Private Rented Sector

Ian Mearns Excerpts

Wednesday 25th June 2014 Commons Chamber

[John McDonnell]

Suitable accommodation is non-existent. Firefighters in the Hayes station were commuting from Devon and Cornwall. It is very difficult to find anyone in public service locally who can afford a property in the area.

This means that the overcrowding in my constituency is appalling. In the 40 years that I have lived there, I have not seen it on such a scale before. People tell me it is as bad as it was after the second world war. We complain about kids being out on the streets and joining gangs, but overcrowding means that kids are forced out on to the streets, and they become incredibly vulnerable. Think about a child going home and having to do homework in the room where the other kids are having tea, or having their bedroom in the room where they have to do their homework either on their knees or on the bed. The social impact is horrendous.

[Ian Mearns (Gateshead) (Lab)]

Will my hon. Friend give way?

[John McDonnell]

I cannot give way any more. I apologise.

There is also squalor in the private rented sector. In my constituency there are landlords, the majority of whom own one or two properties, who do not maintain them. This has been made worse by the economic recession. Walk down any street in my constituency and it will be clear from the standard of the properties and their maintenance which ones are the buy-to-lets. When the tenants complain, they are evicted. They have virtually no legal redress, because they cannot get into the courts; or they turn up at the citizens advice bureau or the law centre and it is difficult to get advice because they too are swamped. There is also an element of blacklisting of certain tenants who challenge particular landlords. The environmental health standards of some properties are appalling, yet obtaining enforcement by the council is difficult. I do not blame the local authority, because with staff cuts it is difficult to provide cover for the scale of the problem faced and the enforcement required.

Houses in multiple occupation in my constituency have experienced all the health and safety risks, including fires and, unfortunately, some fatalities as well. There is a continuous churning process, with families in short-life accommodation, perhaps for 18 months or two years, being moved out. That disrupts the family, breaking down family relationships and undermining communities, and the long-term impact on children’s education and social relationships is devastating.

The solution is a statement of the blindingly obvious: build more council houses. I was critical of the previous Government. We had debates such as this, but I think that the Labour party has learned the lesson that we now need to invest in social housing on a scale that we have not done in the last 20, 30 or 40 years. We need a massive council housing programme. Councils should be encouraged compulsorily to purchase empty land. We cannot wait around any longer while we negotiate with developers. The crisis is too large. In an area of desperate housing need, we still have empty properties. Homes are standing empty. There are 700,000 empty properties in this country, 300,000 of them long-term, beyond six months. We should be encouraging councils to use their compulsory purchase powers to take over those properties, and put homeless families in them.

I support everything in the motion, but, as my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) said, it will have limited effect, at least in my area. What we need are rent controls. We are accused of Chavezism, but I am quite proud of that. I am a Bolivarian. The only thing that would work in my area is control of rents, because at least in that way we would get back some form of affordable housing. If it is not the same in other areas, let us devolve the ability and the power to local authorities to determine in their area whether they want the power to control rents and at what level they should be set. That would at least give hope to families in my community that they might have a decent roof over their heads for their children.

[Jackie Doyle-Price (Thurrock) (Con)]

At the heart of this debate is a chronic under-supply of housing, because for successive decades there simply have not been enough houses built of all types of tenure. That is the challenge that we have to face. It is not about singling out private landlords, although it is in the private rented sector that the consequences of the failure to tackle under-supply are to be seen. We also need to make sure that we are building more houses to buy and for social landlords to let, and that we continue to allow the expansion of the private rented sector.

There is no doubt that there are rogue landlords out there who are exploiting tenants, but there are also many good, decent landlords. Most landlords want long-term tenants in their properties. They want people who will treat their properties as their homes and look after them. It is simply not the case that an army of small landlords is engineering this churn.

There are also a number of reluctant landlords, particularly in constituencies such as mine. We have all talked about the challenges of affordability, particularly for first-time buyers, so we have lots of people out there who are letting a room so that they can use the income to get on the housing ladder. Most of them would prefer to have their home to themselves, but it is the means for them to acquire a home. Those people need to be encouraged. They do not need a wealth of bureaucracy that stops them being good landlords. Equally, as a result of the economic challenges of recent years, we have seen a lot of turbulence in the housing market. We also see many family breakdowns, so people often sit on properties that they cannot afford to liberate to sell, for one reason or another, and they want the long-term security of long-term tenants. We should not be making it difficult for them.

I have been struck by the comments made by Members representing London where, again, the problems of under-supply are particularly acute. There are people who are taking advantage of that, and some letting agents also play the system and encourage churn in their properties: because every time they find a new tenant, they get a letting fee. I have witnessed that practice being encouraged in my constituency, although people would rather keep a tenant for as long as possible. However, when many people are entering the field, owners are always encouraged, with the promise of a higher rent, to change tenants. There is a lot to be said for educating the public about some of these bad practices so that they know how to avoid them. I take the view that educating the public is perhaps the best way in which to get higher standards generally. Regulations are usually a pretty poor tool because, as we have heard, they are often not enforced. We have heard about councils’ failure to take enforcement action against rogue landlords. The best thing we can do is ensure that all tenants know their rights and what they can expect from their landlords.

We have heard a lot in this debate about security of tenure, and rather less about the quality of some of our private rented properties, which is my concern today. The quality of one’s living accommodation can be good or bad for one’s health. We have talked about some properties being poorly maintained, but poorly maintained rented properties are not the preserve of the private rented sector. In my constituency, the worst properties are those owned by the council.

[Ian Mearns]

Shocking.

[Jackie Doyle-Price]

It is shocking that Thurrock council is letting down its tenants.

--- Later in debate ---

[John Stevenson]

I completely agree with my hon. Friend that that was the Committee’s conclusion. We recommended model tenancy agreements—I am delighted that the Government will be introducing them over the summer, after a consultation—a redress scheme and transparency in letting fees.

Addressing the specific issues raised in the motion is remarkably easy. I believe that the Opposition are misguided in their approach to that market. In fact, their motion does not even mention the critical issue: the need for more housing of all types. It mentions stability and certainty, but there is actually a remarkable amount of certainty, combined with a large degree of flexibility. Leases can be for six months, which is the default position, but we often forget that they can be for any length thereafter. It could be five years, 10 years or 18 months; it depends on the relationship between the landlord and tenant and the requirements of both. Indeed, many tenants do not want a three-year tenancy. They might want six months because they are moving into an area to see whether it is the right place for them to live or because they are looking to buy a property or to rent long term.

The same applies to the landlord. The accidental landlord might not want to grant a three-year tenancy. They might want a six-month tenancy, with a view to putting the property on the market afterwards. The existing arrangements create a great deal of flexibility. It is also interesting to note that a large number of tenancies are brought to an end by the tenant, not the landlord.

[Ian Mearns]

As a member of the Education Committee, I often hear head teachers and governors talk about churn, mobility and turbulence in their school populations. A big factor in that churn and turbulence is undoubtedly the existence of a great many short-term, six-month tenancies in the private rented sector, but they are used as a matter of course in many neighbourhoods.

[John Stevenson]

I accept that six-month tenancies are used as a matter of course, and that is a cultural issue that I will touch on in a minute.

The English housing survey notes that the average length of residence for a tenant is 3.8 years and that 66% of tenants are in a property for more than a year. We have heard a lot about rapidly rising rents, but I must confess that I am slightly perplexed. Figures from the Office for National Statistics for the period 2005 to 2014 show that the consumer prices index has risen by 13.3% and rents have risen by 9.5%—12.5% in London. Indeed, tenants who remain in a property often see their rent increase more slowly. I will give a personal example. I mentioned in my declaration of interests that I am a landlord. I have rented out a property to the same tenant for over five years, and during that time the rent has never been increased. Yet the tenancy was not for three years; it has varied from six months initially to a year and then was renewed each year. With regard to letting agents, transparency is the key, not regulation. It is quite right that landlords will look to see their costs being met in a different way. It is transparency we need, not further regulation.

Ultimately, what we want is a vibrant, flexible and competitive private rented sector with quality housing. Therefore, I remind the House of the Select Committee’s key conclusions. First, the present market is broadly working and will continue to develop. Yes, we need a cultural change on the length of tenancies. I think that having six-month tenancies is partly a habit developed by letting agents and landlords, but it has also been influenced by mortgagees, who are reluctant to see tenancies go beyond a year. Secondly, we clearly need much more housing of all types. Thirdly, to improve standards we need proper enforcement by local authorities of the existing laws. We need to allow the market to develop within the existing laws and the recent Government proposals. I believe that that, rather than further regulation and state interference, will lead to a successful private sector market.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Forty years ago, I was one of those who organised the occupation of Centre Point, which was then empty. It was a protest that caught the imagination. It dominated the headlines for several days. It was against the obscene combination of a housing crisis on the one hand, with rapidly rising homelessness and Rachmanism, and office block speculation by the likes of Harry Hyam on the other hand. We then saw some welcome changes under the 1974 Labour Government, who tackled office block speculation and introduced security of tenure. I never thought that 40 years on we would be debating the biggest housing crisis in a generation. It is a crisis that is deeply damaging. It dashes the hopes of millions of people, damages the life chances of a generation of children growing up and holds back our economy.

What we now require is the utter determination necessary to make a great generational change. That is why Labour has put housing centre stage. We have done so for three reasons. First, millions of people desperately want to rent or buy a house they can afford. The gulf between supply and demand is massive and growing. I see it in the city I am proud to represent, where we need 80,000 homes to meet demand and where 33,000 are currently on the council housing waiting list. Secondly, history tells us that there has never been sustained economic recovery—after the depression, through the war and in every recession since—without a major programme of house building, both public and private. Thirdly, there is the impact of bad housing and instability on our country and our community. At its most chronic, in the private rented sector, bad housing harms health. Instability, for example, if someone has to move home frequently—those living in the private rented sector are 11 times more likely to have to move home than owner-occupiers—is damaging, including to the life prospects of kids at school.

[Ian Mearns]

My hon. Friend is making a really important point. We are not talking about statistics; we are talking about the life chances of children being disrupted because the problems in the housing market are having a direct impact on their educational prospects. They are forced constantly to move schools because of the insecurity in housing tenure for their parents.

[Jack Dromey]

My hon. Friend is absolutely right, not least because the evidence shows that if a child under five has to move home three times, that will impact on their educational attainment at school.

The wish of people to live in a house that is also their home is deeply rooted in the sense of aspiration and ambition in our country. It enables them to put down roots, contribute to their community and plan ahead, including where they send their kids to school, which is simply not possible for millions of people in the private rented sector.

To clear up what Government Members have said, Labour’s focus is on homes of all tenure: homes to buy, including our ambitious objective of reaching 200,000 homes a year by 2020; homes to rent; a new generation of social homes; innovation in self-build, custom-build and co-operative build; and catering for an ageing society by helping people to downsize, rather than by using the obscene weapon of the bedroom tax, which will be one of this Government’s first casualties when our Government come to power next May. We also want to bring all homes up to standard, including those in the private rented sector, and to complete one of the Labour Government’s greatest achievements, the decent homes programme, which brought 1.6 million homes up to a decent standard, so transforming the lives of those who lived in them.

The private rented sector is growing rapidly: it covers 9 million renters and 2 million children. In my constituency, 48% of the ward of Stockton Green is now in the private rented sector. The sector has an important role to play to meet housing need. Most landlords are good landlords, but—I repeat, but—the evidence is absolutely clear that there are problems of security and affordability, with typically 41% of average earnings being spent on rent. There are also problems of quality—35% do not meet the decent homes standard—and too many rogue landlords and letting agents. We have all seen evidence of that in our constituencies. For instance, one of my constituents, Cathleen, lived in appalling accommodation before finally, with the help of the council, getting her landlord to carry out some basic repairs, only for the landlord to then serve her notice to quit.

The situation must change. We need a different vision of the private rented sector by 2020. It should be a sector of choice, more akin to the continental model, and one that enjoys a higher reputation, with flexibility and security in equal measure: flexibility for the students on one hand, and security for families who want to plan ahead, including where they send their kids to school, on the other.

Crucially, the sector needs to attract investment big and small. My experience of institutional investors is that they are very positive about Labour’s vision of the private rented sector that we want to create. The sector needs to work not just for tenants, but for landlords: longer-term tenancies with a reliable tenant paying the rent make for a better business model, because churn costs not just the tenant, but the landlord as well.

The sector needs to be no place for rogues. I pay tribute to Labour councils all over the country, particularly Newham council, that have vigorously pursued rogues, seeking to drive them out of the business. I remember going on a raid at 7 o’clock one morning with Sir Robin Wales: we saw accommodation the kind of which I did not believe existed in London.

The shadow housing Minister, my hon. Friend the Member for Wolverhampton North East (Emma Reynolds), is absolutely right to say that we need to tackle the problems with letting agents. Most letting agents are reputable, but there are too many rogues. No letting agent should be able to charge tenants up-front fees—that should be for the landlord. My hon. Friend is right to say that we need a sector characterised by greater stability and security.

--- Later in debate ---

[Stephen McPartland]

I am grateful to the hon. Gentleman for making that point, but Library figures show that it has taken almost 30 years for the figure to increase to 16.5%. His point that there was no demand then but that, all of a sudden, there is now probably does not hold water.

An estimated 89% of landlords are private individuals with one or two properties, which are, in effect, their pension funds. They are, in the main, responsible and proactive people, such as my hon. Friend the Member for Carlisle (John Stevenson), who will keep his tenant in place for as long as he pays the rent on time, as has happened for a number of years.

[Ian Mearns]

The hon. Gentleman has given the interesting statistic that 89% of landlords are private individuals, but they do not cover 89% of the market. Would he care to inform the House what proportion of the market the other 11% control?

[Stephen McPartland]

The hon. Gentleman will be delighted to know that I am not someone who has all the statistics at his fingertips, but I am very happy to discuss that matter with him once I have had the opportunity to google it.

Moving swiftly on, the point I was trying to make is that a huge number of people in this country are among the 89% of landlords who are private individuals, and many of them have been encouraged to invest their family’s future and their family’s finances in what are, in effect, pensions. Those people are very important to our economy and their local communities, which we need to support. We should not attack them just because they have been able to purchase a property and give another family a home to live in. For me, those landlords often provide stability for their tenants. Landlords cannot afford to have any voids, because that might result in their losing their ability to repay their mortgage; many of them are buy-to-let landlords, whose numbers have risen—mostly under the previous Government—during the past 15 to 20 years.

The problem with three-year tenancy agreements is that many families want flexibility, and as a result the reality is that such tenancies will never be standard. There has to be a balance between flexibility and security, which the hon. Member for Birmingham, Erdington (Jack Dromey) spoke about, but rogue landlords will provide flexibility by encouraging everybody to sign up for six months, while the 89% of landlords will provide security for three years, as do they already. For me, such agreements are not the answer, and the issue is not about regulation.

In addition, particularly for the 89% with just one or two properties, landlords whose tenants are not paying the rent or are damaging the property can get possession of the property only at the end of a tenancy. Other forms of recourse are often incredibly expensive. What that boils down to is that somebody with a buy-to-let mortgage whose tenant just refuses to pay the rent for two or three months is more than likely to have their house repossessed. In effect, they will lose their pension for their family’s future. If somebody does not pay their rent for eight or nine months of a three-year tenancy, that will lead to huge legal bills and create huge problems, which is a balancing factor.

My hon. Friend the Member for Carlisle made the point that tenancies are often ended by the tenant, rather than the landlord. Figures I have been given suggest that only 9% of tenancies in this country are ended by the landlord. Landlords have come to my constituency surgeries very disappointed and upset because they cannot get possession of a property where somebody is just sitting in it and refusing to pay rent to go to their mortgage. Stevenage borough council informs such tenants not to let themselves be evicted because they will make themselves intentionally homeless, so the council will not house them. As a result, landlords have to take such tenants to court and go through the whole repossession process, which families often cannot afford. People who own just one or two properties therefore have a huge problem, and protections against that problem should be built into the system. I make that point because, for a huge number of people in all our communities, three-year tenancies without such protections might cause a huge problem for their family’s future and finances.

A ceiling on rent increases sounds attractive and is no doubt incredibly populist, but one little detail that I heard earlier is that rents might increase every year during the three years.