Renters’ Rights Bill [HL]

Baroness Grender Excerpts

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

Moved by

[Baroness Grender]

1: Clause 2, page 1, leave out lines 11 to 18 and insert—
“(1) A letting agent who, in connection with the grant, renewal or continuance of a residential tenancy, requires from the tenant the payment of any premium shall be guilty of an offence under this section.(2) In subsection (1), “premium” means any fine, sum or pecuniary consideration, other than the rent or deposit, and includes any service or administration fee or agency charge.(3) In subsection (2), “deposit”, in relation to a residential tenancy, means any money intended to be held (by the landlord or otherwise) as security for—(a) the performance of any obligations of the tenant, or(b) the discharge of any liability of the tenant, arising under, or in connection with, the tenancy.(4) The Secretary of State may by regulations specify the categories of sum which are not to be treated as a premium for the purposes of this section; and the maximum amount which tenants may be asked to pay in respect of such a sum.”

[Baroness Grender (LD)]

My Lords, I let your Lordships know that I am registered as a vice-chair of the All-Party Group for the Private Rented Sector.

In England, one-quarter of all families with children now live in a private rented home. In the UK, £48 billion is spent each year on rent for privately rented homes, double the figure for 10 years ago. Government data released yesterday show that the median monthly rent in London is now £1,473, a rise of 13% over the last two years. Salaries, as we are all aware, have come nowhere near to matching those rent rises. The number of renters is soaring, monthly rents are soaring and up-front costs are soaring. The sector is changing at a rapid and unsustainable pace and pushing many on low and average wages to crisis point. Ending of a private tenancy is now a leading cause of homelessness, and that does not include the hidden homeless who do not show up in any of the data. One in four renters now say that their last move strained their finances and more than one in three took on some form of debt to pay for it.

This amendment goes to the heart of one of the key issues for renters: high up-front costs, which are a barrier to moving into a home. Ironically, these are even higher for those on low incomes, who are seen as more of a risk to a landlord. Of course, those tenants should be in social housing—we have debated this a great deal and will continue to do so. According to Shelter, one in four renters moved home in 2013-14 and 29% of renters have moved three times or more in the last five years. That rises to 37% if they live in London. Shelter estimates that the median cost of moving for a private renter is £1,500 but we need to ask: how often will that be paid? As I have just explained, it could be paid as many as three times in a five-year period. That is the median cost; for many, it is much higher, with two or three months’ rent demanded up front along with the deposit, as well as letting fees.

Shelter’s research shows that average letting fees are £355 per move, with one in seven people paying £500. On rare occasions, renters have been forced to pay fees of £900 or more to a letting agent, simply for the privilege of moving into a home. Reference checks, credit checks, administration fees, inventory fees—the list goes on. Invariably, the fees charged are extortionate compared to the cost actually incurred by the agent and they are not necessary. Furthermore, any cost actually incurred should be covered by the lettings agent’s client—the landlord—not by the tenant. Far too often these high up-front costs are proving a barrier to tenants, who simply cannot afford to move.

This week Radio 4 broadcast a documentary, presented by Sarah Montague, called “After Cathy”, 50 years on from Ken Loach’s “Cathy Come Home”. It featured the audio diaries of three homeless people over the course of a year. One of them, Zara—not her real name —from London, a teacher and mum of a three year-old and an 11 year-old, had lived in the same private rented home for six years when her landlord put up her rent. She could not afford to move to cheaper accommodation because she could not afford the up-front costs of moving. This teacher is now homeless and has been living in emergency accommodation with her children for a year—a teacher. Does anyone in this Chamber really believe that this teacher, who could not afford the up-front costs to move to cheaper accommodation, would have been helped by a nice clear and transparent breakdown of the additional costs of the credit check, the inventory check, the administration charge and the cleaning costs, on a nice large poster in the lettings agency’s office that complied fully with the Consumer Rights Act, with clear guidance about who she could complain to if the fees were not sufficiently transparent? Does anyone genuinely believe that at that critical moment when she could not afford the up-front costs to move somewhere cheaper, transparency would have made the difference? It would not.

So the critical question in this key amendment and this part of the Bill is what to do about up-front costs—nothing else. I suspect the Minister will tell us that if we take away lettings agency fees from tenants so that only landlords pay them, as in Scotland, rents will rise. But Shelter’s research surveying 120 landlords found only one who had noticed an increase in agency fees and had passed this on to tenants. Of the 50 Scottish letting agency managers it surveyed, 76% either were positive about the change or said it had had no impact. If the Minister is going to say that he is not convinced by Shelter’s research on rents and lettings agencies in Scotland, will he please demonstrate that there is alternative research or a study that the Government have conducted which counter that claim? If there is no such research, I am sure he will tell us.

At Second Reading, the Minister, the noble Viscount, Lord Younger of Leckie, also said that tenants would still end up paying, but through higher rents. If the Minister makes that argument today, could he please tell us where the evidence comes from for it? The evidence from Scotland suggests that this is not the case. But even if it is, tenants would be better able to absorb a smaller rise over a 12-month period than having to pay the up-front costs in advance, with lettings agency fees on top. It is the up-front costs that this amendment and Bill seek to remove. I apologise for labouring the point but I want the Minister to answer specifically about up-front costs.

I am moving Amendment 1 having reached the conclusion that the list of potential fees in the Bill, as drafted, would leave too many options for newly named fees to be charged to get round the list outlined in Clause 2(2). The proposed new section originally specified registration fees, administration fees, an inventory check and reference, extension, renewal and exit fees. This amendment therefore bans all fees from the tenant to the lettings agency and specifies that charging a fee to a tenant would be an offence under that section. Subsection (2) of the amendment clarifies that this refers to anything other than the deposit and rent.

Subsection (4) would enable the Secretary of State to make exemptions through regulations, so that if evidence emerges of services in respect of which there is value to the tenant in charging a particular fee, this can be done. I do not anticipate any such fees but my new amendment allows for the possibility, if concrete evidence was indeed found that a fee for a specific service would be in the best interest of the tenant in some way. Such an approach would ensure that all interested parties can be consulted and allowed to have proper discussions about services where there is value. It also enables the Secretary of State to set through regulations a maximum amount for those exemptions.

While I have made it clear—if not somewhat laboured the point—that the central proposal is about taking away unnecessary up-front costs to the tenant and that transparency, while welcome, is not the solution, I would like to pursue one more matter about transparency. At Second Reading the Minister, the noble Viscount, Lord Younger of Leckie, said that,

“the Government have committed to reviewing the impact of letting agent fee transparency later this year ”.—[Official Report, 10/6/16; col. 987.]

I believe that November is a later part of the year and would like the Minister to tell us what progress has been made on that review.

If, when it comes to up-front letting fees charges to tenants, the Government are waiting, as many suspect, for some industry-led solution to come forward, I believe that they will be disappointed. The Government will have to choose whether to back the “just about managing” tenants, to use the current terminology, who now constitute 25% of the population, or to back an industry which, according to the evidence available, is able to weather the proposed change in this Bill with ease.

I conclude at this stage with what I believe is the significant challenge before us in the Bill. Is there a way to reduce up-front costs for tenants in the private sector when they move? I believe that there is. Do not allow this Government to hide behind the smoke and mirrors of transparency, however welcome that is. There is one central question in this section of the Bill: can up-front costs be transferred to landlords? Shelter’s evidence from Scotland—in the absence of any other—has shown us the way. There is no counterevidence. This amendment provides a positive yes and I beg to move.

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[Baroness Gardner of Parkes (Con)]

My Lords, I declare an interest as someone who has rented out property for a long time. I believe I raised this point at Second Reading, and I certainly did on the Housing and Planning Bill last year. What concerns me about all this is where the money is going to come from. If the noble Baroness, Lady Grender, believes that people will simply reduce their rents, it is unrealistic. When she talks about how much rents have gone up, that is nothing compared to how much property has gone up.

[Baroness Grender]

To clarify the question, is the noble Baroness asking where the money that the lettings agencies currently charge would come from?

[Baroness Gardner of Parkes]

I am raising the point because, as I have discussed in the past—not during the last Bill, but previously—the inventory cost has to be borne by someone. If the inventory cost is paid only once, by the person who has the benefit of it, it is not then built into the rent in the way it would be if the landlord paid it, when it would be included in the rent, and every time there was a rent increase, there would be an increase in the inventory cost. It would already have been paid and would be a one-off and out of the way. I am very half-hearted about these suggested changes here.

People are overlooking the situation where, particularly in London, landlords are giving up ordinary residential lettings. There is quite a desperate shortage of lettings for ordinary people wishing to rent, because landlords can make so much more money out of Airbnb, which is totally uncontrolled. I opposed the practice when it came up last year during passage of the Deregulation Act, but no one else did. Now, sure enough, Berlin is bringing in controls. New York, Vancouver—all these places—are finding themselves in the same position. The Mayor of London has acknowledged the problem. It is only capital cities that have ever had that limitation on short lets. Whether it is in the tenancy agreement or not, people are totally ignoring that and simply letting them, because they can earn as much in four months as an ordinary landlord would in the whole year. It is much more complicated

Again, we have talked about references. The Government expect you now to know that your tenant, whoever they are, is entitled to be in the country. As for the days when people could employ someone who was not legitimately here, all that changed, if your Lordships remember, with the situation that came up with the noble Baroness, Lady Scotland. This is much more complicated than people appreciate. This amendment sounds very good and sweeping but the whole thing has not been thought through in enough detail. There might be limits on what you could charge, but as I have said before, I remember letting a property in the days when the Wilson Government just froze rents. They were frozen for about two years, and then they absolutely escalated when the freeze was lifted.

You cannot really find a very easy answer to this, but I am very much in favour of an answer. I thoroughly approve of the idea that you should have access to a register of rogue landlords and all that, but it is unrealistic to imagine that this list of things which the noble Baroness has set out in detail will suddenly become inexpensive or vanish or something. Where is it going to vanish to? This is what I would like to know. I am convinced it will just be built into rents. The noble Viscount, Lord Hailsham, spoke about this recently, as a landlord or someone who had been one way back in history. He said that people had to realise that people who were landlords were doing it as a business, which is true. It is most unfortunate that the supply of housing, both social and ordinary commercial, has vanished, because people need homes and they need them desperately. We all hope that that housing Act will produce more homes for people at affordable prices but the press on it has not been very encouraging. I wait to hear what is said about it.

--- Later in debate ---

The Government have always been clear that any regulation in the sector must be appropriate. The Minister for Housing, Planning and London in another place has also been clear that we must be mindful of the potential impact on rents from banning fees paid by tenants—something raised by my noble friend Lady Gardner of Parkes. I express some reservations on the clause, but I have listened very carefully to what the noble Baroness has said, as well as to the remarks of the noble Lords, Lord Shipley, Lord Thurlow, Lord Best and Lord Kennedy. My noble friend Lady Gardner of Parkes said that there was value in looking at this, but we have to be careful about unforeseen issues in terms of the effect on rents. This is not as straightforward as it might at first seem.

[Baroness Grender]

If the Minister believes that there will be an impact on rents, can he cite evidence of any research done by the Government into the changes in Scotland, given that at the moment we have one piece of research that says—and I say it again—120 landlords were surveyed and only one had put up costs as a result of the change in Scotland? Does he have some alternative research to present?

[Lord Bourne of Aberystwyth]

The noble Baroness will have heard me say very clearly that we are awaiting the outcome of both the working groups looking at the issue. They will provide important evidence and will have looked at this issue in far greater detail than I have, so I anticipate looking at that when we have the report. I want to take this away and consider it further. I am not opposing the amendment; I am expressing reservations. The noble Baroness and other noble Lords have raised some important issues. I will take this away: we really do need to see the evidence. I hope noble Lords will understand that this is an evidence-based approach that I want to be pragmatic about.

[Lord Bourne of Aberystwyth]

The noble Lord will have previously heard me and the noble Lord, Lord Thurlow. There is an issue of housing supply across the board. There is no question of that: it has been a problem for successive Governments and we have to address it. It is not as simple as addressing a particular part of the problem: it is across the board. There are challenges in all the sectors: private rented, social rented and owner occupied. This is not a straightforward issue and we have to be careful that any changes that we make do not have impacts elsewhere. I therefore want to reflect on this in a positive way and consider all the evidence.

[Baroness Grender]

Noble Lords will not be surprised to hear that, as the promoter of the Bill, I am minded to accept my own amendment. There is no doubt that there are good lettings agents out there who are members of government-accredited redress schemes and pursue best practice. They should continue to charge a fee for the work that they do but the fee should be from the landlord, who can shop around and choose which lettings agency to use. Landlords can decide to use the decent, regulated ones. I particularly thank the noble Lord, Lord Thurlow, for bringing the Committee the perspective from the private sector, which is critically important. I again praise Dorrington Residential, one of London’s leading private sector residential landlords. It has announced that it will work only with lettings agencies which agree not to charge renters any fees. In its own words, it cannot see why other landlords and the Government do not follow suit. There is evidence that it can work and does not impact adversely on the private sector. It is advocated by some private sector landlords, which I praise for doing so.

Citizens Advice produced a report entitled Still Let Down, which found that 18% of letting agents were still not members of a redress scheme, despite this being required since October 2014. Only 4% of renters knew the name of the scheme of which their agent was a member. Generation Rent researched 720 agency websites, of which 96 had no fees published and 240 did not list, as they should, which redress scheme they belong to. We heard from the noble Lord, Lord Thurlow, whom I thank for his support, about the spurious and unreadable small print. I thank the noble Lord, Lord Best. The critical issue, which is not covered in the Bill, is housing benefit and universal credit and the attitude of private sector landlords to it. This is, of course, why we need a healthy, burgeoning social rented sector and we need to build more social housing. I expect with a heavy heart a White Paper which is coming in two weeks. According to an exclusive which I read in the Sun yesterday, this will tell us to build higher and higher—a new whizzo wheeze. I still say that we should give the money to local authorities, or remove the cap, and let them build. We all hold our hands up; there is a 30-year legacy which all of us in government have owned, but building social housing is now critical and we have to get on with it.

I thank the noble Baroness, Lady Gardner, for her support and long years of campaigning in this area. I am sure that all tenants are grateful for this and her pursuit of trying to sort through the complicated issue of leaseholds. The purpose of Amendment 1 is to simplify: it takes away all the lists and bans all lettings fees, but allows the Secretary of State to specify exemptions through regulations. I think that is a better and tidier way of doing it. However, if the Government were to kindly indulge me with a Report stage, I would be happy to work with the noble Baroness and look at any tidying up that could be done to accommodate that issue.

The noble Baroness said that the money has to come from somewhere. I again refer to the experience so far in Scotland. I am very happy to look at alternative evidence on this but so far the evidence is that rents did not go up. However, let us assume that the noble Baroness is correct and rents go up. If they did so, they would be eased out over a 12-year period. I have another example publicised by the BBC yesterday of a lady, Lucy Surridge, who has spent nine weeks living in a hostel in Dagenham, east London, with her 11 year-old daughter and six year-old son. She is a full-time school chef and was made homeless when her landlady sold the property. She is 29 and has approached several agencies, which have told her that she needs to earn £38,500 before they would consider renting to her, and she would need £3,500 in deposit fees. I challenge most noble Lords, bar the obviously extremely wealthy ones, to find that kind of ready cash immediately. That is the critical question we are addressing, that of up-front cash in such cases. I have an 11 year-old who is applying to secondary schools, but I have a fixed and permanent address. However, the two ladies I have described are applying for places in secondary school for their children from an unclear and unfixed address. I know that everyone is up in arms about Brexit, but why we are not rioting on the streets about this is frankly beyond me.

I pay tribute to the Debrief organisation, which has campaigned to make renting fairer and has many examples of people who have experienced exorbitant tenancy fees. A lady called Emily has talked to me. She has moved four times in four years, only once out of choice. Her most recent moving fee was £1,850. She has had to pay that sum up front four times. When this Bill was initiated, most people who contacted me were young professionals living in London. However, as the Bill has been publicised, a striking number of older people have contacted me with similar issues. Whatever we think of the private rented sector and its suitability for tenants on low incomes, we are stuck with that form of tenure for a while. Government data released yesterday show that the affordable housing stock is growing at the lowest rate since 1992—52% lower than last year. Lack of affordable homes is forcing more and more people into the private rented sector, so we are stuck with the private rented sector as an immediate stop-gap solution, even if we could all wave our magic wands and instantly start building social housing at a very fast pace. Therefore, we have to make the private rented sector suitable for people on low incomes.

For all those reasons, I particularly thank the Minister for saying that this is not the end of the journey on this amendment, and that he will consider it. I very much like the suggestion of the noble Lord, Lord Best, which I will call the Hayter/Palmer precedent. I see that as a very valuable way to move forward on this. I am aware, of course, that there is a working group and people are holding meetings to discuss this. However, at some point people will be at loggerheads and the Government will have to make a decision. I beg the Government to make a decision in favour of the tenants I have described.

Finally, I thank my noble friends on these Benches—and my noble friend Lord Shipley, in particular—for their support for this area of the Bill.

Amendment 1 agreed.

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[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord, Lord Tope, for moving these amendments and the noble Lord, Lord Kennedy, for his brief contribution. If approved, these amendments would require the Secretary of State to introduce regulations requiring landlords and/or their agents to ensure that electrical safety standards are met in their rental properties. I am conscious that many noble Lords, rightly, feel strongly about electrical safety—I also pay tribute to the noble Lord, Lord Tope, for his campaigning role on this—and that it has raised considerable debate. I also know that Shelter has campaigned on this; I pay tribute to its role.

Yet again, the Government are taking a measured and pragmatic approach. As noble Lords have appreciated, we have taken an enabling power in the Housing and Planning Act 2016 that allows us to introduce requirements on regular electrical safety checks in rented properties at a future date. It has also been stated, correctly, that we have established an electrical safety working group and are working with experts from across the sector to fully assess whether regulations are needed and, if so, to determine the detailed options for regulation. It would therefore not be appropriate for me to say, “These are the regulations that we will bring forward” or to give a date when we will bring them forward, because we are awaiting the report. The working group has met twice, is due to meet again in the coming weeks, and it is due to present its reports to Ministers by the end of this calendar year.

Six months is an appropriate period in this regard; it is entirely right that on something of this nature we look to a working group to report in a six-month period, and that is what we are doing. The Government will then need to consider it and will of course do so—it is an important issue. I am afraid that I cannot give an undertaking about when regulations will come forward if they come forward. I will not say “in due course”, “timely” or “coming shortly”. However, the Government take this issue seriously, and I can understand the spirit in which these important amendments have been tabled. I can provide the reassurance that the Government regard this as important and will carefully consider the report of the safety group.

However, as I said, it would be premature to commit to legislation, and particularly the scope of any legislation, before the working group has concluded its research and before we have had a chance to look at it and consider what is appropriate in the light of that research.

[Baroness Grender]

My Lords, again it will not surprise the House to hear that I am minded to accept Amendments 2 and 3. This is a Government leaning on the rented sector for support, like leaning on a walking stick that has woodworm, damp and dry rot. We need to improve the rented sector to meet the needs of people over at least the next decade, if not two. Shelter’s research states that one-third of privately rented homes in England do not meet the Government’s decent homes standard, while almost one-fifth pose serious health and safety hazards. The lack of compulsory electrical checks plays a significant part in that.

As I conclude on the final part of this amendment, I would like to pay tribute to Electrical Safety First, which has been campaigning, along with my noble friend Lord Tope, to bring about these changes. More widely, I would like to thank Debrief and its petition, Generation Rent, Shelter, Crisis and Citizens Advice, all of which supported the Bill. I would also like to thank Hull City Council, which yesterday passed a motion at full council supporting the Bill. The motion was proposed by Liberal Democrat Councillor Charles Quinn and supported by Labour councillors. I am sure that the Minister will be pleased to hear that Conservative Councillors John Fareham and John Abbott also voted in favour in Hull, because all three parties think that renters now need a fairer deal and that getting rid of up-front costs will help.

I want to take the opportunity to say that I am pleased that the earlier clause on rogue landlords received the support of the noble Baroness, Lady Gardner. That information should be publicly available in the same way that, for instance, employers who flout the national minimum wage are made public. I see no reason why information on rogue landlords cannot similarly be made public.

In conclusion, and in the knowledge that there possibly will not be a Report stage for the Bill, I want to say that we on these Benches will not let any of the issues in the Bill rest here. My colleague Tom Brake in the Commons will take up as many of them as he can. If a White Paper is to be forthcoming, we will try to ensure that all four of the substantive clauses are continued through other legislation. In particular, we will continue to pursue, with some passion and vigour, the issue of up-front costs to tenants, which is hurting tenants every day.

[Lord Kennedy of Southwark]

Before the noble Lord, Lord Tope, decides what he will do with his amendment, I want to say that I worry that the Minister’s use of the word “measured” is another euphemism for “in due course”. Will the Minister please take back to the department the strength of feeling here? Although six months may seem a relatively short time, this issue has been around for a very long time. As the noble Lord, Lord Tope, said, we really have to sort out the electrical safety check to prevent deaths. The Government have the power and we need to resolve this sooner rather than later.