Financial Markets: Stability

Lord Campbell-Savours Excerpts

Thursday 3rd November 2022 Lords Chamber

[Lord Campbell-Savours (Lab) [V]]

My Lords, following the excellent speeches from the noble Lords, Lord Young of Cookham and Lord Best, I will concentrate my remarks on the narrow issue of housing and the instability in the housing and rental markets arising from the crisis brought on by the war in Ukraine. That war, with its consequences worldwide, is undermining housing markets across Europe, with escalating interest rates and a drop in construction activity. In London there is a particular crisis: Foxtons and Chestertons are reporting between 20 and 30 applicants for each rental property, with supply at an eight-year low.

Escalating rents are driving desperate prospective tenants into offering 12-month upfront rental payments. With thousands of new builds on hold, a Budget forcing up interest rates on mortgages—topping 6%—and escalating building costs, we have a real crisis in the making. This is all against the background of the Bank of England’s statutory objective to

“protect and enhance the stability of the financial system”.

We all know what that means for those who lack resources and buying power. Those with resources will see savings increase in cash terms, while those without will really suffer as they service their borrowings. Of course, all lose in conditions where inflation bites into savings.

Faced with rising mortgage costs, landlords are responding, often erratically, in defence of their business models. On the one hand, they have rising mortgage costs, and on the other hand the problem of affordability by tenants. Faced with escalating mortgages, some landlords are pulling out of the rental market. There are reports that the number of properties available for rent in quarter 1 of 2022 was down a third from the pre-pandemic five-year average—all at a time when demand from new tenants is rising and existing tenants are struggling against demands by landlords for increased rents. In June, the BBC reported on tenants’ bidding wars, with renters under 30 spending 30% of their income on rents, and Shelter’s August survey found that 32% of private renters spend at least half their monthly income on rent—and this was all before the consequences of the disastrous Kwarteng-Truss Budget measures, with their ruinous effects on interest rates.

One of the consequences of the most recent escalation in interest rates is deeply worrying. My contacts in the housing market talk of huge increases in rents being sought from tenants who, on pleading an inability to pay increased rents, are being evicted or pushed to leave, some under the provisions in Section 21 of the Housing Act 1988. This brutal section enables private landlords to repossess properties from assured shorthold tenants without having to establish fault on the part of the tenant.

In April 2019, the Government announced the repeal of Section 21, and the Conservative manifesto equally promised repeal and a better deal for renters. In this year’s Queen’s Speech, the Government announced the “renters’ reform Bill”, and its accompanying White Paper proposed abolishing Section 21 evictions—all good news. However, we now hear some ambiguity in recent statements from Commons Ministers about the timetable of the legislation. Whereas originally it was to be introduced

“in the 2022-23 parliamentary session”,

it is now

“in the course of this Parliament.”—[Official Report, Commons, 17/10/22; col. 355.]

Meanwhile, insecurity of tenure and potential evictions can proceed. Renters in this volatile market need urgent action. They need protection now, not delay. The crisis requires early action, and the Government need to respond. I appeal to the Government to introduce legislation as a matter of priority. Landlords cannot always be relied on to act sensitively.

I want to repeat a question I asked earlier this year, and again ask the Minister to consider my suggestion that

“with vulnerable, low-income elderly groups in this highly inflationary period facing unaffordable, escalating service charges and possible loss or even forfeiture of their homes, why not promote or sponsor a national scheme for elderly leaseholders that rolls up service charges in the form of a debenture against property title—effectively a rising legal charge? The debenture holder would pay the service charge on behalf of the resident, and then claw back payments—interest-serviced or otherwise—on death or even before.”—[Official Report, 20/6/22; col. 12.]

I have not been informed that there is work going on in the department. I hope that the Minister can take my suggestion away and consider it, because there is a real problem developing in this area of housing policy.