickly as possible before the law changes.

In opposing the amendment, the Government might cite concerns about the capacity of enforcement authorities to develop the requisite skills and learning properly to enforce the Bill. If they truly do have those concerns, they should look again at our proposals on enforcement. When the underlying issues with an overstretched trading standards system are so serious that the National Audit Office is warning of a direct threat to the consumer protection system’s viability, a six-month difference will not change much. I fully expect the Government to highlight the need for proper consultation with landlords and tenants to ensure that they are properly briefed, which is absolutely right, but there is no reason that work cannot start before clauses 1 and 2 come into force. The Government have been clear that a strong deterrent effect will be provided by the penalties and convictions described in the Bill. We have already set out in detail our concerns about enforcement, but we agree in principle that, if enforced effectively, the penalties will be a clear deterrent. If the Government are confident about their deterrent, surely the Minister will agree that landlords and agents will be motivated quickly to come to terms with the changes they will need to make. If not, will he tell us which specific measures he expects to take up to a year to put in place?

As we have previously pointed out, a Labour Government would have introduced the Bill years ago. The cumulative total of the money lost to tenants through the Government’s reluctance to do likewise has likely been millions. We owe it to all private renters to bring the Bill into force quickly.

We will shortly discuss the issues posed by the wording of clause 32 and the merits of our amendments 20 and 21. I will not go into too much detail here, beyond pointing out that clauses 1 and 2 are not currently included in the provisions that will come into force on the day on which the Act is passed. As we will hear, clause 32 is problematic, as it allows the Secretary of State to choose the day when the full Act, including clauses 1 and 2, will come into force, and it currently sets no limit on how long he or she might delay that decision. We believe that the combined uncertainty over the effective start date and the year’s delay proposed in clause 28 would be unacceptable to tenants. If the Minister does not support the amendments, will he set out a clear timetable, either now or in writing, for how that year will be used?

The amendment is not onerous. It would not cause disproportionate hardship to tenants, agents, enforcement authorities or the Government. What it would do is ensure that tenants get more quickly the fair deal they were promised which, I think we all agree, is something they deserve.

[Rishi Sunak]

Clause 28 deals with how the prohibitions described in clauses 1 and 2 will apply in relation to agreements that were entered into before the commencement of the relevant parts of the Bill. Upon commencement, the fees ban will apply to all new tenancies and agreements between agent and tenant. The transitional provisions in clause 28 mean that for a period of a year the ban will not apply to tenancies the terms of which were agreed prior to commencement. Similar transitional provision is made for agents’ agreements with tenants.

The amendments that we are considering seek to reduce that transitional period from a year to six months, and we do not believe that that would be fair on landlords and agents. Although most fees are charged at the outset of a tenancy, some landlords and agents will have agreed that tenants should pay other fees at a later stage. Tenants will have signed a contract accordingly, and we need to allow time for landlords and agents to renegotiate those contracts to ensure that they are not unfairly penalised.

Data from the English Housing Survey 2015-16 shows that 48% of tenants had an initial tenancy agreement of 12 months and 39% had an initial agreement of six months. Reducing the transitional provision would mean that more landlords and agents with pre-commencement tenancies—tenancies that were entered into before the legislation came into force—would be at risk of not being able to renegotiate their contracts, and would be responsible for fees that their tenant had previously contractually agreed to pay. That strikes me as retrospective and does not seem fair, and we do not seek in the Bill to unfairly penalise landlords and agents.

We recognise the importance of having a clear date when the ban on fees applies to all tenancies, and we know that tenants are eager for the ban to come into force. That is why the Government have revised their position from that reflected in the draft Bill, which had no end date for when fees could be charged in pre-commencement tenancies. The transitional provisions as drafted here mean that all tenants will see the benefit of the fees ban a year after it comes into force. Unlike the proposed amendments, they ensure that agents and landlords will not be significantly financially affected retrospectively, and will have an opportunity to review their contracts during that transitional period. I therefore ask the hon. Lady to withdraw the amendment.

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[Sarah Jones]

I listened to the Minister, and I agree with him that tenants are eager for the clause to come into force, but I will not withdraw the amendment.

Question put, That the amendment be made.

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[Rishi Sunak]

Clause 33 sets out the short title of this legislation, which is to be the Tenant Fees Act, and as such I hope it will stand part of the Bill.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

New Clause 2

Transferable deposits

“The Secretary of State may by regulations made by statutory instrument amend paragraph 2 of Schedule 1 to make provision which enables a relevant person, at the conclusion of a tenancy, to transfer all or part of a tenancy deposit from the landlord or agent with whom that tenancy was held to a second landlord or agent”.—(Sarah Jones.)

This new clause would enable the Secretary of State to provide for a tenant to transfer their deposit from one landlord to the next when moving tenancy, rather than needing to find the money for a new deposit before the old one had been refunded.

Brought up, and read the First time.

[Sarah Jones]

I beg to move, That the clause be read a Second time.

The new clause seeks to build on the positive outcomes we all hope this Bill will have for tenants by allowing for much-needed changes to the tenancy deposits system. The new clause seeks to resolve the problem faced by large numbers of tenants whereby deposits are charged on new tenancies before the deposit from a previous tenancy is returned, costing significant sums of money every time a tenant moves. There is no need for such a situation to occur, and members on both sides of the Committee support looking at ways of solving it.

As we pointed out last week, it would fail tenants and be a waste of our time if we sat here and allowed through a Bill that simply reinforced the status quo. We have said repeatedly that we welcome the Bill’s ban on agency fees. We urge the Government to go further to resolve other significant up-front fees faced by private renters.

The most significant up-front fees are tenancy deposits, which I remind the Committee are significantly higher than agency fees, often running to several thousand pounds. We have already touched on the issue of the six-week cap for tenancy deposits, but I ask the Government one more time to look at that cap before Report and to think about what we could do. A lower cap would have a measurable benefit for tenants. There are options that the Minister could consider if he really wants to make provision for what he calls “high-risk tenants”.

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[Rishi Sunak]

I am delighted to say that I agree with both the hon. Member for Croydon Central and my right hon. Friend the Member for Scarborough and Whitby. We fully support and encourage innovation in the tenancy deposit sector. We know that it can often be difficult for tenants to raise funds for a deposit at the outset of a tenancy, especially if they are moving from one property to another; indeed, that is partly the motivation for bringing forward the Bill.

In the Government’s response to the Housing, Communities and Local Government Committee following the pre-legislative scrutiny, we emphasised our commitment to assess the merits of alternatives to traditional security deposits and promised to report our findings to the Committee. The Government responded only in May, so I hope Members will forgive me when I say that the work is not quite completed, but it is in process.

We have been exploring this issue for a while, including in the 2017 consultation on banning letting fees. It may interest hon. Members to know that my Department, like many others, offers an employer-backed deposit scheme to civil servants living in the private rented sector. That works in the same way as a season ticket loan, allowing employees to borrow from their salary up front to pay for a rental deposit and repay it from salary payments over the course of their career. Many private businesses, such as Starbucks, take the same approach, and we definitely encourage more to do so.

I am pleased to say that in May the Minister for Housing and Homelessness held a roundtable with my hon. Friend the Member for Broxbourne (Mr Walker), who has been passionate about this issue, along with the three deposit protection schemes and Shelter, to explore further how existing tenant deposit protection was working and what further innovation was possible. I am pleased to say that, as a result of that preliminary work, the Minister has been working much harder to progress the issue and will convene a formal working group with the deposit schemes and key representatives from tenant and landlord groups to explore it further.

There are still many things that need to be considered, as was highlighted by my right hon. Friend the Member for Scarborough and Whitby. For example, the key concern with deposit passporting is ensuring that landlords are still able to recover any damages at the end of a tenancy. There is a great deal of technical complexity that needs to be examined. That would involve understanding the percentage of the deposit that could be passported, and when and how liability for providing a tenant with the relevant prescribed information about where their deposit is protected should be passed from one landlord to another.

We certainly need to consult the sector and get its input before implementation. We are also keen to explore other alternatives, aside from passporting, such as payment of deposits by instalment. I hope hon. Members can see that the Government are taking this issue very seriously. My hon. Friend the Minister has already convened groups and is continuing to convene working groups to examine this issue and figure out a way forward. With that in mind, rather than delay this legislation, I call on the hon. Lady to withdraw her new clause.

[Sarah Jones]

I have listened to the Minister’s response, and I am glad that there are working groups, roundtables and other such things looking at these issues. As a former senior civil servant, I know well the line that there are still many things that need to be considered, which can be used to push things into the long grass so that they never get completed.

I take the point from the right hon. Member for Scarborough and Whitby that we do not want to delay the Bill and that we need to look at these matters properly, but I urge the Minister to speed up the working groups and roundtables and to try to come forward with something. If he did, I am sure he would have the support of the Opposition. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 3

Report on operation of Tenant Fees Act

“The Secretary of State shall within a period of 12 months from the date of commencement of this Act and annually for the four years thereafter lay before Parliament a report on the operation of this Act, setting out the number of breaches of sections 1 and 2, the number and amounts of financial penalties levied by enforcement authorities, and the number of criminal prosecutions commenced and concluded in each 12-month period”. —(Melanie Onn.)

This new clause would require the Secretary of State to report annually for five years on the effect of the Act

Brought up, and read the First time.

[Melanie Onn]

I beg to move, That the clause be read a Second time.

The new clause is quite clear that it intends the Act to be reviewed and closely monitored by the Minister. There has not been a great deal of discussion around the monitoring of the implementation of this legislation so far. Assessing the effectiveness of the legislation is incredibly important, and I hope the Minister will be able to support it. We know from the experience in Scotland that legislation, even when well intended, may not be effective if the wording is not clear enough, the rights are not precisely defined, the impact is not fully, properly and regularly communicated to those who need it, and the enforcement mechanisms are inadequate. I do not want to let the Minister leave here without allowing for future Ministers and Governments to recognise early the elements of the Bill that are not quite working as intended. From the discussions we have had, it seems that the Bill will probably not come into force for 18 months, which is quite some time away. How it actually pans out in practice will perhaps be well out of our hands.

It is inevitable that there will be clauses of the Bill that, once in action, do not work quite as anticipated. To rectify that, the Government could accept this new clause, which would ensure regular assessments are undertaken of the number of breaches of sections 1 and 2, as well as providing details around the fines—how many have been issued, what revenue has been generated and whether there have been any prosecutions. It would enable the Government to show their demonstrable concern for tenants by making it clear that they were keeping a beady eye on the practicalities of the measures and not simply leaving matters to chance.

No doubt there would be a Select Committee inquiry without these changes. What do the Government anticipate that they might wish to hide? By being proactive, they would be ahead of the curve and would save the Select Committee a great deal of time that it might spend on other inquiries.

I anticipate that the Minister will say he is confident that local authorities will maintain such records. That might be suitable for him, but it would not compel him to collate such data to gain regional perspectives on the implementation. Given the failure on the display of tenants fees rules so far—so much so that they now have to be beefed up through the Bill’s enforcement powers—accepting the new clause would be an honest recognition that legislation does not always work well.

The new clause would provide for an ongoing evidence base from which future improvements could be made. It would show landlords, letting agents, councils and tenants that the Government were taking a responsible approach to a significant piece of new law and showing a keen interest in its future application.

Were it to be found that the funding for new burdens was insufficient, the Government could deal with that rapidly, rather than facing the worst-case scenario of the laws not being used and being completely useless. They could check where the laws were being best utilised, identify why and assist in the sharing of best practice around the country. They could check that the legislative process was quick and that the remedy was proportionate to the breach.

In housing, timing is often of the essence. Those who would be charged prohibited fees are most likely to be those who can ill afford them—those who are forced towards bad landlords or letting agents. Should resolution of the process take too long, a tenant may be two or three properties along since the original complaint was submitted. I urge the Minister to consider this sensible step.

Tenant Fees Bill (Fourth sitting)

Sarah Jones Excerpts

Committee Debate: 4th sitting: House of Commons
Tuesday 12th June 2018 Public Bill Committees

[Rishi Sunak]

It is important that there is consistency in the way in which local authorities impose financial penalties and that the process is fair. This schedule sets out the procedure to be followed.

Enforcement authorities must give the landlord or agent notice of their intention to service a financial penalty within six months of the breach occurring. This notice must contain relevant information about the reasons for imposing the penalty, the amount and the right to make representations. The landlord or agent then has 28 days to respond. If the enforcement authority decides to impose a penalty, it must provide a final notice setting out the amount of penalty, how much to pay, the rights of appeal and the consequences of failing to comply. An enforcement authority may at any time withdraw or amend a notice of intent or final notice. The landlord or agent must be notified of this in writing.

Landlords and agents have a right to appeal to the first-tier tribunal against a final notice. This appeal must be brought within 28 days of the final notice and is to be a re-hearing of the enforcement authority’s decision, but the tribunal may admit evidence that was not heard before the enforcement authority, if relevant. The final notice is suspended until the appeal is determined or withdrawn. The first-tier tribunal may confirm, vary or quash the final notice. It may impose a penalty up to the same maximum penalty as the enforcement authority could have imposed. If the landlord or agent fails to pay all or part of this financial penalty, the authority can seek repayment on the order of the county court. Similarly, if the authority requires the landlord or agent to repay the tenant any prohibited fees and they fail to do so, this can be recovered under an order of the county court.

I am aware that concerns have been raised about the resources of local authorities. I trust that the Committee welcomes the schedule, as it enables an enforcement authority to retain the proceeds of any financial penalty, as we have discussed, for future housing enforcement.

[Sarah Jones (Croydon Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma, for our second day in Committee. As the Minister has set out, schedule 3 provides some clarity over financial penalties, including notices of intent, recovery of penalties and proceeds of those penalties. The Opposition support the schedule as drafted. We are seeking clarity, however, from the Minister on certain aspects, before we give our support for its inclusion in the Bill. I would like to focus on paragraphs 6 and 7, which deal with the specifics of appeals and the recovery of penalties.

As with any piece of legislation such as this, the right to appeal is extremely important. It is correct that this is reflected in the Bill. It is also vital that the conditions of any appeal are presented with the utmost clarity to prevent abuse or a miscarriage of justice. Pre-legislative scrutiny by the Select Committee rightly raised concerns about how the Bill defined grounds for appeal, arguing that a first-tier tribunal should decide appeals as complete rehearings, which should take into account all matters, whether known to the local authority at the time of its decision or not. We are glad that the Government took that into account and amended the Bill accordingly. However, a number of questions about appeals remain, and I hope that the Minister can offer some clarity in his response.

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[Rishi Sunak]

Clause 22 establishes a lead enforcement authority in the lettings sector to oversee enforcement of the Bill and associated letting agent legislation, including the transparency requirements in the Consumer Rights Act 2015, the requirement for letting agents to belong to a redress scheme and the forthcoming requirement for letting agents to belong to a client money protection scheme. Although, in the first instance, this responsibility lies with the Secretary of State, the clause gives the Secretary of State the power to designate a local trading standards authority as the lead enforcement authority. The clause also enables the Secretary of State to make provision, via regulations, to smooth the transition if there is a change in the lead enforcement authority.

In the Government consultation, there was strong agreement from respondents across the sector to the introduction of a lead enforcement authority; 86% of respondents were in favour, stating that this would lead to more consistent operation of the regulatory framework. We consider that trading standards authorities are best placed to act as the enforcers, given their other responsibilities for enforcing requirements on letting agents and consumer protection laws.

We recognise the overlap between the lettings and estate agent sectors and will work with National Trading Standards to ensure that the new lead enforcement authority works effectively alongside the existing arrangements in the estate agent sector. We intend to provide funding to support the setting up and workings of a lead enforcement authority.

Clause 23 describes the duties of the lead enforcement authority. Broadly, those duties are to provide guidance and support to local authorities in England with regard to their enforcement responsibilities in respect of relevant letting agent legislation. The lead enforcement authority will help to develop best practice in enforcement and ensure consistent application of the legislation.

The clause also enables the lead enforcement authority to disclose information to a relevant local authority to enable that authority to determine whether there has been a breach of, or offence under, relevant letting agency legislation. That power will, in particular, enable the lead enforcement authority to disclose information as to whether a financial penalty has been issued against a landlord or agent and thus whether an offence has been committed under the Bill.

We have taken into account feedback from the Select Committee, so the clause now places a duty on the lead enforcement authority to issue guidance to enforcement authorities about the exercise of their functions under the Bill. As discussed earlier, enforcement authorities must have regard to that guidance.

Clause 23 also provides a power for the Secretary of State to direct the lead enforcement authority to produce guidance about the operation of other relevant letting agency legislation and about the content of such guidance. The lead enforcement authority will be able to provide information and advice to tenants, landlords and letting agents to help them to understand the impact of the Bill and other relevant legislation.

The lead enforcement authority’s position as a central point of contact for local authorities will facilitate its duty to monitor developments in the lettings sector and, as necessary, to advise the Secretary of State. That includes the effectiveness and operation of the Bill and associated relevant letting agency legislation and related social and commercial developments.

Clause 24 makes provision for the lead enforcement authority to enforce the provisions of the Bill and other relevant letting agent legislation. We want the lead enforcement authority to play a proactive role in enforcement and to exercise best practice and provide support when it is appropriate and necessary for it to do so.

Individual trading standards authorities will remain primarily responsible for enforcing breaches of the fee ban. However, they may want to ask the lead enforcement authority for support. Alternatively, a local trading standards authority may not be taking enforcement action in line with its duties under the Bill, leaving tenants at risk of unfair loss. The clause gives the lead enforcement authority the power to take enforcement action in such situations.

Where the lead enforcement authority steps in and proposes to take action in respect of a breach, it must provide notice to the relevant local authority. The latter is then relieved of its duty to take enforcement action in relation to the breach, but the lead enforcement authority may require it to provide assistance. Relevant enforcement authorities will be required to report on their enforcement of the legislation and other relevant lettings legislation.

The lead enforcement authority will have a number of investigatory powers at its disposal to enforce the relevant letting agency legislation. As we discussed previously, those powers are laid out in schedule 5 to the Consumer Rights Act 2015, which this clause amends. That includes the power to require information where it reasonably expects that a breach has been committed.

I hope that clauses 22 to 24 stand part of the Bill and, with your permission, Mr Sharma, I will reserve the right to respond after the hon. Member for Croydon Central speaks to new clause 1.

[Sarah Jones]

New clause 1 sets out that both the lead enforcement authority and local enforcement authorities will be reimbursed by the Government for costs incurred in enforcing the Bill. That is necessary because the Bill as it stands will simply not provide adequate resources for proper enforcement. That view is backed up by experts from across the sector. We have already talked about the scale of the challenge, and my hon. Friend the Member for Great Grimsby has talked about the cut in enforcement officers and the—

[The Chair]

Order.

Tenant Fees Bill (Second sitting)

Sarah Jones Excerpts

Committee Debate: 2nd sitting: House of Commons
Thursday 7th June 2018 Public Bill Committees

[Mr Robert Goodwill (Scarborough and Whitby) (Con)]

Q I live in North Yorkshire, so the trading standards authority is North Yorkshire County Council, but Scarborough Borough Council is our borough, which is a long way from Northallerton and from some of the trading standards officers. Will the boroughs and districts be able to step up to the mark? Should a disproportionate amount of the £500,000 be made available to the districts and boroughs where we do not have unitary authorities, or will it be difficult for those authorities that are not already trading standards authorities to step up to the mark? They are well involved in housing—we have one of those areas where the housing has to be brought up to standard. Will that work?

Alex McKeown: Some of the difficulty with the legislation that is already there with regard to letting agents is that you have to have knowledge of housing and of trading standards, so you almost need a trading standards and housing officer hybrid person. I have worked in authorities where I was a trading standards enforcement officer but I sat with private sector housing, and that worked quite well.

It is difficult to know, because there are also different problems in different areas of the country. In London, there is a much bigger problem than in the leafy counties. You will not get the same issues. In London, there are more vulnerable tenants who are being exploited, and you get the rogue agent element, but I cannot really speak for how it will work outside London, because I have worked in London for so long.

[Sarah Jones (Croydon Central) (Lab)]

Q I wanted to ask a couple of questions on the enforcement side. Do you have any numbers for how many enforcement officers—trading standards officers—we have now compared with five years ago? How much have the numbers gone down by?

Alex McKeown: Fifty per cent. I think a survey was done in 2010.

Councillor Blackburn: I have 56%—as in, it has reduced by 56%.

[Sarah Jones]

Q Since?

Councillor Blackburn: Since 2009.

[Sarah Jones]

Q On your point about London having more rogue landlords and abuse, can you talk us through some of what you actually see?

Alex McKeown: Because a lot of students come to London, a lot of foreign students come to London, and a lot of people come from all around the world to work in London, they often go to letting agents that take quite substantial up-front fees. They cannot afford very much so they end up in properties—some boroughs in London have selective or additional licensing—such as a house of multiple occupation, where the house is unsafe, the agreement that they have been given is what we would call a sham licence, and the letting agent does not actually understand the legislation that relates to what they are doing.

I have found in the past four and half years that you can talk to a lot of the lettings industry about certain things, such as whether they have an EPC, and they will ask what an EPC is. They think that, because they do not have a job, they will set up a letting agency. Obviously, there are the big ones that are members the Association of Residential Letting Agents or the National Association of Estate Agents Propertymark, and they get the training, but there are also a huge amount of agents who are under the radar. A lot have virtual offices, and a lot cannot be tangibly found. That is some of the difficulty.

[Sarah Jones]

Q Do you have any sense of the scale of the problem and what you are able to do about it? In terms of what you are able to do, how many of those rogue landlords and letting agents have not been tackled?

Alex McKeown: A substantial amount. My colleagues—who are behind me—and I would say that, with the surveys, more were non-compliant than compliant. Even after we have given them a substantial amount of advice, they remain non-compliant. More than 50% are still non-compliant.

Councillor Blackburn: If I may, because this also speaks to Mr Goodwill’s question from a few moments ago, I would not agree that this issue is specific to London. Other parts of the country suffer very much from this, not least seaside towns, where there has been a proliferation of former guesthouses and hotels that have been badly converted into bedsits and one-bedroom flats. We know that local authorities that have implemented selective licensing and additional licensing in those areas have found horrendous living conditions, and a considerable number of properties have been shut down.

To briefly return to Mr Goodwill’s question, giving district councils the ability to work with unitary and county councils to jointly enforce, where appropriate, and to fund that model, would make absolute sense. The issues in Scarborough will be very different from the issues in Harrogate or Northallerton, so there needs to be a strong element of localism in this. However tempted I might be to directly answer your question, the LGA does not get involved in issues of resource allocation, because we represent district, county and unitary councils.

[Sarah Jones]

Q For my final question I just want to change the subject. We will look today at the deposit element of this proposed legislation. There has been quite a debate on what level of deposit is fair, in terms of what people can afford and what is fair for the landlord to be able to hold. Do you have any views on what that level should be, whether it should be three, four, five or six weeks’ rent, or something else?

Alex McKeown: I certainly think the maximum should be six weeks, which it is at the moment. That has been the norm within the industry. I know that Citizens Advice—the CAB—and others that have given evidence want it brought down to at least five weeks. I understand some of their arguments for that, but to be honest with you, that has not been my main focus.

Councillor Blackburn: I do not have a view.

[Maria Caulfield (Lewes) (Con)]

Q I want to touch on the point you made about the requirement in the Bill of proof to a criminal standard and how difficult that will be. Do you have any suggestions for how the Bill could be formed to allow enforcement to happen relatively easily and effectively?

Alex McKeown: I think it needs to be more similar to the redress scheme for letting agents and property managers in the Consumer Rights Act, because that is a fairly simple process. You get the evidence, you issue the notice of intent, they make representations, you then issue a final notice and it goes to the tribunal. That process has worked very well. We obviously get some random judgments coming out of the tribunals, but that is a better way of doing it.

The only issue we have found is that you will get a large fine against a company—such as the £30,000 fine—and they will then fold their company and phoenix. That is where we may need to look at holding the directors themselves liable. That will assist trading standards in getting the money back.

Tenant Fees Bill (Third sitting)

Sarah Jones Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 7th June 2018 Public Bill Committees

[Rishi Sunak]

Our approach to implementing this policy is to ban all payments in connection with a tenancy, with the exception of certain permitted payments outlined in schedule 1. The clause introduces that schedule, and provides for enabling the Secretary of State, by regulations, to amend the list of payments permitted under the Bill.

Although no changes to the categories of permitted payments are currently intended, the private rented sector is expanding and has a changing demographic as well as growing technological innovation. Similarly, legislative changes or other circumstances may arise where it becomes necessary to add, modify or remove a description of a permitted payment. We do not intend for the power to be used to significantly alter the objective of the legislation, but we recognise the broad scope of the power. That is why we consider it appropriate for the power to be subject to the affirmative procedure, to allow adequate parliamentary debate and scrutiny of any changes to the payments permitted under the Bill. That will provide sufficient safeguards that the power is not used for any purposes contrary to the objectives of the legislation, or to make changes that may have negative consequences for the lettings market.

It is also worth noting that the power to amend permitted payments is qualified by subsection (3), which states that the power does not extend to removing rent from the categories of permitted payments. We consider the negative procedure to be appropriate in the case of regulations made solely to amend the £50 cap on fees that can be charged to vary a tenancy when requested by a tenant. Any changes to that cap would purely be to reflect changes in the value of money, and the power could not be used to undermine the intention of the legislation.

It is important to note that in its scrutiny of the delegated powers memorandum accompanying the draft Bill, the Regulatory Reform Committee indicated that use of the power in clause 3 is justified to deal with changes in circumstances that cannot at the moment be anticipated or predicted. Clause 3 is vital to ensure that the legislation remains relevant and, in the words of the hon. Member for Great Grimsby, prepared for the future.

[Sarah Jones (Croydon Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma—it is the first time I have done so, so it is very exciting all round.

As the Minister set out, clause 3 spells out that only permitted payments defined in schedule 1 can be charged by landlords or agents. We have heard already from my hon. Friend the Member for Great Grimsby about the pressures faced by private renters. Given the rapidly increasing number of people in the private rented sector, with only the bare minimum of consumer protections people can be exploited financially and forced into substandard and sometimes dangerous accommodation. All of us in our everyday lives, as well as in our caseload, will have seen people who are either excluded from accessing the sector or charged exorbitant fees.

It is right that the Bill limits the number of things for which tenants can be charged. The most important role of the clause is to give effect to schedule 1, which restricts permitted payments to things such as rent, tenancy deposits, holding deposits, default fees, terminations and bills. I am sure we all agree that the clause is essential in making the Bill work effectively and allowing the private rented market to continue functioning.

However, Opposition Members would like to challenge several poorly defined, excessive or unnecessary permitted payments that are enabled by clause 3 and schedule 1. That includes issues with tenancy deposits, holding deposits, default fees and termination payments, and we will discuss those in more detail. There are other permitted payments enabled by clause 3 which we are not seeking to amend at this stage but, as the Minister will know, several of the permitted payments were added subsequent to the publication of the draft Bill, following Government consultation and pre-legislative scrutiny. The draft Bill presented last year included just four permitted payments: rent, tenancy deposits, holding deposits and default fees. As the Committee will note, there are now 10 permitted payments enabled by clause 3 and outlined in schedule 1. I hope the Minister can answer that he has confidence that the addition of those new permitted payments was done with sufficient evidence, and that he can tell us which views were taken into account when they were added.

The clause also gives the Secretary of State the tools to add, remove or amend what is considered a permitted payment if it is necessary to do so in the future. That has the potential to future-proof the Bill by ensuring that the Government can easily bring forward changes to prohibited and permitted payments if it turns out that there is a need for change, either through a loophole that becomes apparent after the Bill becomes law, or through a change in style of renting that means we need additional permitted payments, or a change to permitted payments if it becomes apparent that there is a route for exploitation.

The powers in the Bill should come with the responsibility to use them wisely and in a timely manner if it becomes apparent that it is necessary to use them at all; otherwise, there is a risk that the Bill’s provisions slowly become obsolete as our renting culture evolves over the years and decades. I look for reassurance that the Minister will use that power in a proper manner, to keep the Bill up-to-date as much as feasibly possible.

A particular concern I have with the Bill in general is that there are certain maximum thresholds contained in schedule 1 that are far too high to have a real positive effect on the everyday finances of tenants. That is why we have tabled amendments to try to tip the balance away from something that looks good on paper, but achieves very little saving for tenants. The Government are consistently slow to adapt to ideas to reset the balance of power between tenants and landlords—a Labour Government would have brought this Bill forward five years ago—so I suspect that things the Conservatives may oppose today, they may see as perfectly reasonable in three or four years’ time, once the harsh reality that tenants face in the housing market becomes even clearer.

I look for reassurance from the Government that they will continue to monitor the real-life effects of the numbers they have chosen in schedule 1, and to pledge to lower the permitted thresholds if it becomes apparent that the levels in the Bill are far too high to have a meaningful effect on the ground. Overall, the Opposition support the clause.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Schedule 1

Permitted payments

[Sarah Jones]

I beg to move amendment 7, in schedule 1, page 23, line 12, leave out “six” and insert “three”.

This amendment reduces the maximum amount that may be taken as a deposit from six weeks’ rent to three weeks’ rent.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 8, in schedule 1, page 23, line 15, leave out first “six” and insert “three”.

This amendment reduces the maximum amount that may be taken as a deposit from six weeks’ rent to three weeks’ rent.

Amendment 9,  in schedule 1, page 23, line 15, leave out second “six” and insert “three”.

This amendment reduces the maximum amount that may be taken as a deposit from six weeks’ rent to three weeks’ rent.

[Sarah Jones]

Amendment 7 seeks to amend part 2 of schedule 1, on tenancy deposits. We all agree, I think, that this long-overdue Bill will go some way to addressing some of the issues we have been debating.

[Rishi Sunak]

I am conscious that in the debate on clause 3, the hon. Lady posed a specific question that I did not respond to, about the changes in the permitted payments, to which I wish to respond, if she does not mind and if you would indulge me, Mr Sharma. As we are coming on to discuss those payments in general, I hope it is appropriate and within scope.

The reason for the expansion was that the previous drafting was less all-encompassing around the payments that could not be charged. As the drafting in clauses 1 and 2 was expanded to cover almost any incidence of anything happening during the tenancy, it then necessarily became apparent that we needed to add specific clauses to allow for payments that would previously not have been captured by clause 1, but now would be and needed to be expressly permitted, such as an early termination clause or a change in sharer. With the new drafting of clause 1 and 2, things such as that would not be permitted unless they were specifically listed in schedule 2, which is the reason for the expansion. I hope that gives the hon. Lady the reassurance she needs.

[Sarah Jones]

Thank you. As we have heard, the Bill will mainly address issues within the private rented sector through the banning of letting agent fees, but, as we all know, letting fees are not the only cost faced by prospective tenants, nor are they the largest or even the most common. Tenancy deposits are the largest and most common fees that renters face. Research by Citizens Advice found that nine in 10 renters pay a tenancy deposit, and that one third of tenants paid more than £1,000 for their deposit. According to deposit protection scheme data, the average deposit in March 2017 was £1,161—up from £979 in 2012. That is an increase of nearly 20% in five years.

We all understand the need for tenancy deposits of some kind, so it is absolutely right that they are included as a permitted payment in schedule 1, but the absence of a cap on tenancy deposits to date has left some private renters paying extortionate amounts. It is undeniable that that presents a major barrier to people looking to rent privately—particularly in areas such as London. We will not improve the situation for tenants to any significant degree if we do not solve the flaws in the tenancy deposit system.

Citizens Advice says that, in the past year alone, it has worked with almost 11,000 private renters who have come to it because of issues relating to deposits. One of my members of staff had to find £3,000 for a tenancy deposit—equivalent to eight weeks’ rent. One of my constituents who came to me about this issue is currently homeless with five children. She approached the council for help, but it deemed her to be intentionally homeless because she abandoned a tenancy in Manchester to come to Croydon as she was suffering ill health and wanted to be closer to her family. At present, she is staying in her brother’s house, which means there are eight people living in a two-bedroom flat. Her brother said she cannot stay for long, but does not want to kick her out on the streets. She is on universal credit and cannot afford to save for a deposit on a private rented property. She has been left in a Catch-22 situation.

People are looking to move to a new city, perhaps to find work or start a business, but are restricted by significant up-front costs. People face the combined costs of a large deposit, their first month’s rent and living costs for a month or more before they get their first paycheque. That means that, to move to a more expensive city, they must set aside £2,000, £3,000 or more before making the move. We cannot ignore the impact that has on our economy. It is important for people with the right skills to be able to move easily to places where those skills are in demand.

The Mayor of London has recognised the pressures in cities such as London, and has worked with London First and employers to give Londoners access to tenancy deposit loans. Organisations such as the Met police, Transport for London and other private companies now offer tenancy deposit loans to their staff. That has given more than 100,000 Londoners access to loans. Although that is commendable on the Mayor’s part and shows that he is on the side of tenants, it is a very sad state of affairs that the situation has got so bad that tenants have to borrow from their employers to cover their housing costs.

In addition to the actual cost, there are several ways in which tenancy deposits, in their current form, leave tenants out of pocket, which the Bill fails to recognise. One major issue is the need for tenants to pay a deposit on a new property before receiving their deposit back from a previous one. Tenants are charged high sums twice simply because of the way the system works. Tenants are also penalised through the deposit protection scheme. We all agree that the scheme’s introduction was a good thing, but it was set up in such a way that tenants are losing out to landlords, agents and the deposit protection companies.

Generation Rent has found that most of the £4 billion currently held in deposit protection is held by landlords and agents, who then pay a small insurance fee to deposit protection companies. Although in most cases that money is paid back to tenants, only 2% of tenants receive interest on their deposit when it is returned. Essentially, it gives landlords and agents a low-cost loan. Generation Rent estimates that tenants are missing out on £80 million per year in lost interest. Others advocate a proper reform of the system, such as a personal tenant account with passporting, which would allow tenants to transfer funds between deposits and to accrue the interest they deserve on their deposit. We will debate that point later.

A cap on tenancy deposits as part of schedule 1 is, in principle, very welcome, but in proposing a cap equivalent of six weeks’ rent and ignoring the significant other flaws with tenancy deposits, the Government have missed a huge opportunity and have ignored the advice of numerous experts. I hope the Minister will work with us today and will consider the merits of amendment 7 and the related amendments, which seek to bring genuine improvements for tenants. For too many people, tenancy deposits are one cost too many. As I will set out, in its current form the Bill is at the very least ineffective and at worst risks making things worse for renters than they already are.

First, I will explain why the clause is ineffective. The Government have said very clearly that they want to make things better for private renters. On Second Reading, the Secretary of State said that by setting a six-week cap,

“we are delivering on our commitment to make renting fairer and more affordable”.—[Official Report, 21 May 2018; Vol. 641, c. 645.]

However, we all know that in the vast majority of cases that is simply not true.

Polling by Shelter found that the majority of deposits—55%—are charged at just four weeks’ rent. According to the same polling, only 6% of landlords require a deposit of more than six weeks’ rent. Similar figures have been published by Citizens Advice, which found four weeks’ rent to be the most common deposit amount. It argues that in its current form this measure will make renting “more affordable” to just 8% of renters. That would not fulfil the Secretary of State’s objectives.

--- Later in debate ---

[Richard Graham (Gloucester) (Con)]

On the length of time for the deposit, it is of course eight weeks in Scotland, so does the hon. Lady agree that this Bill is a significant step forward?

[Sarah Jones]

I am looking specifically at the impact of this Bill, which will be on people in England, and currently most people in England pay a deposit of four weeks’ rent—some pay less, some more—so we know that in England this Bill will not have an impact on the vast majority of people who are currently renting. That is the point that I am trying to make; I am not comparing the situation in England with that in Scotland.

[Richard Graham]

Surely the hon. Lady will agree that this is part of a package of measures, and that, taken in the round, these are significant steps forward in bringing down costs for tenants, as all our witnesses this morning realised.

[Sarah Jones]

I will shortly make the case that in some cases people will end up paying more money as a result of the Bill as it currently stands.

So a cap of six weeks’ rent will not make a difference to the vast majority of private renters, and it does not send a message to tenants that this Government want to improve things for them. I would like the Minister to explain his thinking on that.

In areas with higher housing costs, such as London, a six-week deposit based on median rents will see private renters needing to fork out £2,000. Therefore, amendment 7, in keeping with the advice from various experts, seeks to make this part of the Bill more impactful by setting a three-week cap. That would save tenants £575 compared with the Government’s proposals, rising to £928 in London.

I come to my second main point. We have established that, as it stands, this schedule will be fairly ineffective, but in fact it is in danger of making things worse. To emphasise the lack of impact that it will have in its current form, we can again look at the Government’s own impact assessment. It claims that a cap of six weeks’ rent will result in

“money being available to tenants to spend, leading to wider economic benefits.”

The impact assessment estimates that 1.4 million households moving home in the private rented sector in year one will pay £12 million less in deposits than they do currently. If that benefit is spread across all those households, the average saving is £8.50 per household, which would not be a massive boost to the economy.

The original briefing for the Queen’s Speech indicated an intention to cap deposits at four weeks—that is really important. The Financial Times was among publications that reported that

“deposits that tenants leave with landlords or their letting agents will be capped at no more than one month’s rent.”

When the draft Bill came out in May 2018, groups such as the National Landlords Association and the Association of Residential Letting Agents claimed victory in pushing the cap back to six weeks. A National Landlords Association newsletter stated:

“The Government had initially proposed in the consultation to cap security deposits at no more than 4 weeks’ rent. From the beginning of the process, the NLA has been actively campaigning around raising the cap to 6 weeks. This was outlined when…CEO of the NLA…met with the Minister of State for Housing and Planning…in September and pressed him to rethink the level of this cap.”

Perhaps the Minister can explain what arguments the Government took into account when deciding to amend their plans for a four-week cap, and why they did not listen to the evidence given by Shelter, Citizens Advice and others that a lower cap was the only way to effectively tackle the hardship faced by many private renters. Indeed, why did the Minister not listen to the views of tenants themselves?

On Second Reading, the Secretary of State gave various arguments in defence of a six-week cap, but I am afraid that none of them stands up to scrutiny. He argued that a cap of six weeks’ rent will give landlords greater flexibility to accept higher-risk tenants, such as those with pets, but analysis conducted by MHCLG as part of its impact assessment did not find a link between the level of deposit and the riskiness of the tenant. As landlords told us earlier this week, a better system for higher-risk tenants might be to allow an exception to the cap in specific cases, such as pets.

The Government have also argued that a six-week cap will address concerns about tenants leaving without paying their final month’s rent. Experts have argued that that is a rare occurrence, and just this morning, we heard that only 2% of tenants used their deposit as their final month’s rent. The important role played by the deposit protection scheme means that there are already means by which we can resolve disputes.

The Housing Secretary rightly pointed out the need to ensure a balance between financial security for landlords and affordability for tenants, but the data we have on deposits suggests that the proposals are skewed in favour of landlords. Deposit protection scheme data suggests that on average, since 2007, tenants have received more than 75% of their deposit value back. In more than half of cases, tenants receive their deposit back in full, with no deductions. Of course, landlords need the security of knowing that they can recoup costs if needed, and there should be a deterrent for tenants who might otherwise leave properties in a bad state, but the numbers suggest that a much lower-value deposit would still allow landlords to recoup any legitimate costs at the end of a tenancy.

The amount of the deposit could be halved and landlords would still have an ample amount to cover the average deduction. If the average deposit is £1,000, with people paying back a quarter on average, that means landlords receive back £250 on average. If the deposit was halved to £500, they would still have enough for that average to be returned. The majority of the deposit would still be returned to the tenant in most cases, but it would also leave room for a bigger than average deduction if necessary.

Importantly, the Housing Secretary argued that the six-week cap was not a recommendation, despite repeated warnings on Second Reading that it may be interpreted as such and become the norm. The inherent seal of approval of a Government cap could result in landlords thinking it was okay and normal to raise deposits to that six-week level. That is relevant in the context of other fees being restricted by the Bill.

The potential backfiring of the Bill could mean that an average deposit of 4.8 weeks across the country suddenly jumped to six weeks, which would cost tenants hundreds of pounds in extra deposit fees and completely negate the benefit of the main part of the Bill, which bans letting fees. The Government estimate the average cost of letting fees to be between £200 and £300. If the most common deposit of four weeks became six, based on average rents, Londoners would pay £500 more on their deposits, which means that the net impact of the Bill on renters would be negative.

[Daniel Zeichner]

My hon. Friend is making an excellent speech, but she has a tendency, as all London MPs do, to constantly refer to London, which I entirely understand. I suggest that she looks a bit further up the country to an area such as mine, which displays similar attributes to London. There are always different views on exactly what average rents are, but something like £1,000 to £1,200 is typical in my city. She is making an important point about what the Bill could lead to for young people such as those looking to rent in Cambridge, which they have to do because they are completely priced out of purchasing property. They would have to have about £1,500 or £1,600 up front. That would have a significant effect on one of the economic powerhouses of the country. Will the Minister bear that in mind? If six weeks’ rent becomes the norm, that will have importance not only ethically but for the effectiveness of our economy in difficult times.

[Sarah Jones]

My hon. Friend makes an excellent observation, and I take his point completely. There are many parts of the country where the rental market is pressurised and prices are prohibitively high, so the impact would be the same as it is in London. He is right.

There is precedent for the Government setting a figure that becomes the norm, whether it is a cap or a floor. In many cases such a precedent has been created, and that could occur here. That price level is given inherent Government approval for those on the other side of the deal, who say, “This is what the Government say we can charge”. There are two obvious examples, one a cap and one a floor: tuition fees and the minimum wage respectively. We are all aware of how universities raised their fees to the maximum of £9,000 as soon as they could, despite claims that there would be price competition. Likewise, when the minimum wage was introduced, it was said that it would be an absolute floor but, sadly, for many workers it has become the norm.

If we are trying to make things better for private renters, which I am sure the Minister is, we should not be settling for the status quo, nor should we be considering something that may make the situation worse. We should be the leaders we were elected to be and change the Bill. To reiterate our argument for a three-week cap, if the most common deposit is now four weeks’ rent and the average amount returned is more than 75% of the deposit value, reducing the cap to three weeks would still leave more than enough room to give landlords financial protection while at the same time bringing real benefits to tenants.

[Rishi Sunak]

I appreciate that reasonable people can disagree about these amendments and the number of weeks that is suitable for a deposit cap. It is a tricky issue to balance. However, the amendments would not help tenants. Lowering the deposit cap to three weeks risks distorting the market and leading to behavioural change.

Using data from deposit protection schemes, we estimate that about 93% of deposits are for greater than three weeks’ rent, and as we have heard, most landlords require a deposit of about one month or five weeks’ rent. The deposit serves an important function as a deterrent. It gives tenants an added incentive to comply with the terms of their tenancy agreement. Further, if we lower the cap on deposits to three weeks’ rent, there is a higher risk that a deposit will no longer fully cover the damages to a landlord’s property or any unpaid rent. Landlords would be likely to seek to offset that risk by asking for more rent up front, or they may be deterred from investing in the sector entirely. Neither of those outcomes would help tenants.

We have listened to concerns that a cap at four weeks’ rent or less may encourage tenants to forgo their final month’s rent. The Housing, Communities and Local Government Committee also recognised that particular risk, acknowledging that this was an area where it is difficult to achieve balance, and interestingly suggested a cap of five weeks, which is considerably more than the three weeks that we are discussing. Furthermore, nine out of 10 respondents to our consultation on banning letting fees agreed that deposits should be capped at at least four weeks’ rent.

As the landlord or agent representatives we heard on Tuesday pointed out, a cap of six weeks provides the flexibility that landlords need to rent to higher-risk tenants. For example, lowering the deposit cap to three weeks’ rent might hurt pet owners or those who live abroad.

[Sarah Jones]

Does the Minister not accept the evidence from his own Department, which states that there is no link between high risk and deposits?

[Rishi Sunak]

It is important not to conflate aggregate information with the particular circumstances of individual tenants. We are talking about particular, unique circumstances pertaining to individual tenants that would put them at potentially more risk of a landlord cherry-picking and not wanting to rent to them if they did not have a deposit that would cover their risk. We heard that from the landlord and agent representatives on Tuesday. The groups in question often have to pay a higher than average deposit, to provide landlords with the assurance they need. That provides them with a home to rent.

[Sarah Jones]

Will the Minister consider accepting our amendments and introducing a separate one that applies to pet owners?

[Rishi Sunak]

It is hard to be prescriptive about all the circumstances in which someone might require a higher than average deposit, which is why the Bill provides a cap and guidance on interpreting that cap. It is for individual landlords to make the determination as they see fit. I remind hon. Members that these amendments would reduce the cap to three weeks.

Lastly, I will mention Scotland, which was raised by the hon. Lady and my hon. Friend the Member for Gloucester. It is important to know that Scotland has an eight-week cap, which is considerably higher than the six weeks that we are proposing. There was some concern that deposits would escalate up to that cap, but the evidence that we have seen and analysis that we have conducted thus far do not suggest that that is the case. The average deposit in Scotland remains at about a month’s rent. There is good evidence there that that fear is misplaced.

[Sarah Jones]

What does the Minister say about the fact we have seen time and again, such as with student fees and the minimum wage, that when the Government set a definition, that is where the industry moves to?

[Rishi Sunak]

The specific issue we are talking about is a cap on deposits. We do not need to look at potentially similar industries; we can look at an exactly analogous industry, because in Scotland where there is an eight-week cap that has been in force for a while. There, deposits have not gravitated to that level and have remained at about a month’s rent. There can be no more compelling evidence than that.

[Rishi Sunak]

My hon. Friend is right that the evidence on apprenticeships certainly does not suggest the conclusion that has been referred to.

The guidance that will be published will encourage landlords to consider on a case-by-case basis when to take a deposit and the appropriate level of deposit.

[Sarah Jones]

It would be nice if the Minister could publish the evidence on Scotland.

[Rishi Sunak]

I would be very happy to write to the Committee with the current analysis. In fact, I can give the Committee that right now: the statistics on deposits in Scotland suggest that average deposits have not accelerated to the cap. Average deposits in Scotland during 2017-18 ranged from £580 to £730, compared with a median rent of £643for a two-bedroom property over a similar time period. I will happy provide the Committee with the source for that, which I do not have to hand, as soon as I can.

I hope that the hon. Lady will withdraw her amendment.

[Sarah Jones]

We want to push the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Rishi Sunak]

I am sure the hon. Lady will appreciate that I cannot comment on an ongoing legal case, nor speculate on what policy might be depending on its outcome. I remind her that we are considering an amendment that would do away with holding deposits in their entirety. That is not the recommendation of the Select Committee, of which she is a considered member, which wanted to tweak how holding deposits work.

The Bill does not require landlords and agents to take a holding deposit. The amount can be capped to prevent abuse, and the tenant will get their money back if they proceed with the tenancy and provide correct information. Of the tenant respondents to the Government’s consultation, 93% agreed with the general premise of the proposed approach to ban letting fees for tenants, with the exception of a holding deposit, refundable tenancy deposit and tenant default fees.

[Sarah Jones]

The Minister is using the evidence of tenants for one argument, but ignoring it for others. I ask him, throughout the Bill, to look at the views of tenants. In other cases, that would lead him to do a different thing entirely.

[Rishi Sunak]

I would like to think that we are focused on getting the policy right. We have listened and responded to all participants in the industry. It is not a question of one or the other. We want to get the policies right for the long term to ensure not only that tenants are treated fairly, but that the market functions and that a healthy buy-to-rent sector is available, with investment going into it. It is important for that reason to make sure that some of the concerns that landlords have are addressed and listened to in order to ensure the functioning of this market in the years ahead. In the past, we have seen the catastrophic consequences for the supply of private rented accommodation of dramatic impositions on landlords, and I am sure that none of us would want to return to those bad old days.

--- Later in debate ---

[The Chair]

I take your point, but it is up to Opposition Members what amendments they propose, and it is up to the Minister to respond to them. Opposition Members have that democratic right. You cannot just say that you think it is bad—I am sorry.

[Sarah Jones]

I beg to move amendment 11, in schedule 1, page 24, line 34, after paragraph (4), insert—

“(4A) In the event of a tenant terminating a tenancy as a result of a breach of section 1 or section 2 of this Act, any payment beyond the date of termination is a prohibited payment.”

This amendment is consequential on Amendment 10.

[The Chair]

With this it will be convenient to discuss amendment 12, in clause 4, page 4, line 5, at end insert

“, except that the tenant may choose to terminate the agreement without penalty.”

This amendment enables a tenant to end a fixed-term tenancy immediately in the event of a section 1 or 2 breach by a landlord or letting agent.

--- Later in debate ---

[Sarah Jones]

I rise to speak in support of amendment 12, which would give tenants a right to leave a tenancy agreement after a breach of clauses 1 or 2, and amendment 11, which would prevent landlords from charging a tenant for termination of a tenancy if they leave under the provisions added in amendment 12. Those simple amendments would help to redress the balance in the relationship between landlords and tenants and offer real benefit to other areas of the Bill.

The Bill provides for a strong set of rights for tenants to dispute and reclaim money that was taken as a prohibited payment. Yet if there is one thing to take away from all the evidence we heard this morning and on Tuesday, it is that people on all sides want an enforcement system that works and want landlords who charge such fees to be held accountable for their actions. As the Bill stands, there is not enough funding in the enforcement mechanism for that to be done consistently by a trading standards body or enforcement authority. The Opposition want more funding for enforcement to catch out wrongdoers, but inevitably tenants may need to go to a first-tier tribunal themselves if they are charged a prohibited fee and wish to challenge it.

The Bill should therefore consider closely the drivers and the things that discourage tenants in reporting landlords and letting agents that charge prohibited fees. The amendment aims to resolve one of the real discouraging factors for anybody who has either just moved into a new house on a fixed-term contract or anybody who has agreed a long fixed-term contract with their landlord.

We know that the relationship between a tenant and landlord is important to having a happy and successful tenancy. Indeed, for those who live with their landlord it is a relationship with someone they see on an everyday basis and with whom they share facilities. Taking a landlord to a tribunal could drive a significant wedge into that relationship, and it would be natural for tenants to feel that they are no longer secure in their rental agreement through no fault of their own, after a landlord has tried to charge them a prohibited fee. Yet, as the Bill stands, they may need to remain in the agreement until the end of the tenancy. So the landlord has tried to charge a prohibited fee, but the tenant has to remain in the agreement until the end of the tenancy.

That would be a major barrier to bringing up the prohibited charge. People might think that challenging a prohibited fee is not worth their feeling uncomfortable in their rental agreement for months, possibly years, as opposed to just accepting the fee, so as not to sour the relationship with the landlord.

This amendment would get rid of that barrier by giving the tenant the ability to leave if they feel uncomfortable staying in an agreement with a landlord who has already charged a prohibited payment. It is a method both of improving the rights of tenants if they are charged a prohibited fee and of removing a barrier to reporting the charging of a prohibited fee by a landlord or letting agent.

It would also act as an extra disincentive to a landlord or letting agency charging a prohibited fee. If they could lose a tenant as a result of charging a fee, that could lead to the loss of rental income for the period between the tenant moving out and finding a new tenant, given that amendment 11 would prevent the charging of fees for the early termination of tenancy under this new provision. This set of simple amendments would improve the effectiveness of the Bill and I hope that Members from all parties will support it.

[Rishi Sunak]

I hope that we can do this very quickly. The Government believe that both amendments 11 and 12 are problematic, and this discussion comes down to just a simple difference of opinion on principle. Removing the obligation for a tenant to pay the remainder of their rent if they terminate their tenancy following a breach of the ban could lead, in our view, to landlords being disproportionately penalised for perhaps an inadvertent breach that they immediately take steps to rectify.

Clause 4 already ensures that any term that breaches the ban on fees is not binding on the tenant and the Bill also provides for tenants to recover any prohibited payments, and for enforcement authorities to take quite significant action in such cases, potentially leading to an unlimited fine.

For those reasons, and it is a simple difference of opinion on what is proportionate, I ask the hon. Lady to withdraw the amendment.

[Sarah Jones]

I heard the Minister; there is clearly a difference of views. I am happy to withdraw the amendment, but I obviously reserve the right to return to this matter on Report.

Amendment, by leave, withdrawn.

Question proposed, That the schedule be the First schedule to the Bill.

[Sarah Jones]

There are parts of schedule 1 that we have concerns about; we have already touched on those concerns briefly. In particular, we touched on paragraph 8, which deals with

“Payment in respect of utilities etc”.

We are really concerned that these measures were not part of the consultation and of the initial Bill, but have been added subsequently, and we are also concerned that people have not been given enough time to consider them, or make a case against them.

It would be the case—would it not?—that landlords could charge, say, £500 a month, including bills, when the bills are only £30 a month and the market rent is £400 a month. This is a loophole that is new and that has not been consulted on, and it would leave people open to abuse.

Agencies could make back what they are losing in fees by charging higher rates on bills than the bills come to, and this would be particularly an issue for students, where they do not use the whole house and it is therefore harder to work out what the bills should come to.

We have not tabled an amendment to that effect, but will the Minister look again and ensure that there is some kind of clause that enables tenants not to be ripped off by being charged more for their utilities than they should be?

Question put and agreed to.

Schedule 1 accordingly agreed to.

Clause 4

Effect of a breach of section 1 or 2