Energy Bill [HL]

Lord Best Excerpts

Monday 24th January 2011 Grand Committee

[Lord O'Neill of Clackmannan]

My Lords, before we leave this issue, I am not quite clear on the extent of the penetration of the membership of the British Property Federation and on whether it captures all landlords. If the BPF has not so far—as I imagine—captured the recalcitrant landlords, I suggest that we should not try to impose too much responsibility on the BPF. At the same time, if this legislation is to succeed, the Government’s role should be to show leadership by trying to inform the public of what could be available to them and what might be being denied them because of landlords who by and large—historically, sadly, there are all too many of these—are indifferent to the needs of many of their tenants.

It would seem that the more insecure the tenancy, the higher the rents and the less attractive the accommodation. Very often, individual metering and inadequate insulation are the hallmarks of such properties. While we have a responsibility towards those tenants who live under registered or trade association landlords, we have an important and even greater responsibility to those who live in wretched and dreadful conditions because of the force of very complex circumstances. Sometimes, such tenants are not in a position to make the right economic judgments—which, in many respects, lie at the heart of the Green Deal—because, sadly, they have too many other things to worry about. The fact that these folk may not be in these properties for long does not mean that their successors should be condemned to the same dreadful conditions as those in which the previous tenants had to stay. The Government must pay greater attention to this issue. It is to the shame of previous Governments that these situations have been allowed to prevail for so long.

[Lord Best]

My Lords, perhaps I may add a little factual information on the profile of the private rented sector. We know from Dr Julie Rugg at the University of York that there are some 1.2 million private landlords. Very few of these belong to the British Property Federation, for which I have a great deal of time and which is doing some very good work, including on this Bill. The vast majority of the 1.2 million private landlords do not belong to any kind of federation. The Residential Landlords Association and the National Landlords Association together have, I think, less than 5 per cent of the ownership from the private landlords sector. We will have to bypass some of those institutions and put in place mechanisms that will reach out to this huge mass of small-time private landlords.

[Lord Marland]

My Lords, this group of amendments covers a wide range of issues. The noble Baroness, Lady Smith, rightly asked about the purpose of the review, which is, we hope, to safeguard against regulation. We do not believe that regulation will be the answer if we want to encourage landlords in the private rented sector to respond to the Green Deal with open arms, to embrace it and to act as willing and proper landlords. As my noble friend Lord Deben rightly said, we should strike a balance between the pressures brought on by the sector and what we want to achieve, but we should not be led by the nose. Of course, we are working closely with the BPF.

The noble Lord, Lord O’Neill of Clackmannan, rightly drew our attention to the fact that there are unscrupulous landlords out there. It may be that we have to take action against them in the strongest possible way through regulation, but it is our desire not to do that and to give them an opportunity—a breathing space—to take part.

The noble Baroness, Lady Maddock—the godmother of HECA—drew our attention in her usual persuasive way to the merits of the Home Energy Conservation Act. We are incredibly grateful for all the work that she did but, as she has nobly recognised, we have moved on to another phase. Perhaps she will be godmother of HECA II.

Finally, let me respond briefly to my noble friends Lord Jenkin and Lady Noakes, who have raised a number of issues relating to the review period. Perhaps I may discuss the review later, given that—as my noble friend Lady Noakes mentioned—groupings 7 and 8 also deal with the review and its various timeframes. Although my noble friends’ amendments aim to strengthen the review, I reassure noble Lords that there is already a requirement in Clause 36(5)(b) for the review to assess the extent to which financial assistance is available. On the broader point, I think that we will be able to debate the timings of reviews and the need for them when we consider groupings 7 and 8. With these assurances, I ask noble Lords not to press their amendments.

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[Lord Teverson]

My Lords, I am a landlord—very much in the line that the noble Lord, Lord Best, described of one property, but I thought that I should declare that interest in this debate.

[Lord Best]

I shall just add another statistical piece of information. Some 40 per cent of tenants move within a year of the occupation of their home. In principle, the idea of consulting with the residents of a place before you start doing anything to it is entirely right, but we have a big transient population in the private rented sector. My other point is that, although you could consult the first occupier, the debt is taken on and lasts 25 years. In almost no cases will the same person be there for all that period, and you are not able to consult people further down the line about a decision taken by an earlier tenant. Although I sympathise with the sentiment that one should consult with the tenants, this is possibly impractical.

[Lord Davies of Oldham]

My Lords, we are getting to the complexities and challenges of the Green Deal. We had early indications this afternoon of the problems in the private rented sector; they are not solely in that sector, but they mushroom in significant ways so far as it is concerned. The important statistic that the noble Lord, Lord Best, brought in identifies the challenges before us. As the noble Lord, Lord Deben, argued on the previous amendment, it is no doubt important that we get as much information across as we can both to landlords and to tenants. This is a major public information task, and we should make sure that this legislation enhances and creates the opportunities for the spread of as much information as possible. Of course, as my noble friend Lord O’Neill identified, there will be groups who are difficult to reach and for whom the relevance will be limited; that is where a significant challenge is represented by this legislation. We want the Minister’s assurance that he appreciates how important it is that the legislation be as enhancing as it can be on the need to distribute information so far as possible, and that we succeed in bringing the nation on board with regard to the objectives, benefits and significance for society. We have a whole range of private interests that are massively diverse, so we should recognise the challenge that the Government face.

--- Later in debate ---

[Baroness Smith of Basildon]

I thank the Committee. This is a probing amendment to look at the powers of local authorities regarding sanctions and the non-letting of properties where landlords have failed to make the required energy efficiency improvements. Clearly, landlords need to be given a reasonable length of time to comply, and that must be built into the notice. We should look at this in the light of later clauses.

Imposing a fine on a landlord who has failed to comply is not always the best way to proceed. If a landlord is fined for not complying with energy efficiency improvements, he has to recoup the money he has been fined and the energy efficiency of the property will not be improved. The council could seek to undertake the work and put a charge on the landlord through the Green Deal, through rent or by other means. It seems to me that where a landlord does not comply, it is necessary to make a range of compliance tools available to local authorities, giving them a number of options to take up depending on the circumstances. I am rather reluctant to follow the line of fining landlords or seeking to remove properties from letting as the first course of action. Every case has to be looked at on its merits.

As I have said, this is a probing amendment to look at what the Minister envisages in this regard. What kind of tools does he consider could be made available to local authorities to ensure that energy efficiency measures are implemented within a reasonable and appropriate timescale? I beg to move.

[Lord Best]

I am not sure that the new clauses I have proposed to come before Clause 40 fit terribly well at this point, but since they have been grouped with Amendment 20TA, perhaps I may now speak to them. I have a feeling that may well be familiar to noble Lords. I might have wasted my Sunday preparing a lengthy speech because the debate up to this point has already covered much of what these proposed new clauses seek to address. The point of them is to add a few more teeth to the regulatory process and to try to ensure that the difficulties in the private rented sector that we have been discussing are dealt with by reaching all landlords.

I ought to add a point that has not yet arisen. It is often necessary to reach the agents of private landlords. Some 60 per cent of homes in the private rented sector are managed by managing and letting agents rather than directly by landlords themselves. I declare an interest as chairman of the council of the Property Ombudsman that receives the complaints about managing agents. Although I can assure you that most agents do a very good job, there needs to be some protection against lazy agents who do not get round to doing the things that they ought to do on behalf of their landlords and on behalf of the tenants who live in those properties.

[The Deputy Chairman of Committees]

I wonder if the noble Lord could clarify for the Committee which amendment he is speaking to, because I do not have any in my grouping.

[Lord Best]

I am speaking to the two amendments grouped with Amendment 20TA; namely, Amendments 21ZA and 21ZB. Further, I think we will probably be able to embrace a bit of 21ZC.

These two proposed new clauses have been prepared by the Association for the Conservation of Energy, which represents 30 organisations in this field, and Friends of the Earth. They are trying to avoid the pitfalls of the Green Deal, of which I am a tremendous supporter, proving to be a bit of a wet blanket for some parts of the private rented sector. They establish a minimum standard of energy efficiency at band E on the energy performance scale, which we suspect is where the Government are going in any case, for all properties that are let from 2016. To put it in the negative, this would make it illegal to let a property after 2016 if it does not accord with the minimum standard set at band E, which is a pretty modest level but one that affects some 350,000 properties in the private rented sector. As we all know, the private rented sector has a much higher number of properties that are in need of bringing up to new standards.

Let me give the reasons why this might be a good plan. Knowing that this legal obligation will kick in in five years’ time would mean that landlords are likely to gear up now to make sure that their properties meet the standard. Their agents will also know that it is coming, so they can prepare for this as a certainty in the future. This follows the same approach that the Government have already determined for commercial properties, where a minimum standard will apply.

Properties that are rated only F and G are in fact classified as a health hazard, a category 1 risk, under the housing health and safety rating system. Action to enforce that measure, however, has proved to be difficult. Local authorities have other fish to fry, they often do not have enough environmental health officers to go round and there are other priorities. This would address the health hazards of people, often on low incomes and vulnerable, who are prone to hypothermia and winter deaths in these low-energy rated properties. It does not put the onus on the tenant, and indeed it is unrealistic to expect tenants in all cases to be bold enough to go through the hassle of requiring their landlord to do something. We should remember that many tenants have short-term tenancies. They do not have security of tenure and, if they fall out badly with their landlord, the tenancy may not be renewed. It is better if there is a regulation outside of the landlord-tenant relationship to do this.

Landlords, and as I mentioned in 60 per cent of cases their agents, are familiar with the gas safety certificate. The new regime that requires you to meet an energy performance certificate standard is just the same as the gas safety certificate. Landlords have all got used to it. Tedious as it may seem, you have to go through the inspection process and the property has to meet the gas safety requirement. This is a health and safety matter as well, so they would have to meet the energy requirement on that same pattern. This is classified as moving into regulation, but it is fairly light-touch bearing in mind that band E is a pretty low level to reach, and it is five years away, giving plenty of time for people to get there.

It gives local authorities a specific measure and a clear duty. They know where they stand and they can get on with it. These clauses would be a helpful addition to the Bill. They also put on the Secretary of State the duty to take the minimum standard up another notch by 2020, since band E still represents a very basic bottom line.

The second proposed new clause here puts some constraints on the requirement to meet a minimum standard over the next five years or face a fine of up to £10,000 if it is ignored. These constraints are that there must be exceptions where the landlord can show that achieving the minimum standard is impractical; it offends against the golden rule. The tenant may refuse to have the works done, although there is still a question mark in my mind following the point made by the noble Earl, Lord Cathcart, as to what happens when there is a group of tenants of which all but one are keen to see energy efficiency measures in their block of flats or converted house, and one tenant refuses. There may be more to be said on that, but where the single tenant of a single property refuses to have the works done or because the changes would reduce the value of the property, these circumstances would be exceptions and the obligation would not apply.

Secondly, there would need to be a duty placed upon the Secretary of State to establish an appeals process to ensure that all was fair and proper. Thirdly, if in a particular local authority area there is evidence that the new requirement is leading to a shortage of rented properties, which frankly is an unlikely event, the Secretary of State could then suspend the minimum standard for that area. This contingency seems better than a blanket suspension across the whole country on the basis that the number of homes to rent had fallen in one or two specific places, as it would target the places where it happens.

These amendments seek to ensure that for the private rented sector the Green Deal is not a damp squib. They make it pretty certain that the very worst properties will be tackled within the next five years. Landlords will know where they stand, and voluntary action over the years ahead seems highly likely. I was pleased to note that the thinking behind these amendments is endorsed by the Government’s fuel poverty advisory group, by the Committee on Climate Change and by the many MPs who signed the Early Day Motion. I was also going to quote the Mayor of London, but the noble Baroness, Lady Smith of Basildon, has already done that for me.

[Baroness Maddock]

My Lords, my name is attached to the amendments to which the noble Lord, Lord Best, has just spoken. I do not intend to say much. It is clear from the amendments I moved earlier that I have a great deal of sympathy for what the noble Lord is saying. Perhaps we can also discuss between the Committee and Report stages whether there is some merit in doing more to encourage the private rented sector and to help local authorities with this work. I support the noble Lord, Lord Best, and I hope the Minister can at least agree to discussions on the detailed proposals that have been put forward.

[Lord Marland]

I am very grateful to the noble Lord, Lord Best, and for the support expressed by my noble friend Lady Maddock. The noble Lord spent a constructive Sunday writing his excellent speech because it has given us a good picture of what is going on in the sector. In many ways I wish he had spoken earlier, because he would have set the scene nicely for some of the debates today, as indeed he did at Second Reading.

Amendments 21ZA and 21ZB would insert two new clauses setting a minimum energy efficiency standard. However, they go further in that they would prevent the renting of properties that do not meet the minimum standard. They would also allow for the Secretary of State to suspend regulations with any local authority area if it is found that regulations are having an adverse effect on supply. Amendment 20TA would also prevent a landlord letting a property if a notice had been served by a local authority but not complied with.

The amendments raise an interesting proposition: that of using a minimum standard to improve performance in the sector and preventing properties that do not meet this new standard from being let. I read them with interest and welcome their intention to create a level playing field in terms of energy efficiency within the sector. However, I cannot accept the proposals for two reasons. First, I reassure the Committee that the provisions as currently drafted in Clause 37 already target the worst performing properties. Secondly, and most important, we will achieve this without setting minimum standards, other than those that have been referenced, which could be viewed as a barrier to new landlords entering the market. We are trying to plot a pragmatic and sensitive course.

Amendment 21ZB would give powers to the Secretary of State to suspend minimum standard regulations in local authority areas where they could be shown to be impacting adversely on the supply of properties available. As I have outlined, it is not our intention to impact on the market; in fact, it is the opposite. We want to create a more attractive rental market for improved properties. The review already creates a safeguard. It will take a very careful look at the impact of potential regulation on the rental market across the country.

I turn to the issue of timing, which we have covered quite frequently. Amendment 21ZA proposes that regulations, if any, be made no later than 1 January 2016. The noble Lord, Lord Best, has already referred to that. I hope that this explains the Government’s position. I am extremely grateful for the very valuable input, but I hope that these amendments will not be pressed.

[Lord Best]

My Lords, I will address the point that the Government are very keen for there to be no barrier to the entry of new landlords into the market. It is improbable that people will enter at the level of the worst properties in the worst conditions. The buy-to-let market has become an extraordinary phenomenon. More than 1 million properties have been acquired on a buy-to-let basis. The typical profile of these properties is that they cost around £100,000 to £110,000, are brand new and are in a block of flats built by a housebuilder. The energy rating for these properties is pretty good. One would not be setting a big barrier if one prevented the entry into the market of landlords who buy the most rubbishy properties on the market. It might be a good idea if they were required, before they let them, to bring them up at least to band E as a basic level. With those provisos, we live to debate this another day.

[Baroness Smith of Basildon]

I am grateful for the Minister's comments, but I am not sure that he answered any of the points that I raised. I am still seeking guidance from him about the non-letting of a property where a landlord has failed to make the required energy efficiency improvements. I think that the Minister was referring to Clause 37(2)(c) when he said that the legislation provided that regulation should apply first to the worst performing energy efficiency homes. It defines a property in this category as one that,

“falls below such level of energy efficiency … as is provided for by the regulations”.

The Minister has not made it clear, and we do not yet know, what that level will be, although there has been a lot of guidance to the Committee that it should not be below band E. What happens when the landlord does not meet that standard? At what level would the local authority be able to tell the landlord not to re-let the property? That was the point that I was probing and that the Minister has not yet answered.