Earl of Lytton
Main Page: Earl of Lytton (Crossbench - Excepted Hereditary)
The Earl of Lytton (CB)
My Lords, I hate to voice a tone of slight dissent from what the noble Lord has introduced because I know where he is coming from. I declare an interest because I am a private rented sector landlord. Some of our assured shorthold tenants had six months or one-year lettings originally and now double-digit years later are still there, with or without dependent children. I think we have seen at least two families grow up and the next generation start to fly the nest. I am very proud of that. The critical point is that there is no bar in letting longer term at present.
There are also many reasons why it is convenient for both parties to rent shorter term. I live in an area that is customarily known as the “Gatwick diamond”. It is an area of Sussex and part of Surrey where the great driver is the industrial and commercial activity associated with Gatwick Airport. Many people move in or have temporary secondments to places such as that or indeed may be seconded elsewhere to postings abroad for varying times—six, 12, 18 months and so on. This applies whether they are landlord or tenant. Whether it is job secondment, moving home or being in the process of selling a property somewhere else and moving in, my wife and I have a constant source of applicants for accommodation. There is a need for the short term—it is very important and part of the fluidity of this section of the market.
Another thing I would be slightly fearful of in the noble Lord’s amendment is when a buy-to-let situation exists on that sort of mortgage. The deferral of the reversion might have undesirable effects in terms of how the mortgagee would see the risk. A mortgagee, of course, needs to be in a position to lay claim to the property and dispose of it on the open market to redeem the mortgage, and needs to be able to do so at reasonably short notice. That obviously should not be operated to the disadvantage of a contractual tenant under an AST, but if it is deferred for three years, I can see that that might interfere with the way in which a mortgagee could perceive that particular bit of the risk.
The basic premise is a little bit unbalanced as between the parties. I have some sympathy with the noble Lord here, but not every part of the country and not every sector suffer from the issue that I suspect this amendment is trying to address. The private rented sector is important. I like to think that most private sector landlords think as I do, offering a quality product and treating our tenants as decent people, as human beings, as neighbours, as friends and, indeed, seeing their children grow up and taking great pleasure in that.
However, we have been down this road before on creeping security of tenure. Memories are quite long in that respect. I remember that from the 1960s until the 1980s the private rented sector was more or less annihilated in all but name. I would not like to think that the message here is that this is a harbinger of that situation. With the benefit of those thoughts, I suggest that the Committee should not go along with this amendment, although I have some sympathy with the rationale behind it.
Baroness Hollis of Heigham
I very much support my noble friend’s amendment, which proposes that any tenancy must be offered for a fixed period of three years. Of course, there may be people who have sold a house and are waiting to buy who need a short tenancy, or there may be students who want it for less than a year—nine months, perhaps—and will then move on. Obviously, no one is saying that any tenant and landlord should be locked into it irrespective. The tenants themselves will be the best judge of how long they are likely to need that tenancy.
As it stands, all the power is with the landlord. I was interested to hear in the speeches opposing this no recognition of the fact that something like a third of all privately rented property is below the decency standard and that if any tenant in that situation asks for repairs, they risk—I am not saying it will happen—losing the right to extend their tenancy. After six months, 12 months, or whenever that tenancy is up for renewal, they can and will be out. As a result, we know, not just from Crisis and Shelter, but from our own environmental health officers in local authorities, how often tenants are afraid to require repairs to be done because if they do, they will lose their home. There is too much of an imbalance of power between the landlord and the tenant, given the legal situation in tenancies, the level of rents and the shortage of supply.
Who is most interested in six-month, short-term tenancies? It is not necessarily the landlord. A good landlord may be delighted to have a long-stay tenant without the risk of voids, the cost of churn and so on. I am sure that there are many such landlords in that situation; I do not doubt that the noble Earl, Lord Lytton, is one such.
Who does have an interest? The letting agencies, of course. Every time there is a new letting after six months, they get a new set of fees. The six-month limited tenancy is gold to the letting agencies. It is desperate news for tenants who might need repairs. There is also a problem in respect of mortgage providers: I understand that only a couple of building societies, one of which is Nationwide, are willing to underwrite buy-to-let where the assured tenancy is likely to last for more than six months. Therefore, everything colludes to prevent a good landlord doing what he might like to do and to prevent tenants having the security of putting down roots in their community. It is not in the interest of a bad landlord who does not want to do repairs; it is not in the interest of the letting agency; it is not in the interest of the mortgage providers. There is, therefore, a complete imbalance of power. I am not speaking about those tenants who, quite rightly, see the rented sector as a temporary tenure on their way through to either a different home in a different part of the country or to a different form of tenure. I am talking about those who are locked into the private rented sector with children who need to go to schools, with GPs’ surgeries that they need to get placements in, and who may have a disability in the family and need the support of neighbours who will help them. They should not be at the whim of a bad landlord, a bad letting agency and overly risk-averse mortgage providers for buy-to-let.
This amendment would say that that tenancy must be offered; rogue tenants would be sent on their way, as they should be. It would help good tenants and strengthen the arm of good landlords to provide what is needed, which is homes in which people can put down their roots.
The Earl of Lytton
My Lords, will the noble Baroness comment on the following scenario, which happens very often in the part of the world I inhabit? A family takes a foreign posting; they have a house in the UK and the posting is, perhaps, for a year, which is quite common. During that year, they wish to let the house that they own in the UK. When they come back from that foreign posting, however, they need the house back. In the circumstances that would occur under this amendment, they would not be in a position, as I understand it, to let for a certain period of a year and get their house back. Might I have the noble Baroness’s observations on that?
Baroness Hollis of Heigham
My Lords, in that situation I would expect there to be an agreement. Where a landlord is seeking to regain possession for their personal use—as their own home—that, in my understanding, has always been recognised in law as a different situation from someone being a permanent landlord and seeking merely to churn their tenants.
Baroness Hollis of Heigham
My Lords, what worries me above all is that starter homes are supposed to fly the flag for affordable housing. Behind that is a recognition by the Government that the problem in this country is the lack of affordable housing, which in turn is determined by the lack of new and adequate housebuilding. Starter homes are just one part of a complicated jigsaw that the Government are offering us which all pushes in one direction—away from making social and affordable housing available to people on modest incomes. Later on in the Bill we are going to get the sale of housing association homes through right to buy, which, if council housing sales are anything to go by, will quickly be turned into buy-to-lets and then into student housing, and away from housing for young families who need affordable homes in which to bring up their children and live their lives.
Secondly, we are going to see the sale of empty council housing into owner occupation over and beyond local authority RTB in order to fund the discounts on the sale of housing association properties into owner occupation. So we will lose housing association properties and we will probably double the number of local authority housing sales—all away from affordable housing. On top of that we are ensuring that Section 106 land and grants, which have been the source of so much housing association and local authority building, will now become monopolised by starter homes. At the same time we are knocking out shared ownership.
So what is actually happening is that the sole concept of affordable housing, both for the future and with the recycling of existing property, is going to be starter homes—the only game in town. Housing association properties should be sold with discounts into right to buy; local authority RTB will continue; and on top of that empty homes will be sold to fund the discounts for housing association tenants to be able to buy in order to send the stock into buy-to-let in due course. And on top of that, not only can local authorities and housing associations not replace that stock but they will now find—because of the requirements of central government—that their Section 106 land will be available exclusively and solely for starter homes. So for the whole of the next decade, if the Government have their way, the affordable housing programme for those in the greatest need, who have least leverage in the market, whose need is highest, will have just one option, starter homes—which, we are told by Savills, will not benefit 90% of them. I ask the Minister: what on earth do the Government think they are doing?
The Earl of Lytton
My Lords, at the risk of prolonging this very interesting debate, I should say that my employer is a firm of chartered quantity surveyors and one of the things that we do is assist housebuilders. We have a sister company that has just secured a large contract to build houses.
It has become apparent to me as the discussion has gone on, as it was apparent to me at Second Reading, that this Bill has a very small component related to the need to build new houses generally. It just is not there, because all we have is a reference to starter homes and a reference to self-build and custom housebuilding. Those are the only two bits concerned with building new homes of any sort, so there must be a working assumption sitting behind this that somehow, in the big, wide world out there, the general thrust towards new homes will continue and that a proportion of those —on the principle of the affordable housing component under Section 106, the community infrastructure levy or whatever it happens to be—will be devoted to an element of affordability.
The noble Baroness, Lady Hollis, is right in the sense that I can confirm, from speaking to developers, that they are of the view that conventional affordability, in terms of affordable rents, will go into some form of attrition and that starter homes will indeed be the only show in town. That appears to be the belief among housebuilders. I pass no particular judgment in relation to government policy—I have to accept that this is something that they have as a manifesto commitment, and it is up to us to scrutinise the matter and make sure that it is, as far as possible, fit for purpose—but there is no doubt that the starter home will effectively be not affordable in any sort of perpetuity but will be a one-off windfall for the first person who happens to occupy it.
It is very important therefore that the studies to which the noble Baroness, Lady Royall, and other noble Lords referred should be before us. The outcome of those pilot studies should be known so that we can assess this. Otherwise, it seems to me that we are in a very brave new world indeed, in which we know neither the outcome nor, indeed, a great deal of the process that sits behind this. So I have to say that I am with noble Lords who have tabled the amendments in this group in terms of having doubts about this. I have other doubts which I have expressed in meetings which the Minister was kind enough to convene some time ago—although I was not able to attend the most recent one—about the financial viability of how this works and how you retain the substance of the starter home, or social concession, within the system.