Private Rented Sector

George Hollingbery Excerpts

Wednesday 23rd January 2013 Commons Chamber

[George Hollingbery (Meon Valley) (Con)]

In the interests of allowing as many colleagues as possible to contribute to the debate, I hope to keep my remarks very brief—five minutes is simply not long enough to develop a substantial argument. We know that the private letting market is extremely important in this country. Indeed, it is of rising importance. The Communities and Local Government Committee published in May 2012 our report “Financing of new housing supply”, for which we took a great deal of evidence on the barriers to investment in the private letting market, particularly from institutional investors. That evidence was very important.

Straightforwardly, regulation, and certainly uncertainty about it, can lead to difficulties in encouraging meaningful institutional investment in new supply. That is particularly important, because I believe firmly, as I think do shadow Front Benchers and Government Front Benchers, that large institutional investment in private rented housing is a really interesting way forward for providing better and higher-standard accommodation with long lets to more people across the country. We should therefore do whatever we can to try to make that happen.

Raising finance is difficult at the moment. I want to quote from a report produced for the Joseph Rowntree Foundation by Professor Michael Ball of Reading university in November 2010:

“Regulations and the threat of more regulation put off investors. This is generally due to the costs of compliance. Rogues ignore rules, so it has to be demonstrated that the total costs of compliance by all landlords are outweighed by improvement in the quality offer by the few. The paradox may arise where regulations deter good quality investors and the resultant accommodation shortages generate substantial financial incentives for those prepared to flout the rules.”

We need to be careful to understand that a well-meaning regulation can easily put off potential institutional investors, because their investment might lead to much better regulated and longer-term private rents in the sector. I want the House to be aware that there is plenty of academic evidence available showing that regulation can be a barrier to raising finance simply because of the uncertainty it generates for long-term investors.

The Government have already invested considerable sums in that area. We have already talked about the £200 million fund to provide equity finance for builders and developers for this interesting nascent market. Of course, the £10 billion debt guarantee scheme should allow more of those long-term investments to be made. The Housing Minister told The Spectator last week:

“What we need to do is attract and encourage new players to the market, while at the same time avoiding the excessive regulation that would force up rents and reduce choice for tenants.”

That must be right. The Select Committee agreed and its report’s first recommendation was for a more flexible approach:

“We encourage local authorities to consider taking a flexible approach to affordable housing requirements in planning obligations on a case-by-case basis, where this will help to stimulate build-to-let investment and will not be to the detriment of the wider housing needs of the area.”

Ultimately, if we need to provide more purpose-built private housing for rent, what we need, ironically, is less regulation, not more. That will produce housing owned by large-scale investors who will have a vested interest in the long-term viability of their property portfolios and who are much more likely to operate in an ethical and transparent way. I refer hon. Members to Grainger in my constituency, which is putting together exactly that sort of investment and development. I believe that is the way forward. I believe that well-meaning regulation could be dangerous in that regard. I absolutely understand the desire to regulate letting agents more. That is essential, makes good sense and we should do more of it, but we need to be very careful when we impose regulation on the wider marketplace.

--- Later in debate ---

[Graham Jones]

That question is easy to answer. My local authority is the third worst hit in terms of revenue grant and it is doing everything it possibly can. If the Government take resources away, they have to accept that it becomes difficult for local authorities to meet their obligations. That is the position in which the local authority finds itself.

I return to the scale of the problem. In the ward of Spring Hill, 71.6 % of houses do not meet the decent homes standard; in contrast, only 17.2% of social housing in the ward does not. In Central ward, 73.6% of houses do not meet the decent homes standard, compared with 32.1% in the social rented sector. That is a damning indictment of the state of the private rented sector in my constituency and the behaviour of some who let those properties. I should say briefly that the housing health and safety rating system is not fit for purpose and is due for an upgrade.

What do Haslingden and Hyndburn constituents get for the privilege of renting a home? Last year, national TV crews came to Hyndburn to see the sorry state of the sector. One house that TV crews visited in my neighbourhood had asbestos, single wooden windows, damp, mould and electrical sockets hanging off the wall with live electrics exposed at a low level. A young mother and a toddler were housed there as there was nowhere else better. The house had innumerable category 1 and 2 hazards, as is common throughout the constituency.

As my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) said, the Government should tackle the dangers of electrical safety, not just by regulating electrical safety certificates but by the mandatory installation of residual-current devices in every rented property.

Nationally, the last English housing survey revealed that the number of people who agreed with the statement “the landlord does not bother with repairs” was twice as high in the private rented sector as in the social rented sector. In Haslingden and Hyndburn, the figure is far higher. At another property in my neighbourhood, I saw a questionable gas fire, which was checked by a gas fitter. It was condemned immediately and removed. For 12 months, the landlord had been asked to look into it. Shockingly, the property was rented by a parent with a two-year-old and four-year-old.

Such stories reflect the chronic state of the private rented sector in Haslingden and Hyndburn. There is a huge problem, not just with rogue landlords, but absent and long-distance ones. Crucially, there are also amateur landlords who know nothing about property maintenance and are simply looking for a quick profit. I ask the Minister to consider this point. Landlords need guidance, and a national register would assist landlords, tenants, neighbours and the local authority to work together.

Recently, a woman suffering from exactly the problems that the Leader of the Opposition has recently identified came into my surgery. She is a single mother with three children. She had been forced to rent a three-bedroom former council house now owned privately through the right to buy. She had been the victim of domestic abuse and her partner had abandoned her and her three children. Her rent is £600 a month, while the rent at the Hyndburn Homes property next door is just £300. The average price of a Hyndburn Homes property is about £64 a week, yet a private rented property costs £108 a week—68% higher.

Then there is the scandal of top-up, which has not been mentioned, whereby landlords raise rents way above housing benefit levels and push families and young, innocent children into the worst poverty imaginable. The lady I mentioned received £425 in housing benefit, so the Department for Work and Pensions was paying £125 more than on the property next door, but that still left her with a £175 shortfall per month that she had to find from the other benefits that she received. Her children were going hungry and she had to be clothed with clothes from the charity shop just to keep a roof over their heads. Moreover, the house was in a terrible state of repair because it had been bought under the right to buy, and the landlord had shown no interest in making good.

When I contacted schools in my local area, they confirmed a rise in the number of poorly clothed and hungry children turning up for school in the morning. My surgery is filled with people desperate for decent housing, all of whom are housed in the private rented sector, while the local authority has a very long waiting list for housing association houses. A recent survey highlighted that Hyndburn has the second highest number in England of people living on the breadline.

I would like to speak for much longer, but time is running out and I will have to conclude my remarks.

[George Hollingbery]

rose—

[Mr Speaker]

Order. Before I take the forthcoming point of order, I am afraid that in the interests of trying to accommodate the level of interest I am going to reduce the time limit for Back-Bench speeches, with immediate effect, from five minutes to four minutes. In that way, I hope to be able to get everybody in if people are helpful.

[George Hollingbery]

On a point of order, Mr Speaker. I apologise for delaying the House’s business. In my speech, I omitted to alert the House to the details of my entry in the Register of Members’ Financial Interests. I apologise to the House for doing so and now alert it appropriately.

[Mr Speaker]

I am grateful to the hon. Gentleman for his point of order, and the House will be too.