Private Rented Sector

Frank Dobson Excerpts

Wednesday 25th June 2014 Commons Chamber

[Nick Boles]

I do not accept anything that the hon. Gentleman says, but then I never do. The fact is that the interests of his constituents who are tenants are best served by having more investment coming in, to produce rental property of a higher quality supplied by professional companies that they then will be able to access.

We have to ask ourselves why the hon. Member for Wolverhampton North East has come to the House with this policy today. The first reason is that her boss, the Leader of the Opposition, wants to be seen as the man who will stand up to business and impose his will on the unruly forces of the market. He is not much interested in housing, and, lucky fellow that he is, it is a very long time since he needed to find a flat to rent, so he does not much care if the policy will work; he just wants a policy that will beef up his brand as the scourge of British business, and on that at least he has definitely succeeded.

The other reason lies deep in the DNA of the Labour movement. It is addicted to compulsion and control. From Douglas Jay, who thought that the gentleman in Whitehall knows best, to Nye Bevan, who wanted to know if a bedpan dropped in a ward in Tredegar, to Ed Miliband, who wants to decide how much rent should be charged on every property in the country in three years’ time, the instinct is the same: to make people do the things they want them do in the way they want them to do it. So they ignored the fact that, without Government intervention, average tenancy lengths have increased by 6% to reach an average of more than 21 months—without Government legislation. They block their ears to the majority of young people—still a very important group of tenants—who say that they value the flexibility of existing tenancies and do not want to be bound up in a three-year agreement. They draw a veil over the awkward truth that the Royal Institution of Chartered Surveyors, which the hon. Member for Wolverhampton North East claimed was helping her to devise a benchmark for her rent controls, is doing no such thing and opposes the policy.

Last year, the Communities and Local Government Committee, chaired by the ever-wise hon. Member for Sheffield South East (Mr Betts), who is unfortunately not with us today, conducted a review into the private rented sector. It concluded that it did not

“support rent control which would serve only to reduce investment in the sector at a time when it is most needed. We agree that the most effective way to make rents more affordable would be to increase supply, particularly in those areas where demand is highest.”

Perhaps the Chair of the Select Committee is not in the House today because he did not want to face the embarrassment of disagreeing so intensely with his own party’s Front Benchers. The approach that the Committee suggests is the right one.

[Frank Dobson (Holborn and St Pancras) (Lab)]

On a point of order, Mr Speaker. Could you ask the hon. Gentleman to tell us whether he warned my hon. Friend the Member for Sheffield South East (Mr Betts) that he would be mentioned in this debate?

[Mr Speaker]

It is the normal courtesy so to notify. A simple nod of the head will suffice if the Minister did notify the hon. Gentleman.

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[Frank Dobson (Holborn and St Pancras) (Lab)]

We last debated private rents on 24 March, and at that time I and other London Members pointed out that ordinary Londoners were being priced out of the city. I do not mean the City where they play with money; I mean the great London conurbation. That is because there has been a total failure in the housing market, be it buying or renting. Increasingly, ordinary people can no longer afford either to buy or to rent in London, and the situation is still changing for the worse. Prices and rents are still going up and, if the Evening Standard is to be believed, according to a recent headline rents in London are rising eight times faster than wages. Rents are continuing to outstrip wages.

[Meg Hillier]

Nowhere is that truer than in my constituency of Hackney South and Shoreditch, where private rents are out of the reach of many people, who are unable to live in the borough. Does my right hon. Friend agree that the resulting higher population churn causes real damage to the strength of our local communities?

[Frank Dobson]

I entirely agree with my hon. Friend.

Things generally have been getting worse, but there has been one enormous change for the better: the Labour party’s commitment to regulating rents and providing security of tenure in a way not proposed for a very long time. I am delighted to welcome this development, although personally I would go rather further. However, it is the right thing to do, it is popular, certainly with Londoners, and it is an approach that works.

We had the “less than GCSE” economics lecture a few minutes ago on the merits of encouraging investment in the private sector, and how it would be damaged by regulation. That ignores all the European evidence. Germany and Switzerland have a heavily regulated private sector, including rent regulation, and they have the highest proportion of people living in the private rented sector. They live, generally speaking, in rather good quality private sector flats and houses, certainly better than the average here. People in the Netherlands, where the first rent that anyone can charge is set, are better housed than most people in Britain. We simply cannot go on with the current situation—ruinously high rents—under this Lib Dem-Tory coalition.

Last year, the average weekly rent in London was 51% of average weekly pay. It is now 55%, which is clearly ruinous for tenants.

[Ms Karen Buck (Westminster North) (Lab)]

Does my right hon. Friend share my disappointment that the CityWest Homes letting arm of Westminster Council recently advertised an ex-council flat for sale at £650,000, but in doing so mentioned that it has just been let for £500 a week? Does he think that tells us everything that has gone wrong with the central London letting market?

[Frank Dobson]

My hon. Friend—my good, long-term and hon. Friend—makes an excellent point, as usual.

I recently picked up a brochure advertising new apartments to rent in Bloomsbury. A two-bedroom flat costs £560 a week. That is £26,880 a year. Who can afford that sort of rent? A Russian oligarch, I am sure—even perhaps a Ukrainian oligarch—and perhaps a banker who spends their time advising tax swindlers on how to avoid paying more tax by investing in Luxembourg; and here I do not mention Mr Juncker. However, nobody who is contributing to the local community can afford £26,000 a year—no shopkeeper; no bus driver; no teacher; no research scientist at the shortly to open Francis Crick Institute; no nurse. As I said in my last speech on this issue, no new consultant surgeon at Great Ormond Street hospital or University College hospital can afford that sort of rent. As a new consultant, they get, at most, about £80,000 a year. After taking off their tax and national insurance, that leaves £40,000 a year. So somebody on £40,000 a year would have to pay £26,000 a year for a two-bedroom flat.

It is a ludicrous situation that is bad for tenants, obviously. People come into London, or go to their local hospital, relying on Great Ormond street or University college hospital to get the finest treatment and care in the land, but the people providing it cannot afford to live near those great hospitals. The situation is intolerable. But it is not just bad for the local community and tenants; it is ludicrously bad for taxpayers, because private sector landlords are getting a public subsidy from the taxpayer of between £9 billion and £10 billion every year—that is what is paid out in housing benefit. It does not stay in the handbags and wallets of the tenants; it goes to the landlords. The last time I checked, agriculture was getting a subsidy of only £6 billion a year, but apparently it is okay for the private rented sector to get a £9 billion a year subsidy.

The Mayor of London now says that when he wants an element of “social housing” in a new development, it will count as such if it is going to be asking up to 80% of market rents. Most people cannot afford to pay that, so his programme does nothing for badly off Londoners. What we need to do is build more homes—homes that ordinary people can afford. We have the ludicrous situation where people who are homeless and the responsibility of the local authority cannot be re-housed by the local authority, because it does not have enough flats and homes, and so it places them in the private sector, where they have no security of tenure and pay ludicrously high rents, which are being met largely by the taxpayer. No economic theory can possibly justify anything as daft as that. The worst thing someone can say about something these days is that it is daft, and that situation is extremely daft.

Clearly, we need to put more effort into getting new flats and houses built. I have a madcap scheme to create more land in London by decking over all the deep railway cuttings and either building housing on them or using them as green spaces in order to justify building higher-density housing next to them. That is the only way in which we will create more land in the area, and we need revolutionary ideas such as that. In the end, however, we have to get a grip on house prices and private rents. Unless we do that, we are ruining—

[Mr Slaughter]

Will my right hon. Friend give way?

[Frank Dobson]

I have given way twice and I ought to sit down before my eight minutes are up.

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[Angie Bray (Ealing Central and Acton) (Con)]

It is important to recognise the opportunities that the private rental sector offers in terms of choice for people and of benefits to the work force. To be able to move to a city for a new job with no worries about finding somewhere to live is hugely attractive and allows people to experience living in different places without the commitment of buying a property. The fact that a third of private tenants in London have lived in their property for less than a year should not be seen as a uniformly negative thing. In my constituency, we see a great deal of churn, with young renters coming and going. They like the flexibility. Moving around different areas and sharing with friends and colleagues is an interesting and formative stage for many young professionals. Not everyone considers three-year tenancies to be either desirable or the norm. For others with different needs, more supply providing more choice and more competition is surely the right way forward.

Of course there are cases of unscrupulous landlords, but there are ways of minimising the problem without wholesale state intervention in the market. The Mayor of London has introduced the London rental standard, aimed at accrediting landlords and bringing transparency to the market. Landlords with the accreditation will be more attractive to both renters and agents, and in a competitive market, the advantages of signing up to it are clear. Councils could, in some cases, do more to ensure that private landlords, to whom they pay housing benefit, do more to ensure their properties are maintained to a good standard.

Estate agent fees can be unpopular, but the agents are operating in the free market and will be paid for their service. It is unrealistic to think that the costs would not simply be passed on by increasing rents if the one-off charges were scrapped. Someone has to pay them for their professional time spent doing the admin work. In any case, estate agents are starting to reduce fees in many cases in order to be competitive. Many landlords will acknowledge the speed with which the marketing undertaken by agents can fill their properties, and similarly, agents make finding a property remarkably straightforward for the renters. Agents can fulfil a useful purpose.

The best solution to affordability of housing, whether rented or not, is to increase supply, as so many in the Chamber have said today.

[Frank Dobson]

In terms of fees paid, the hon. Lady surely cannot think it is right that some agents charge people £450 simply to change the name on an agreement, because one of the people sharing a flat has moved out and someone else has moved in.

[Angie Bray]

To my knowledge, in many cases, agents do considerably more than that. They check the credit details for people who are going to be renting the property, and there is often quite a lot of admin work involved in the work they have to do. As I say, I think they would expect to be paid for that.

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[Lilian Greenwood]

My hon. Friend is exactly right. We do of course need to unlock the ability for small and medium-sized enterprises to get access to finance and to be building the houses that we want.

Many of my constituents, particularly those under the age of 35, would love to buy their own home, but they simply cannot get a foot on the property ladder. Young people who manage to buy often do so only with help from their parents, but in cities such as mine most parents simply do not have the level of savings that would be needed to help their children in that way. The Government’s failure on housing means that an entire generation in Nottingham could be locked out of home ownership entirely, left to cope with the insecurity offered by the private rented sector and facing rents that are expected to soar by an average of 39% by 2020. The Opposition are clear: if the private rented sector continues to make up an ever-increasing proportion of the market, we must ensure that it is fit for purpose, provides good quality, affordable homes and offers tenants the security they so desperately need.

[Frank Dobson]

In a great university city such as Nottingham, large numbers of people are graduating with phenomenal debts because of the massive increase in fees, and in many cases they have very little chance of getting what might be described as a graduate job. That adds to their problems in raising the money either to rent or buy and provide services to the people of Nottingham.

[Lilian Greenwood]

I agree entirely with my right hon. Friend. One of the things that we would like to do in our city is ensure that more graduates stay in Nottingham and do graduate-level jobs, but their ability to buy a home is a really important part of that offer. Ministers should come to Nottingham and see for themselves the misery that is being caused by the status quo before attacking Labour’s plans to take action and tackle the issue head-on.

There are excellent professional landlords in Nottingham who take pride in the standard of accommodation they offer, but some do not, and it is important to stress that the management of the private rented sector is not simply a good landlord versus bad landlord issue. The sector is complex, and landlords come in many guises. In particular, there is an emerging need to target so-called “accidental” or “amateur” landlords who are new to the sector—those renting out an inherited family home, letting a property whose owners are in long-term care, or who have bought a house for a family member to live in with others. According to Rightmove, home owners letting out their property as a result of circumstance make up as much as 30% of all landlords, and many are casualties of the recession. Those landlords are often inexperienced and can be naive about the standards and management needed to provide quality, well-managed accommodation. With better advice, guidance and—yes—better regulation, we can help those people become responsible landlords who provide decent accommodation for their tenants.

Nottingham city council recently completed a review of property conditions in the city’s private rented sector and assessed the effectiveness of voluntary accreditation as a way of driving up standards. I agree that there should be greater national recognition of accredited landlords and the superior management and service they provide, but our local review concluded that although accreditation is an effective tool in driving up standards, on its own it will always leave a significant part of the market unprotected.

My hon. Friend the Member for Kingston upon Hull North (Diana Johnson) spoke about the way accreditation has been used in her city, particularly for students, and that is also the case in Nottingham. For other parts of the market, however, accreditation does not seem to work as well, and it remains a challenge to get landlords to join such schemes. That is why in Nottingham we have introduced an additional licensing scheme under an article 4 direction to manage the private rented sector better, especially in parts of the city with a high concentration of homes of multiple occupation.

Nottingham is a young city with almost a third of its residents aged 18 to 29. That high rate of young people can in part be attributed to the large number of students studying at our popular universities and colleges. The city’s growing student population has been the predominant driver behind the private rented sector’s wish to convert properties into HMOs, particularly in the Dunkirk and Lenton area of my constituency, but also in Radford, the Park, Wollaton Park and Lenton Abbey, which are close to the main campuses of the university of Nottingham. Uncontrolled development of HMOs has put pressure on the number of affordable rented properties suitable for families, and HMOs in high concentration have had an enormous impact on the resilience, balance, stability and sustainability of the neighbourhoods in which they sit.

People in my constituency who have campaigned on HMO-related issues believe that article 4 directions are still enabling HMO creation to take place, but in a controlled manner that benefits tenants as well as other residents in the neighbourhood. Accreditation and licensing are not mutually exclusive—they are complementary tools to improve standards.

The Nottingham experience indicates that the private rented sector, while needing to provide a professional service, is still not professional enough in its approach to rented accommodation, especially for students and other under-35s. In Nottingham that has contributed to the issues our city faces, but Labour’s plans would seek to address such concerns by providing more certainty, more stability, and greater protection for tenants and landlords alike.

Too many tenants and potential tenants face rip-off fees from letting agents. Landlords are being charged for services provided by the agent, and tenants are charged again for the same services. Despite facing fees averaging £355 every time they move, tenants continue to report difficulties in contacting their agents, and serious delays in getting repairs and maintenance completed. It is simply not good enough.

We need better management of the private rented sector, an end to rip-off agents’ fees, action to make three-year tenancies the norm, predictable rent rises, and more homes built to tackle the crisis in supply. Labour’s proposals have the potential to transform life for individual tenants and parts of my constituency that are suffering from the worst effects of the Government’s policies. It is astonishing that Ministers continue to oppose those proposals. Have they simply forgotten the thousands of people in Nottingham who are experiencing the greatest housing crisis in a generation? Well, we have not, and we will not.

[Jeremy Corbyn (Islington North) (Lab)]

I am pleased that we are debating the private rented sector. I suspect there will be many more such debates between now and the general election, because the situation requires urgent intervention, and in many respects a change in the law.

Like some of my colleagues who have already spoken, I represent an inner-London constituency, and we are facing the most acute housing crisis that I can remember, both in my time as an MP and before that as a councillor in a neighbouring borough. When I hold a constituency advice surgery—as we all do—I am frequently there for five or six hours, and 90% of the cases are about housing. Such cases are desperately sad: it is frightening to hear about what people are going through and the trauma of families being upheaved and forced to move out of the borough from one private rented property to another and another and another, with all the disruption that causes to their children’s education, their health and family relationships, and the damage it does to the community as a whole.

The ward where I live has a population turnover of almost 30% per year, which makes any kind of community cohesion much more difficult and voluntary organisations less well populated, and affects all the social infrastructure that is so important in our societies. We must consider the desperate housing need, not just in inner-city areas but in the country overall.

[Frank Dobson]

Does my hon. Friend agree that one of the biggest problems is that these constant moves often involve children? It is clear from the research that a child having to shift from one school to another—sometimes two or three schools in one year—is about as damaging to their educational opportunities as can be imagined.

[Jeremy Corbyn]

My right hon. Friend makes a strong point with which I absolutely concur and which I understand well. It works like this: a family is in receipt of local housing allowance, and the landlord puts the rent up way beyond what the allowance enables them to pay; they do not have enough other income—either from a low-paid job or from other benefits—to make up the difference, so they have to move. There is no possibility of their getting another private rented property in the same community, so the council is forced to do its best by hassling various agents all over the place to try to find somewhere for them to live—my council does that all the time, and Camden council does much the same thing. The family is perhaps found somewhere to live in Enfield, Barking or wherever. They are there for six months, they have the temerity to complain about the conditions, the tenancy ends, and they get moved again. The children either have to be uprooted from one school to another in another borough, or make a long journey to return to their original borough—such as Camden or Islington—and try to maintain themselves at the same school. What kind of life is it for a seven or eight-year-old child to be dragged on a bus or train for an hour every morning to get to primary school and having to change time and again? Ask the teachers how the kids suffer because of that.

My borough is doing its best to provide as much council housing as it can. My hon. Friend the Member for Wolverhampton North East (Emma Reynolds) kindly visited our borough last week, and she will have seen the excellent quality of our new build. Indeed, it is rather better quality than the current private sector new build: larger rooms, better accommodation, and more energy efficient—very good quality stuff. It is difficult to find land to build it on and expensive to do, but the social investment is enormous, as is the return for the whole community.

The message from the Government is that we should increase council rents to 80% of market value. That would be totally unaffordable for people who live in our existing council properties, and would mean that they could not accept them even if they were offered them. We must maintain the social rented model and address the problems of housing in this country, essentially by building a lot more council houses.

Some 200,000 or more new households are created every year, and the number of new properties being developed in the country is around 100,000 per year. We are all into the science of managing shortages. Councils are doing that, as is everybody else, and the only safety valve is the private rented sector. The only safety valve in that is ever-increasing rents and the huge profitability that exists within that sector. We therefore need to do two things; the first is to support local authorities to build council housing.

I do not support the sale of council houses or big discounts on their sale, particularly in areas with enormous housing shortages, not because it makes a lot of difference to residents, if they remain living in them, but because later the properties might be sold on or rented in the private rented sector. The highest rent I have come across so far—there might be more in the pipeline—for a former council flat is £660 per week. For the person living next door in an identical council flat—possibly even in better conditions, because the council tends to look after things quite well—the rent would be about £100 to £120 per week. How can anyone possibly justify that discrepancy?

I support the Opposition Front-Bench team’s proposal for the regulation of letting agents and for the enforcement of much better conditions and much longer tenancies. In areas of very high housing demand—in London and other cities such as Oxford and York and in the centres of other cities—rent rises are huge. I have no idea where the Residential Landlords Association gets its figures from, but it claims that in the 12 months to March 2014, the rent increase in London was 1.4%. I tried this figure out on people in my community, but I only got as far as “1.4” before they started laughing. They said, “That must have been last week’s increase.” I have no idea where these figures come from, but these things are very important.

We seem to be presiding over a cowboy mentality among some, although not all, letting agents who think it okay to stick some scruffy piece of paper in a window saying, “No DSS allowed here”—they are a bit out of date: the Department of Social Security was abolished a long time ago and is now the Department for Work and Pensions; perhaps they should be educated about that. However, should anyone be allowed to say, “If you’re on benefits, you’re a second-class citizen and you cannot even apply”? Also, the “Panorama” programme has exposed the racial profiling that goes on, presumably under pressure from landlords saying they do not want any Muslims, blacks, Jews—or any other group they care to identify. To his credit, the Minister correctly agreed with me that this is criminal activity, completely wrong and has to be outlawed. I hope there will be serious prosecutions where it can be proved, as a lesson to others that we will not accept race discrimination in the housing market.

I hope that the House will support the motion. I do not know whether the Government will support it—I seriously doubt it—but I hope we can have not just the regulations outlined by my hon. Friend the Member for Wolverhampton North East but even longer tenancies. I also think there is a case for rent controls, particularly in areas of very high housing demand such as London. If we do not manage the private rented sector, control rents and build more housing in London, it will become a totally divided city: a city divided between those lucky enough to get social housing through councils or housing associations, those rich enough to buy and become owner-occupiers, and the rest, who will be spending all their earnings and savings on excessive rents. It will lead to labour shortages and economic decline in our big cities. We need regulation and a determination that we, as a nation, will solve the housing crisis and give all our kids somewhere decent and safe to live.