Houses in Multiple Occupation

Baroness Morgan of Cotes Excerpts

Thursday 18th November 2010 Westminster Hall

[Nicky Morgan (Loughborough) (Con)]

It is a pleasure to open a debate that you are chairing, Mr Chope. I thank the Backbench Business Committee for allowing this debate on houses in multiple occupation after I pitched the idea to it “Dragons’ Den” style. A colleague told me that I am making history today by having been granted the first one-hour Backbench Business Committee debate in Westminster Hall. If that is the case, I am grateful to be blazing a trail on an issue that so directly affects my Loughborough constituency.

It is a pleasure to see the Parliamentary Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hazel Grove (Andrew Stunell) here today. Some of the substance of what we shall debate was discussed in the Delegated Legislation Committee debate on two relevant statutory instruments earlier this week. I see from Hansard that even though I was not present at that debate, I managed to get a mention in it because of this debate. The hon. Member for Southampton, Test (Dr Whitehead) suggested that my right hon. Friend the Minister for Housing and Local Government, who spoke then, would be speaking today. In fact, we have a different Minister today. I hope that that is because the Department realises that this is a topic of serious concern to quite a large number of hon. Members, so two Ministers need to take an interest in it.

I thank hon. Members for being here today. I realise that 4.30 on a Thursday afternoon is something of a graveyard slot, but several hon. Members have delayed leaving Westminster to be here and I am very grateful to them. I have received messages of support from hon. Members who cannot be here, including the hon. Member for City of Durham (Roberta Blackman-Woods), the right hon. Member for Oxford East (Mr Smith) and my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood), who all confirm what a huge problem the concentration of houses in multiple occupation is in their constituencies.

On 9 June, my right hon. Friend the Prime Minister was asked by the hon. Member for City of Durham to confirm that the Government would not seek to undermine the Town and Country Planning (Use Classes) (Amendment) (England) Order 2010, which came into force on 6 April this year. He replied:

“We all know of the problems of houses that are kept badly, and of past problems involving HMOs. I will ask the Minister for Housing to get in touch with her about his plans, so that we can ensure that we get this right.”—[Official Report, 9 June 2010; Vol. 511, c. 329.]

I suggest to the Minister that the fact that we are here today means that we have not yet got this area of policy quite right, but I hope that today’s debate will assist with that.

The primary reason for my asking the Backbench Business Committee for the debate was the changes that the Government decided to make to the April order. However, issues surrounding HMOs are not just about planning. I suspect that some hon. Members might want to talk about licensing and regulation of HMOs and safety concerns.

The change that I have mentioned was to introduce the Town and Country Planning (General Permitted Development) (Amendment) (No. 2) (England) Order 2010, which came into effect on 1 October and drove a coach and horses through the earlier order by allowing as permitted development the change of use from a dwelling house to a small-scale house in multiple occupation. The reasons for the April order and the reasons why the October change has been greeted with such disappointment by affected communities were discussed during the Delegated Legislation Committee and I do not want to repeat all of them here. That said, certain of the concerns are so great that I cannot avoid repeating some of what was said by hon. Members on both sides of the Committee. This debate also provides an opportunity to consider the wider issue of sustainable and balanced communities, and I will say more on that in a while. I should say now that I am a member of the all-party group on balanced and sustainable communities.

I shall concentrate on four issues. First, I shall talk about why any control on HMOs is needed at all, focusing on our experiences in Loughborough. The second issue is the April and October orders and the third is the practicalities of directions under article 4 of the Town and Country Planning (General Permitted Development) Order 1995. The final issue is where we go from here.

Shortly after I became the candidate in Loughborough, I was contacted by a group of residents known as the Storer and Ashby Area residents group, or SARG for short. Many of them live in an area of Loughborough known as the golden triangle. The area consists of a concentration of terraced houses, which had previously been occupied by all age groups and were within easy reach of the town facilities. However, over the years and particularly between 1994 and 2004, as our extremely successful local university expanded, there was insufficient student accommodation on campus, so landlords, including parents of students, began to buy those terraced houses and rent them to our students. That led to various problems, such as late-night noise, pressure on parking and rubbish collections, poor maintenance of houses and so on. Furthermore, the problem is not confined to one area of our town, but has spread to other areas and types of housing.

I should stress that I and, I think, the residents, because many of them work there, are very proud of our excellent, world-class university. It is my pleasure to visit the campus regularly—even when that involves a live TV debate about student finance against the vice-president of the National Union of Students. However, a growing university in a relatively small town causes problems, and no one seemed to be hearing the problems. The crunch came when the members of the residents group opposed a planning application relating to the building of more student accommodation in their area of town because of the impact that that would have on the local area. The planning inspector agreed with them, and everyone else locally started to sit up and realise that there was an issue that had to be tackled.

I am pleased to say that, since then, we have all learned a lot and come a long way. On the whole, there are good relations between town and gown in Loughborough. We have an excellent community relations officer at the university, senior management who want to be helpful, committed local street wardens, a proactive student union, a supportive and engaged council in Charnwood borough council, and residents who are able to raise the alert about problems. However, the problems remain.

The fact is that the balance in the part of Loughborough to which I am referring has almost irrevocably changed. Each academic year, residents have to brace themselves for the arrival of the students. Will they be good neighbours, as many are, or will they bring trouble, late-night noise and too many cars, often inconsiderately parked? The Minister might well ask, “Hasn’t the damage been done? What would the April order have done to help with that situation?” Well, even now, there are people buying the remaining properties and trying to convert them. The April order would have given the local authority the power to know when those conversions were being proposed and to consider the impact on the local area.

In 2005, Charnwood borough council introduced a supplementary planning document on student housing provision in the town, which adopted a threshold approach that applied different responses to planning applications, depending on the percentage of student houses in any one area. The SPD is a material planning consideration when planning permission is sought—but that assumes that it has to be sought. If the property is being converted into a small-scale HMO, planning permission is not needed. That is why the April order was good news for Loughborough.

What are the consequences of losing a balanced community? The part of Loughborough to which I am referring has lost its primary school, church and post office due to lack of permanent residents. There is a rather ghostly atmosphere during university holidays, and as students are, by their very nature, transient, there is less of the sense of community and social interaction than is normally found in a stable and balanced community. There are also higher levels of crime. If a burglar breaks into a student house, he is likely to find several laptops, TVs and so on, which is bad news for the neighbours.

Turning to the April and October orders, I entirely understand the Government’s desire to empower local communities, where there is a problem with a proliferation of HMOs, to take action. I also understand that that problem does not affect the vast majority of local authorities. However, we must give communities real power to put effective controls in place if they want to do so. I will come on to article 4 directions, but first I want to examine the reasons given for the change as set out in the explanatory memorandum and impact assessment for the October orders.

The evidence base for the impact assessment sets out many of the problems associated with HMOs—for example, antisocial behaviour, increased litter, parking issues, reduced opportunities for low-cost home ownership, closure of under-used community facilities, pressure on over-used community facilities such as doctors, and loss of community balance. The evidence base goes on to say:

“It has also been argued by some that it”—

that is, all councils being caught by the April order—

“could result in a reduction in supply of this type of low cost housing in areas where it is needed because prospective landlords could…be deterred from entering the HMO market by the time, cost and uncertainty arising from the requirement to submit planning applications. However, there is no reliable evidence supporting this.”

Pages 8 to 10 of the evidence base set out the costs and benefits of the new orders for each affected group: landlords, local authorities, the planning inspectorate, HMO tenants and the local community. Those drafting the evidence base managed to think of both costs and benefits for each group, except for local residents, for whom no benefits are listed at all. That is at best highly unfortunate, given that they have to live in the affected areas.

On page 11, the document also says in relation to the costs of the new October orders that

“there may be some costs such as: local communities would have no opportunity to comment on new individual HMOs…local authorities would lose the ability to consider the impacts of new individual HMOs”

and

“there may be a slight increase in complaints from neighbours in relation to particular HMOs. These costs have not been monetised.”

I will say a word about the way in which the July 2010 consultation was conducted. A limited number of groups, including, I am pleased to say, the National HMO Lobby, were invited to take part. In response to a written question, the Minister for Housing and Local Government sent me a summary of the responses. Of those invited to respond, eight were against the proposed change and six in favour. Of those who responded on their own initiative, 31 were against and eight in favour. I ensured that all my local interest groups, the residents, Charnwood borough council, Loughborough university and Loughborough students’ union, responded. All supported the retention of the April order.

Loughborough university stated:

“The concept of community balance is important in our local setting and the University continues to invest significant time, energy and resources to community issues. The University continues to believe that the case for the new legislation is similarly unchanged.”

SARG stated:

“We fail to understand why you are overlooking the responses of 92% of more than 900 respondents to last year’s country wide HMO consultation, all of whom saw a change in the Use Classes Order as the preferred way forward for avoiding concentrations of HMOs. Participants did not make a blanket proposal to stop landlords converting family homes into HMOs. We envisaged a change in the Use Classes Order which councils could opt out of in situations where it was expedient to increase such accommodation. We breathed a sigh of relief that Charnwood Borough Council were at last being given the tools with which to control concentrations of HMOs and which could be tied into the existing Student Housing SPD.

Your decision to revert to the status quo, with some slight changes to Article 4 Directions is like a slap in the face to local communities. We have been told for years by our local authority that Article 4 is not a practical means of control, more so now, in view of cutbacks to budgets and workforce. This implies that you are happy to consign communities like ours to eventual extinction.”

The reason given for the limited consultation was that the detailed consultation that had taken place a year earlier had teased out the main points. I am sure that that is true. If those responses hold good, it is worth noting that only 1% of respondents supported the position that we find ourselves in of relying on article 4 directions.

I acknowledge the letter and attachments that the Department sent to me last night about article 4 directions and the process for making such directions. It would have made it easier if they had arrived at 7 pm when I started drafting my speech, rather than at 11 pm when I had just finished, but I was glad to have them.

My concern is whether the ability to put in place article 4 directions adequately fills the gap left by the April order. The evidence base for the impact assessment on the October orders shows that there are direct financial costs to local authorities of putting article 4 directions in place. First,

“they will bear the administrative cost of processing planning applications as the fee is waived where article 4 directions have been made”.

Secondly,

“there will be costs associated with publicising the intention to make article 4 directions.”

Thirdly,

“where article 4 directions have been made with immediate effect or less than 12 months notice and where applications which were submitted within 12 months of the effective date are refused or granted subject to conditions, local authorities may be liable to pay compensation to applicants as set out in the Benefits section above.”

Fourthly,

“there may also be costs associated with the need to investigate where intervention is necessary…and enforce against unauthorised HMOs.”

The evidence base concludes:

“It is difficult to determine the extent to which local authorities will use article 4 directions to deal with new HMO development.”

Local authorities have concerns about having to pay compensation to a party whose planning permission is refused when it would otherwise have been permitted development. Charnwood borough council’s response to the Department in July 2010 stated that the article 4 option

“was among those offered to stake holders by the previous government in its exploration of potential planning responses to the problem. It failed to attract support chiefly because of the provisions for compensation which would have discouraged local planning authorities from claiming that power.”

The Minister knows that local authorities will be calculating whether that is a financial risk worth taking at a time when money is so tight.

The submission of the Residential Landlords Association to the Department in July responded to the question whether planning authorities would choose to issue article 4 directions with immediate effect or with less than 12 months’ notice:

“No, from our experience where compensation is involved it is highly unlikely that local authorities would seek to do anything which could involve them having to pay compensation.”

In the light of the documents that were sent to me last night, will the Minister confirm what is the situation in relation to the conversion of a dwelling house to an HMO? Am I correct that if a council makes an article 4 direction with 12 months’ notice of that direction, compensation may be payable if permission is refused within that first 12 months, but that after that time, assuming that all the proper processes are followed and the article 4 direction remains in place, compensation would not be payable?

I note that the Secretary of State also has the power to make article 4 directions. Will the Minister confirm whether the Secretary of State might take action if a local authority unreasonably refuses to make an article 4 direction in an area that needs it? I appreciate that that is not the kind of top-down action from Whitehall in which this Government, and this Secretary of State in particular, want to indulge.

[Sarah Newton (Truro and Falmouth) (Con)]

I congratulate my hon. Friend on securing this debate. A number of hon. Members present have a university in their constituency. Much as we value those universities and the economic benefits that they bring to our areas, there are significant problems relating to HMOs. Does she agree that in areas with large unitary authorities, such as Cornwall, the council that is best placed to make decisions about the use of article 4 directions is the parish or town council in the area that contains the HMOs?

[Nicky Morgan]

I agree absolutely. If the Government want to empower local communities, they must do so at the right level and include those who are most aware of the problems. Local communities and councils that work together are fully aware of the problems. The Government rightly talk a lot about the localism agenda, and I am sure that the Minister has taken on board my hon. Friend’s point.

[Greg Mulholland (Leeds North West) (LD)]

The counter-point to that and to the Government’s thinking on this matter is that if there is not a problem in an area, there will not be many applications to change to HMOs. The Government have therefore got this argument on its head.

[Nicky Morgan]

I recognise that this is not an issue for a large number of local authorities. Submissions have been made to suggest that councils could opt out of the regulations if they do not apply to their area. The Government have decided to give local authorities the power to impose restrictions when planning permission is sought. If that is the case, my argument is that local authorities must have real power and not be open to undue financial risk. Even those of us who have not been councillors know that local planning authorities do not like to take risks. If there is any chance of a financial risk in the current financial climate, they will be reluctant to take the powers that the Government have said are on offer to plug the April order.

Finally, I will say a word about restoring balance to our local communities. It is generally accepted that when a concentration of about 20% or more of a particular group, such as students, is found in one community, the balance of that community starts to change. I have mentioned the damaging effect that that shift had on the local school, church and post office in one area of Loughborough. Long-established residents decide they want to move out and potential new permanent residents decide to stay away. I do not believe that any national or local authority wants to see that, and I certainly do not as Loughborough’s MP.

Where do we go from here? I hope that I can help the Minister by offering a few constructive thoughts. First, the explanatory memorandum for the October orders states that the policy changes are to be reviewed in October 2013 to consider their impact and the extent to which the objectives have been achieved. It states that arrangements are in place to allow a systematic collection of monitoring information for future policy reviews. In annexe 1, the post implementation review plan is helpfully set out in detail. I agree that it is important to check what impact the changes are having. Will the Minister confirm that the review will take place and say what arrangements are in place to allow for the collection of that monitoring information?

Secondly, I hope that the Minister will pass on to the Minister for Housing and Local Government that since July, I have received more requests for him to visit Loughborough. Indeed, more constituents have requested him than have requested the Prime Minister. Please will the Minister or his colleague agree to visit Loughborough to see for themselves why local residents and the council are so concerned about this issue?

Thirdly, anecdotal evidence in Loughborough suggests that, as a result of the university having built much more on-campus accommodation, demand for houses in certain streets might be beginning to fall. Is there a way that the Department could work with local councils and communities to restore balance to such areas and to create more sustainable communities?

The Department recently announced a consultation on the new homes bonus. One of the questions is whether the bonus should be extended if empty properties are brought back into use. Would the Government consider whether the scheme or some other incentive could be extended to properties that can be used by families or other long-term residents, rather than sitting empty because the demand for them as student lets is shrinking?

In particular, many of my residents are concerned that, because students do not pay council tax, no council tax is received in respect of HMOs occupied solely by students. I agree that that is a whole other debate, for another day, but some form of financial incentive for restoring balance to local communities might be welcomed by local authorities and, indeed, actively sought in difficult financial times.

The idea of empowering local residents and the council to take direct action in specifically affected areas is right, but the powers must be real and capable of being exercised without opening local authorities to undue financial risk that would stop them taking those powers. This is also an opportunity to empower communities to put right some of the damage done—the imbalance caused by the rapid proliferation of HMOs in towns such as Loughborough. I look forward to hearing the Minister’s comments.

[Mr Christopher Chope (in the Chair)]

Before calling the next speaker, may I say that there is a lot of interest in the debate? If I call the first Front-Bench speaker at 5.10 pm, that leaves only half an hour to fit everyone else in, so I hope that people will keep their remarks appropriately brief.