Letting Agents

John Pugh Excerpts

Wednesday 27th February 2013 Westminster Hall

[John Pugh (Southport) (LD)]

It is a pleasure to serve under your chairmanship, Mrs Brooke. I congratulate the hon. Member for Rotherham (Sarah Champion) on introducing this topic. She has kept the pressure on, and she put her points in a very lucid way.

We all acknowledge that there is a problem. For a variety of reasons, there is an increasing number of new landlords in the private rented market. Some people go in for buy to let. Two of my daughters, who are married, are coincidentally temporary landlords by virtue of not being able to sell their houses—one in Wales and one in London—and they could not let them without using a letting agent. There is also increasing demand for rented property as people fail to stump up the deposit and the finance to purchase their first home.

That all leads to an increasing reliance on letting agents, and there is no dispute that that is a problem. In terms of service, a great deal is left to be desired by the letting process and by the way in which repairs are conducted and deposits are handled. People have illustrated quite forcefully that there is not the same transparency in the system as we would expect from a reputable business.

That is reflected in the high level of complaints we get. At the top end of those complaints are issues of downright theft and sharp practice. We are looking at an unregulated market, and everybody—the OFT, Shelter, charities concerned with homelessness and the political parties—acknowledges that. The Liberal Democrat conference passed a motion emphasising its concern.

The Government acknowledge the problem. In a recent debate on the subject in the main Chamber, the Under-Secretary of State for Communities and Local Government, my right hon. Friend the Member for Bath (Mr Foster), made it clear that they would keep the regulation of letting agents under review. When he was in opposition, the Housing Minister spoke favourably of such a proposal.

We all agree, therefore, on the problem. There tends to be a difference of opinion, however, when we come to the solution. One solution staring us in the face is simply caveat emptor: basically, let us have a smarter set of customers. However, that is clearly an inadequate solution and an inadequate hope. Many players in the market—landlords and tenants—are novices. They are making critical decisions, they are short of cash and they are often going through the trauma of moving home, which, as we all know, is one of the major traumas in life.

The second solution, which is favoured by some, is voluntary registration. That leaves out what the hon. Lady called the cowboys. Of course, they are not immediately identifiable: they do not all have stetsons and holsters so that people can pick them out straight away. Even if they did, voluntary regulation has been tried, and it has not been found to be a sufficient solution, because complaints have not gone down. It was a laudable move, and we have to support it, but it is obviously not sufficient to deal with the problem.

Then we come to the thorny issue of whether we need more regulation, legislation or compulsory registration of letting agencies. The Government are right to be sceptical about over-regulation, but it is not obvious what such a proposal would result in. It is not obvious that the burden will in any way be increased for good letting agents, who already pay for voluntary schemes of one kind or another and accept the administrative cost of that. Any scheme we embrace will also presumably be self-funding and therefore not a call on the Government’s sorely stretched coffers. It is not clear in any case why regulation is inappropriate. How would we answer the question: why should estate agents be regulated, but not letting agents? There is no really good answer. Furthermore, if we have a better regulated market, we will deliver some sort of social good. Despite the fact that there is a threshold to be crossed, and despite the fact that this environment is not utterly lawless—there are sensible pieces of ordinary civil law legislation that apply to it—there does seem to be a case for effective market intervention, which would presumably start with some sort of compulsory regulation of letting agents.

The decisive issue is this. We all accept that the issue is in the balance: it is not one on which people have dogmatic or doctrinaire ideas, or which they resist out of an ideological preference. Equally, the issue will not go away, and the problems are on the increase. In introducing regulation, the Government will not reduce the supply of property. The more likely market effect is that they will drive landlords, who one assumes will be just as numerous as ever, to use the services of reputable agents, not agents who are unworthy of effective registration.

Of course, regulation is supported by the Royal Institution of Chartered Surveyors and players in the industry. It is not evident that good markets are unregulated markets. It is also not evident that regulation in this case will necessarily be onerous. I accept the point made by the hon. Member for Folkestone and Hythe (Damian Collins) that regulation is not necessarily sufficient. Whether or not we have regulation, the elephant in the room is enforcement. We need to draw attention to the fact that most local authorities have quite a lot to do managing their existing budget and delivering the formal commitments the public expect them to deliver, without venturing into a territory where the public may not notice whether they are delivering. Such things would be an easy hit for those who want to reduce council expenditure, and most local authority chief executives are, unfortunately, in that position.

Although regulation is not a sufficient move, therefore, it is the right move; it is a step in the right direction, and I applaud the hon. Lady for having pushed us a little further in that direction.

[Several hon. Members]

rose—