Private Rented Sector

Baroness Thornhill Excerpts

Monday 20th June 2022 Lords Chamber

[Baroness Hayman of Ullock (Lab)]

My Lords, we welcome the publication of the Government’s White Paper and the recognition in the Statement that

“conditions in our private rented sector are simply not good enough”.

I want to consider some of the 12 points of action that it introduces.

Section 21 evictions will be abolished, meaning that landlords will have to prove grounds to evict tenants. New grounds will be created to allow landlords to sell or move close family members in, while grounds around persistent rent arrears and anti-social behaviour will be strengthened. Landlords will be able to evict tenants on sale or moving-in grounds only after the first six months of the tenancy. If the landlord chooses to sell and is unable to do so, they will not be able to re-let the property for three months. Otherwise, tenancies will be indefinite and can be ended only by the tenant or the landlord giving legitimate notice. It is welcome that these changes should stop landlords from evicting tenants simply to re-let at a higher rent or to avoid making repairs after a complaint, but it must be made clear how renters or local authorities will be made aware of a property that is being re-let.

Indefinite tenancies will mean that tenants have the option of moving out with two months’ notice without penalty if their circumstances change or if the home turns out not to be suitable, which, again, we welcome. This should provide renters with more flexibility. However, there is a risk that if it is too easy to prove intention to sell or move family into a property, unscrupulous landlords could abuse this, creating Section 21 by the back door. Penalties for abuse should be easy to enforce. Scotland has wrongful termination orders, which can see tenants evicted on false grounds compensated. One of the big challenges for local authorities is the lack of skills and resources to enforce the law, so this must be addressed if we are to see success in this area. Can the Minister outline how the Government intend to deliver enforcement?

With fixed terms gone, automatic rent increases in the contract are also gone. If landlords want to raise the rent, they will need to use Section 13 notices, a maximum of once a year, which can be challenged at tribunal. It should follow that tenants can challenge Section 13 notices or negotiate with their landlord with less of a threat of eviction hanging over them. Extra notice of rent increases will give tenants more time to challenge if they deem it necessary. As things stand, landlords in areas with high demand for homes will still be able easily to use unaffordable rent rises to force tenants out, so does the Minister agree that there needs to be a limit set on rent rises based on affordability?

Does the Minister also agree that a key element in giving greater security, transparency and power to tenants is to ensure that letting agencies, which act on a landlord’s behalf, work to the very highest standards? Will he commit to looking at a code of conduct for letting agents, as has been done in Wales?

I turn to the welcome measure to require all privately rented homes to meet the decent homes standard and the new right to claim back rent on non-decent homes through expanded rent repayment orders. Private renting has grown as social housing has been sold off and not replaced, and, as a result, more people are paying more for less-regulated homes. However, the need to build more social housing is a debate for another day. Bringing standards into line with the social sector will stop private landlords from short-changing renters and, through the benefits system, taxpayers. Expanding RROs is welcome; they need to be a huge deterrent to criminal landlords but are currently underused. Can the Minister confirm that local councils will be given the resources they need to properly enforce the decent homes standard?

The new ombudsman that all landlords must join is a positive step, as this has been a huge gap in regulation. Currently, if you rent from a letting agency, you can pursue complaints through a redress scheme, but not if renting directly from a landlord. However, to be successful, it needs to be well-resourced so it can deal with the sheer volume of complaints that tenants will likely raise. Can the Minister shed any light, at this stage, as to how it will be resourced? A single ombudsman is better than the two-scheme system that exists for agents. So it is surprising that, despite acknowledging the confusion and perverse incentives resulting from competing schemes, nothing has been proposed about making changes for letting agents. Can the Minister explain why this is the case?

A digital property portal will be set up to help landlords demonstrate their compliance with legal requirements. This is basically what a landlord register looks like, so can the Minister confirm whether it is the Government’s intention to introduce a national register of landlords? Although councils will be responsible for enforcing portal membership, the Government should give tenants an incentive to take action if their landlord is not registered. This already happens with licensing schemes, and tenants with unlicensed landlords can get back up to 12 months’ rent via rent repayment orders. Is this something that the Government will consider?

One in three private renters lives with children, and nearly 40% of private renters rely on benefits, yet landlords are still able to deny both those groups a tenancy. So it is good to see this addressed with a proposal to outlaw blanket bans on children and benefit claimants. However, discrimination on these grounds often happens because many landlords do not trust the welfare system to cover their tenants’ rent, so the underlying problems still need to be addressed: universal credit delays and sanctions, the benefit cap and local housing allowance rates. Further, despite rapidly rising inflation, the Government are cutting funding available to local councils to support struggling renters through discretionary housing payments by £40 million. Can the Minister explain how he thinks this is going help the thousands of renters who are struggling with the cost of living crisis?

The White Paper also pledges to monitor private sector solutions to problems with deposits between tenancies and to keep the deposit protection system under review. Disappointingly, this is a retreat from the Government’s manifesto commitment to a lifetime deposit which would allow passporting of deposits between tenancies. Problems with deposits are probably the most common negative experience for private renters, so it is frustrating to see that it is only being kept under review. Can the Minister explain why this is the case?

I will say a few words on court reform. The Government are looking to digitalise the court process, but renters who are digitally excluded must still be supported. In addition, a digital approach will not always be suitable in some cases. Does the Minister agree that more funding could be provided to the courts so that they can deal with backlogs and more legal support could be provided to the renters who need it most?

I end by thanking the organisation, Generation Rent, for all its hard work on this issue. I look forward to this short debate and to the Minister’s response.

[Baroness Thornhill (LD)]

I say to the Minister that there is general support across all sectors for these reforms in the White Paper, which we too broadly agree with. In fact, I agree with so much of what the noble Baroness, Lady Hayman, has said that I could just say, “#MeToo” and sit down—but I am not going to. I will not go through the proposals and rationales for each point in the White Paper, because I believe that there will be opportunities to do that later. I want to stress our key points that we would seek a chance to influence and explore.

First, we are disappointed by the speed at which this has gone. We are now only going into consultations and pilots, not legislation—at a time when homelessness and evictions are set to rise. Does the Minister have any timelines or milestones for us?

Our greatest area of support for these reforms—and, paradoxically, of concern—is around evictions. We totally applaud the ban on no-fault evictions, but ask whether any lessons have been learned from Scotland about the application in reality of the new grounds for eviction. How tightly are they drawn, and how have they measured success? Let us take one example which the noble Baroness mentioned: eviction because the landlord wishes to sell the home. How will that be proved and dealt with, or are the Government considering recourse, as happens in Ireland?

We know that revenge evictions are more common than we might like and hope that the decent homes standard and the annual rent rise will discourage such evictions, as do the Government. But even after a year, a tenant can still be priced out of a flat by an unreasonable, excessive rise in rent that they can ill afford. Have the Government considered encouraging rent rises only in between tenancies—a practice that many good landlords already do? Given that the cost of living crisis will not be short lived, what, if anything, will the Government do to curb excessive rent rises, or will it all be left to the market? Why have the Government yet again decided to freeze the local housing allowance?

The Government’s commitment to extending a legally binding decent homes standard to the sector is a potential game-changer, but only if there is enough capacity in the system to monitor and enforce it. Local authorities are definitely down on capacity and funding. What reassurances can the Minister give us that there will be capacity and resources within the system to enforce this standard—a vital part of the reforms?

Regarding capacity, the proposal for a private sector ombudsman is a good one. After all, there is one for the social housing sector. But we know that the social housing ombudsman is under pressure due to capacity issues already, so how will this one be any different? After years of stressed budgets and the demands of the pandemic, will the Government use one of the pilot schemes to review the available capacity of all the partners whom they will need on board to make sure these reforms work, and look at how their roles effectively all knit together?

Finally, there is a legitimate concern in the sector that these changes will force landlords out of the system at a time when we need more, not fewer. Is there a danger of unintended consequences? There is some anecdotal evidence that this is happening in areas popular with tourists, such as Cornwall, the Lake District and Edinburgh. Homes once for long-term let are now seen on more lucrative Airbnb sites. Consequently, locals are priced out of the housing market due to second home owners and they are unable to rent due to a lack of supply. Do the Government recognise this as an issue? If so, are there any possibilities of looking at ways to incentivise landlords to stick with longer-term lettings? There will be time to go into detail in the future, but hopefully not too far in the future.

[The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)]

My Lords, I thank the Opposition and Liberal Democrat Front Benches for a constructive critique of this important Statement. There is a recognition on all sides of the House that the private rented sector is the most expensive, least secure and lowest quality of all housing tenures. A fifth of renters are paying a third of their income to live in substandard accommodation, which is completely unacceptable. I think that is why the chief executive of Shelter described the proposals around the 12-point plan as a game-changer for the 11 million private renters in England.

This White Paper really is the biggest set of reforms in a generation. It seeks to ensure that tenants have access to safe and decent homes; to increase security and stability by abolishing Section 21, which I know is supported by the vast majority of people in this Chamber—I have not come across anyone who is against that; to improve dispute resolution but, importantly, ensure that there is better compliance and robust enforcement; and to improve the renting experience for private rented sector tenants.

I turn to some of the points raised in this short debate. The noble Baroness, Lady Thornhill, raised enforcement of the decent homes standard, which is a centre point of the reform programme. We will consult on applying the decent homes standard to the private rented sector shortly and carry out a number of pilot schemes across the country to explore different ways of enforcing the standards, because it is important that we do not have the decent homes standard just defined but with an inability to enforce.

The noble Baroness, Lady Thornhill, also wanted to know why these reforms have taken so long to come forward. It is a legitimate question, but we have had a global pandemic and in the last couple of years we have been focused on supporting tenants during the pandemic with longer notice periods, a ban on bailiff evictions and unprecedented financial support. We have made the very clear commitment to bring forward this renters reform Bill in the third Session, and this White Paper is an important part of getting this right. This is a once-in-a-generation opportunity to get these reforms right.

The noble Baroness, Lady Hayman, quite rightly wanted to know how these new reforms would be enforced. I have talked about the pilots, but equally the property portal will make sure that local authorities have the information they need to enforce the standards so that we are not relying, as we currently are, on tenants coming forward to point out when there is an issue.

The noble Baronesses, Lady Thornhill and Lady Hayman, both raised the cost of living issue. The Government do not support rent controls. When this was introduced in the 1970s, we saw a disincentive and a private rented sector that did not get the quality of housing and investment that we needed. That is why we feel that focusing on allowing an increase in rents only once a year and ending rent review clauses are ways of ensuring that we get a more reasonable approach to rent increases.

The noble Baroness, Lady Thornhill, raised an interesting question around the burdens on landlords and whether we are going to get the unintended consequence of more Airbnbs and fewer people wanting to let. The English Housing Survey says that we are seeing some landlords leaving but an equal number coming in, so there is no evidence from the survey yet of an exodus of landlords. It is important that we think about landlords in these reforms, though, and that is why we have strengthened the repossession grounds for landlords, including in cases of serious anti-social behaviour and persistent arrears, and for landlords who wish to move back to their property.

I think there was a strong element of a briefing from Generation Rent in some of the questions from the noble Baroness, Lady Hayman. Certainly, I am aware of the issues raised by the noble Baroness, Lady Kennedy, about the no-fault moving and selling grounds, wanting to extend that to 24 months and not seeing a Section 21, if you like, by the back door.

As a Government we feel that it is important to protect tenants, and that is why we are limiting the use of moving and selling grounds in the first six months of a tenancy. To mitigate any abuse, we are also restricting landlords from remarketing or reletting the property for three months when they use these grounds. It is about getting a balance between landlord and tenant.

Overall, it is fair to say that there is a fair wind behind these reforms. It is important, as they say, to get things done and better late than never.

--- Later in debate ---

[Lord Greenhalgh (Con)]

I am sure the Government are happy to look at ideas. We have had ideas from Wales, Scotland and Ireland that I am sure the policy officials can look at and advise Ministers on. We have to recognise that there are often unintended consequences on supply if you tinker too much in the private rented market and try to control rent levels. We heard from the noble Baroness, Lady Thornhill, that you might find it more lucrative to use Airbnb than to have longer term rents. I think that what the noble Baroness, Lady Bennett, is really saying is that to tackle the affordability crisis we need a fair amount of taxpayer subsidised housing, whether that is affordable rent or social rent. We recognise that as a Government. Not every person can own their own home or afford market rents. That is why we need a steady supply of affordable housing available around the country. We need communities of mixed tenure to allow households with different incomes to live cheek by jowl. That is good social policy and something that the Government certainly support.

[Baroness Thornhill (LD)]

In that case, may I ask why the Government have frozen the local housing allowance, which was the question I asked, if they have what sounds like a very sincere commitment to social housing? Following what the right reverend Prelate the Bishop of St Albans said, I was thinking that the people we are really concerned about, with the grottiest landlords and flats and the worst deals, in the past would have been in the social housing sector being looked after by good councils and housing associations. We are really trying to play catch up but let us not kid ourselves; it is a huge task that we have.

[Lord Greenhalgh (Con)]

It is fair to say that we raised the local housing allowance and maintained that raise. What the noble Baroness is saying is that we have not increased it further. Let us give the Government credit for having raised it in the first place and having maintained it. The reality is that it goes back to getting the balance of tenures right. We have far too many people who cannot afford to live in market-rate accommodation and therefore they need taxpayer support. The housing benefit bill has effectively ballooned from when I was first a council leader from around £7 billion to around £30 billion, I think—or at least, that is what the projections are. That is completely unsustainable. We need more affordable housing and social housing to mitigate the unintended consequences of getting the taxpayer to fund these very high-cost homes for people who cannot afford to live in them. That is why there is a need to look at other ways of answering that point.