Baroness Grender
Main Page: Baroness Grender (Liberal Democrat - Life peer)Renters’ Rights Bill [HL]
Baroness Grender Excerpts
Baroness Grender (LD)
My Lords, the natural consequence of the chronic lack of social housing and the prohibitive cost of buying a home means that we now have a growing number of people who live in the private rented sector. Sometimes it would appear that this ever-growing customer base—almost one in five of the population, one-third of them families with children—have more consumer rights when they buy a white good, such as a fridge, than they do when they rent the home to put the fridge in. That cannot be right. The Bill aims to address that current imbalance. The rising demand for rented homes is pushing up costs and allowing some landlords and letting agents to take advantage of tenants who have relatively little power to object to high prices or poor conditions, or to make choices about which letting agent to use.
The law needs to change to make renting cheaper, safer and more secure for tenants. The Bill will reduce the costs of moving for renters by banning letting agents charging fees to tenants, a practice already outlawed in Scotland. The Bill will also make renting safer through mandatory electrical checks and give tenants greater protections against rogue landlords. The Government have helped tenants by introducing legislation on rogue landlords in the Housing and Planning Act 2016, but they stopped short of giving real power to tenants through information so that tenants know who those rogue landlords are. Under Clause 1, tenants would have access to that information. This change would put transparency and choice into the hands of the consumer, the customer, the tenant. A landlord can require a tenant to provide a reference, yet tenants are unable to apply the same principle to their landlord. If the list of employers who flout national minimum wage legislation can be made public, why cannot rogue landlords be made public, too?
In Clause 3, we return to an issue debated during the passage of the Housing and Planning Bill, which is that electrical safety checks should be compulsory. Clause 4 would prevent a rogue landlord obtaining an HMO licence. The points covered by Clauses 1, 3 and 4 were recently debated during the passage of the Housing and Planning Bill, and my noble friends Lord Foster and Lord Palmer will elaborate on them. I shall concentrate the rest of my remarks on Clause 2, which aims to end letting fees for tenants.
The cost of living for private renters has reached crisis point. Renting is the most expensive form of housing to live in, and with rising rents and increasing demand, renters are trapped, with limited choice. Tenancies are increasingly very short—often of only six months or perhaps 12—so renters often lack security and, as we all know, they constantly have the imminent threat of a rent rise hanging over their heads.
Unlike people in the owner-occupied market, one in four renters moved home in 2013-14. Just under a third of renters have moved three times or more in the past five years, and just under a quarter of them in London. Each time they move, the up-front costs are often the greatest barrier of all. In London, the median amount that renters must pay before moving is £1,500, and in many cases the cost is several thousand pounds. It goes up disproportionately for those on low incomes, who are viewed as a higher risk and so may be required to provide several months’ rent in advance. Indeed, of those who rent on a very low budget, a third have to borrow or use a loan to pay up-front fees and, disgracefully, 17% have to cut down on heating and food to cover the up-front cost of moving.
Costs vary from agent to agent and range from £40 to £780, with the average cost just under £400 per move. Many of those charges seem completely arbitrary. A credit check, for example, costs about £25 today, but some agencies charge a tenant £150 or more to carry one out. Marta, a lady who contacted the Debrief’s Make Renting Fair campaign, had asked to sign a three-year tenancy agreement. The agent said, “Fine, but you’ll have to pay three times the fee”: that was three times £360 just to re-sign. I spoke to a young woman this week who is in a two-bedroom flat. She is the main tenant and happily paid £150 for an inventory check and other things at the start of her tenancy, but every time her flatmate changes, the new tenant is charged a £150 for an inventory check which, of course, never happens—what a rip off!
Citizens Advice, which in the past year has seen 80,000 people with a problem in the private rented sector, has seen an 8% increase in complaints about letting agents. One tenant described a fee of £180 to renew a tenancy agreement that is staying exactly the same, except for a change of dates. It requires a simple printing or photocopying job, and it is the renters who go into the office and sign the form, but they are charged almost £200 for it.
We all accept that letting agents have some genuine costs in moving tenants into a property, but the appropriate payer of these costs is the landlord, not the tenant. It is the landlord who is the client, and most of the fees charged to tenants would be costs landlords would expect already to be covered in the amount they pay the agent. It is the landlord who can choose which agents they use and which is the most competitive agent in the marketplace. The tenant is choosing where to live, what the rent is and whether they can afford the deposit. They have no ability to pick and choose which letting agency they will use. Let us take the example of Jess, a client of Citizens Advice. She found a property that she wanted to rent in her local area, and the letting agent requested £600 to run credit checks and get references—let me remind the House that a credit check costs about £25—which was non-refundable if the landlord did not accept her as a renter. I am sure she would have loved to choose which letting agent she used, but she was not in a position to do that.
These agents are charging both landlords and tenants because they can get away with it. That needs to end, and that is what the Bill does. Imagine if this model were applied in a different market, say, to employment agencies. A company would ask the employment agency to find it a temp. On this model, the temp would be charged a fee as well as the company employing him or her. It just does not make sense.
Fees for tenants have already been successfully banned in Scotland following legislation in 1984, which was clarified in 2012. Research into its impact commissioned by Shelter shows that it has had only minimal side-effects for letting agents, landlords and renters, and the sector remains healthy. Only 17% of letting agents increased fees to landlords, and only 24% reported a small negative effect on their business. Not one agency manager interviewed said it had a large negative impact on their business, while 17% said they considered the change to be positive for their business. Research by Shelter suggests that even if the charges are passed on to landlords, in Scotland this has not led to an increase in rental charges. However, for the sake of argument, let us say it did. Instead of an up-front, prohibitive cost of £1,500 to move, that amount would be absorbed into a weekly or monthly rental sum. There would be no up-front charges, and those on housing benefit would have the possibility of the amount being absorbed into the monthly or weekly rent. Dorrington Residential, one of London’s largest residential landlords, works only with letting agencies which agree not to charge renters any fees. In its words:
“Dorrington is able to run a successful residential investment business and give renters a fair deal by avoiding unnecessary charges, and we can’t see why other landlords—and the Government —do not follow suit”.
There is a clear case for the Government to take action in support of renters and end these fees once and for all.
We have debated many aspects of the housing crisis in this Chamber, and I recognise many faces from those debates. There are many things that are difficult to solve, but this is a simple thing that is very easy to solve. Today on the green opposite Parliament I met a group of young renters. The work that Generation Rent has done to stand up for renters’ rights and the Debrief’s Make Renting Fair campaign have provided a strong voice on these issues. There are more than 250,000 signatures on their Change.org petition. They support this Bill. This is a broken market where the consumer has little or no power, but it is a growing market and one the Government should serve well, like any other. Transparency has been tried, but evidence suggests that it is not enough as little has changed. We should ban these fees, clarify that the landlord pays the fee and make it a fairer marketplace for those who rent. I beg to move.
Baroness Grender
My Lords, I thank all noble Lords who have participated in this debate, particularly the Minister. This Second Reading on the Bill occupies the third slot on a Friday and I much appreciate his contribution. I greatly admire the noble Baroness, Lady Gardner of Parkes, who is a champion of leaseholder rights, and I wish her more power to her elbow as she continues to seek clarification on the mess here. Australia sounds very interesting in that respect. I quite agree with her that this issue needs considered thought and piloting, although I believe that we have a very strong pilot. Scotland has always been reluctant to pilot certain things for the United Kingdom, but there has been a highly effective pilot in this case. I will come back to that.
The noble Baroness also raised the issue of rent. I do not want us to go too far down a cul-de-sac on this. She is right that rents may not come down, but the overall cost of renting will. I emphasise again that the biggest point I want to convey to the Government is the financial shock at the beginning of a tenancy, which is almost unaffordable for a lot of people. As I said earlier, the poorest 17% have to decide whether to eat or heat their premises after paying some of these exorbitant and, I believe, still very arbitrary, sums.
I turn to the ability to complain about an inventory that is not forthcoming and the ability to shop around to avoid slippery letting agents. I can shop around for a landlord and for the area where I am going to live. I can shop around for the rent and the deposit. However, the letting agent is imposed on me, because that is the landlord’s decision. The arbitrary sums they may charge are also imposed on me. The Property Ombudsman may fulfil many of the roles to which the noble Baroness referred, but complaints in this area have gone up substantially. That may be a sign of its success as an organisation, but it is also a sign that people are making complaints. Surveys by organisations such as Citizens Advice reveal that a lot of people do not know that they have that opportunity to complain. We are all familiar with that conundrum in public policy. I thank the noble Baroness for her support for the Bill. We can tease out and examine some of these areas. I completely agree, for example, that an inventory is a really important document that enables a landlord to check what remains in a property when a tenant moves out. However, it is perfectly possible for the letting agent to charge the landlord for that.
I thank the noble Lord, Lord Palmer, the noble Lord, Lord Tope, who is now in his place, and the noble Baroness, Lady Hayter, for their continued resilience in campaigning on the deposits issue and on electrical safety checks. We think that the little word “must” would be a very good thing to include. The Minister said that the DCLG has now contacted Electrical Safety First. I will work on an assumption that that took place in the last 24 hours, unless he indicates otherwise. He nods assent, so I assume that is correct. It is good that this debate has generated that kind of involvement, because there has been a very clear promise to work with Electrical Safety First. That body is very keen to get shifting and to help out in this area, so that is good news.
I thank the right reverend Prelate the Bishop of Derby for his comments. Like him, I have heard stories about landlords everywhere charging people £380 for the pleasure of viewing a property, with the implication that they may or may not take that person on as a tenant. We are not plucking these arbitrary sums out of the air—they actually exist. If anything, the sums are arbitrary on the part of these letting agencies, which think that they can get away with this.
He has also asked whether we can explore the impact with regard to rogue landlords—a definition, by the way, that I never want to debate again. I was here for the original debate; I thought that it was ridiculous and I do not want to participate in any debate of that nature. For me, they are rogue landlords and I completely agree with everything that the Minister at the time said. I am very clear on that; let us never debate it again. But we do need to explore this and Committee stage is the perfect opportunity to do so.
I thank my noble friend Lord Foster for describing some of the achievements that were made under the previous Government; revenge evictions were an excellent example. I have a friend who made a complaint about her landlord and was then taken down a very nasty route. This is an incredibly important issue. You are so powerless in that situation; if you are on a very low income, you cannot shop around and you cannot make a choice, yet you have a landlord who is making your life almost impossible—and, for my friend, that was with two young schoolchildren who needed to be near their school. I am delighted that revenge evictions are now outlawed.
Regarding the transparency issue, I refer to some research done by Citizens Advice. It asked some of these questions, now that we do have transparency and are trying to go down that route. The vast majority of agents, even when asked, do not supply financial information. It is correct that complaints should be made about that and there is a simple, straightforward way to deal with this. I have already described a very large, residential private sector landlord who said that they employ only letting agencies which do not charge a fee to tenants. As a private sector, residential landlord, they expect to pay a fee and they expect it to be transparent. They can negotiate, shop around and make a decision about which reputable letting agents to use. The tenant has no power and no choice in that matter—that is the most important principle that I would like to convey. Given that there are 4.4 million—and increasing—customers in this market, it is also the particular area that I think the Government would do well to take another look at to see whether there is potential for change. I thank the noble Lord, Lord Kennedy, for his support in all these areas. I share his surprise that a little word such as “must” is not included regarding electoral checks. This is an excellent opportunity, with a very small four-clause Bill, to look at some of these issues, especially on landlords and letting agents.
With regard to what the Minister said about signing up and the database, I hope that in Committee we will be able to explore in more detail how a database could be accessed. It does not mean that you know where a person lives, who their children are or any of that kind of detail, but you might know that there is a traffic light scoring for that person and, at the moment, they have a red light. It might be as simple as that. The friend of mine who had very substantial issues with her landlord cannot for the life of her understand why it is not possible to get a reference check on a landlord, given the experience that she went through. As I said before—I do not think that there was a response on this—if it is possible that employers who flout the national minimum wage legislation can be included on an open register, it must be possible to explore this for landlords.
On Clause 2, regarding what was said about transparency, in the Citizens Advice survey, 81% of agents’ offices are not publishing full information about their fees. I agree—we could all go to the Property Ombudsman and make a complaint about every single one of these examples. But there is a very simple solution: no letting agent fees to tenants and the costs absorbed by landlords.
Why was there no impact in Scotland? Why was there no substantial increase in rents? Why was there no substantial problem with the letting agency industry, which, by the way, is an entirely uncredited and unqualified industry, and pretty much unregulated? It is the difference between £25 and £150. It is thin air. Will it have an impact on letting agencies? At the moment it costs them only £25 to do a credit check and they charge £150 for it. No, because it is such a mark-up. That explains why in Scotland, according to the research from Shelter, there has been no hike in rents, no reduction in the letting agency sector and no increased costs to landlords as a result of this. The difference seems to be because the sum is so arbitrary.
I know that there was some talk about fixed costs. My understanding, having read up in this area, is that under trading standards that is a little bit complicated. Again, I am happy to explore that but I think in a free market and under trading standards fixed costs in this area might go against some of the other things that the Government may hold dear. It would be worth making sure that we are clear in that area.
In conclusion, this is a very simple single principle that I am pushing here with regard to the letting agents. It is perfectly possible to do. The impact is minimal, if not non-existent, where it has been done before in Scotland. It is worth very serious consideration by this House. There is very little that we can do about some of the more significant housing issues but this is something that with a very small change in legislation we can implement and make a massive change. As I said at the outset, the substantial up-front costs of moving for people who have very limited resources are what we need to focus on when we are considering this Bill.