Renters’ Rights Bill Debate
Full Debate: Read Full DebateLord Cromwell
Main Page: Lord Cromwell (Crossbench - Excepted Hereditary)Department Debates - View all Lord Cromwell's debates with the Ministry of Housing, Communities and Local Government
(3 days, 15 hours ago)
Lords ChamberMy Lords, I have added my name to the amendment of the noble Lord, Lord Best. I will add a brief footnote to what he has just said. As we heard in the last debate, there has been considerable concern about the capacity of the courts to handle the volume of appeals that will go to the tribunals when the Bill becomes an Act. The backlog has been going up: in the first quarter of 2025, the average time between a landlord submitting a claim and getting possession was over seven months—32.5 weeks, up from 29.8 weeks a year ago.
The Minister uses a different figure—eight weeks—but that covers only getting a possession order, not actually getting the property back. In an earlier debate, the Minister implied that it was actually quite difficult for a tenant to challenge an increase in rent. I respectfully disagree with that. There is a whole range of organisations that will give tenants advice on how to challenge an increase from the landlord.
This Government have made it clear that, unlike the previous Administration, they are not prepared to wait until the necessary reforms to the court processes are in place before they activate the Bill. That is a decision they are perfectly entitled to take, and it will be welcomed by tenants. However, a necessary corollary of that decision should be a process to minimise the chance of the courts being overwhelmed, which would be in the interest of neither tenant nor landlord. That is what Amendment 25 does.
The likelihood of the rent—a market rent when it was fixed—diverging significantly from CPI or RPI over four years is quite small. The certainty that goes with that guarantee will be welcomed, I think, by both tenant and landlord. If, after four years, there is a divergence, as the noble Lord, Lord Best, has explained, the rent can then catch up. As someone who voted for the Housing Act 1988, which abolished rent control, I see no problem with this measure to simply smooth increases over a four-year period. Again, speaking personally, if at the end of the four or five years the courts have shown themselves to be up to speed, with no backlog, I would be happy to see this provision lapse, but in the meantime, I hope the Government will smile on it.
If I may add one note to what the noble Lord has just said, it is very common in commercial contracts to have CPI over a series of periods followed by a reset to market level, in part because CPI may take it up too high and it comes back down to market level. I think that needs to be part of this amendment.
My Lords, we support the amendments in this group concerning rent affordability, a matter that strikes at the heart of the lived reality of millions of tenants. We welcome the long-overdue commitment to abolishing Section 21 no-fault evictions but, as Shelter rightly said in a release only this week:
“For every day the government doesn’t pass this bill, another 70 households will be threatened with homelessness because no fault evictions are being kept on life support for no good reason”.
I hope that we will soon get some reassurances about when this key measure will begin, to overcome some of the rumours in the media of late about it being delayed.
We also welcome all the work to fix the issue of the supply of decent homes across all tenures, but private rent inflation is persistently outpacing both wage growth and general inflation. According to the latest data—we heard some of it from the noble Lord, Lord Carrington, earlier—average rents in England rose by 7.1% in the 12 months to May 2025. Meanwhile, wages continue to grow more slowly than rents, with the most recent data showing annual growth of 5.2%. Rents have outstripped wages every month for nearly two years; that is, since September 2023. Over the past three years, the average annual rent has increased by £2,650, rising from £12,800 to £15,450, a 21% increase, compared with—for all the owner-occupiers here—just a 4% growth in house prices over the same period. This relentless rise is not just a statistical anomaly. It is a driver of poverty, hardship and, in some—way too many—cases, homelessness.
Amendment 25, tabled by the noble Lord, Lord Best, and supported by me and the noble Lord, Lord Young of Cookham, proposes a mechanism to smooth in-tenancy rent increases by limiting them to the lower of wage growth or inflation. The Bill currently restricts rent increases to once per year and allows tenants to challenge above-market rents at the First-tier Tribunal, as we heard in the previous group. However, “market rent” is often calculated based on arbitrary information, such as advertised rents for new tenancies, figures that will inevitably and typically be inflated and do not reflect the actual rents paid by sitting tenants. This methodology leaves tenants exposed to rent hike evictions—Section 21 in all but name—undermining the very security that the Bill purports to deliver.
Tenants on lower incomes will be particularly exposed. For the many renters who have no alternative but to rent, the cheapest places they can find at market rent are already, by definition, unaffordable. The tribunal process will help, but not fix, this problem, and certainly not soon. Generation Rent’s analysis found that while 73% of tenants who challenge a rent increase through the tribunal succeed in reducing the proposed rent, the average increase awarded is still 14%, and only a small minority of cases result in annualised increases below wage or rent inflation. The process is also onerous and complex, deterring many tenants from pursuing it at all.
Smoothing in-tenancy rent increases is therefore not just a technical fix but a vital safeguard during this period of transition. It will provide tenants with the predictability and stability needed to budget and to remain in their homes, free from the constant threat of unaffordable rent hikes. For landlords, it offers an indexed yield without the administrative burden and uncertainty of tribunal proceedings.
I ask in particular that the Opposition Front Bench and the Government Front Bench resist the temptation and lure to comment on these proposals as rent controls. That would suggest that the years of knowledge and experience of the noble Lords, Lord Young and Lord Best, have rendered them somehow incapable of being able to understand the difference between rent control and something else. This proposal is fundamentally different. It is time limited. It applies only to in-tenancy increases. It does not set market-wide caps. It is designed to stabilise rents for existing tenants, not to distort the market or stifle investment.
Beyond these immediate protections, we must look to the medium term while we wait for the much-needed and long-awaited additional supply of homes. That is why I have tabled Amendment 114, requiring the Secretary of State to conduct a comprehensive review of rent affordability with the express aim of establishing a national rental affordability commission. I thank the noble Baroness, Lady Lister, for her support and the Renters’ Reform Coalition for their work on this issue. The coalition has found that nearly one-third of private renters—an estimated 3.8 million people—always or often struggle to afford essentials such as groceries due to the amount that they spend on rent, and nearly one in 10 have sold or pawned personal items to be able to afford to rent.
My Lords, Amendment 58 is in my name. I express my gratitude to the noble Lord, Lord Pannick, who apologises that he is unable to be with us today but who has added his name to the amendment, and of course to the noble Lord, Lord Hacking —and indeed to the Minister and her officials for the time they have taken to discuss the background to this with me.
This amendment is at heart a simple and technical one. The Bill says that if you ask a tenant to leave on the grounds that you are selling the property but then the property fails to sell, as happens in about a third of cases, you are not allowed to rent the property out for a period of 12 months. It simply has to stand empty and impossible to rent out for a year. That means that numerous properties would, for the crime of not selling, be punished by standing empty and unrentable. My amendment does not seek to change the principle or any other element or clause of the Bill. It simply introduces a rational and balanced obligation to stand empty in this way for six months rather than 12. That is all that it does. I will now set out the reasons why.
On financial logic, when I and others suggested that 12 months was too long, the answer given was that 12 months’ lost rent would prevent evil landlords from claiming they were selling simply as a means to eject a tenant and then re-letting the property at a higher rent. The theory was that after the tenant had left, the landlord would jack up the rent to a high level, both to recoup their interim losses and make profits. Let us look at that proposition rationally.
First, if the landlord has a valid claim to increase the rent, the Bill already provides for that. A landlord would simply seek a normal rent increase rather than going to the dramatic and expensive process and risk of requiring a tenant to leave and then hoping to re-let at a much higher rent.
Secondly, in Committee I set out the mathematical calculation behind a six-month void period; noble Lords will be relieved to know that I do not propose to repeat the numerical details here tonight, or those that I provided subsequently in a meeting with the Minister and her officials. However, the numbers demonstrated clearly that the supposedly avaricious landlord, even if having the property empty for only six months, as I propose, rather than 12, would have to put the rent up by a very substantial amount—in excess of 200% or even 300%—to recoup their rental losses. I say nothing of the other costs, including the council tax surcharge bills and the risks of leaving a building empty. Such a huge rent hike would be impossible. The rent asked would be completely uncompetitive against other properties not carrying such an inflated rent level. In short, being obliged to leave a property empty for six months is more than enough of a financial burden and barrier so as to make the strategy so feared by the Minister simply untenable.
Thirdly, it was suggested that those nasty landlords might lie about selling a property or put it on the market at an absurdly high price, presumably in collusion with a disreputable estate agent—there are some, I believe. I therefore draw noble Lords’ attention to the second part of the amendment. This requires the landlord to provide, if necessary, to the local authority or the court hard evidence of marketing, pricing and offers, et cetera. A landlord flouting these requirements would be breaking the law and punishable accordingly. I understand that an agent colluding with them would also be acting contrary to the law. I remind noble Lords that any landlord taking this approach would face not only the legal risk of a false sales process but ending up with the property back on the rental market at an absurd and uncompetitive level of rent and, on top of that, losing six months’ rent.
Turning to other reasons, having made the argument on the rental conspiracy theory advanced in defence of the 12 months of standing empty, I heard that the landlord might have “other reasons” for wanting to get rid of the tenant, such as those that the noble Lord, Lord Hacking, touched upon. Let us examine this argument. Whatever these other reasons might be, the Minister has confirmed that the Bill makes it perfectly clear that the landlord has only four grounds for requiring a tenant to leave: sale, anti-social behaviour, moving in a relative or persistent failure to pay rent. If the landlord cannot demonstrate that one or more of these cases applies—for example, through not providing conclusive evidence of a genuine sales process—that landlord will be in breach of the law as well as having the financial penalty of the months of lost rent. It is a fundamental of the Bill to block any attempts to get around Section 21 by other means. I entirely agree with that. However, as I hope that I have demonstrated, this amendment is no such thing. The “no renting out” mechanism to prevent abuse remains, but the amendment makes it proportionate rather than excessive and heavy-handed.
Standing back from the detail, we are frequently assured that most landlords are good landlords. Perhaps some in this House have friends who are landlords. Perhaps some Members of this House let out property. This provision to leave a property unlet will not apply just to a subset of bad landlords. It will apply to anyone who rents out a property and genuinely wants or needs to sell their property but does not manage to do so. It also, for the same 12 months, deprives the market of rental properties—a market already bedevilled by a lack of available property to rent. That does not help tenants. This is not only unnecessary but manifestly unfair and will actively harm the supply of rental property. The Minister has accepted in a letter to the noble Lord, Lord Hacking, that landlords will lose out, but says that it will be in a small number of circumstances. Where is the evidence for that—or that the six-month penalty is not enough?
I underline that I am no lobbyist for landlords. I have spoken repeatedly in this House about the need to protect the poorest and the most vulnerable tenants who are abused and evicted by genuinely unscrupulous landlords. I have a later amendment seeking to prevent illegal evictions which is specifically on that theme. However, as the Minister has stressed, a successful rental sector is about a balance of rights. The amendment that I am speaking to does not do away with the relevant part of the Bill. It simply reduces the punishment —and it is a punishment—for not managing to sell a property from 12 months to six months. Those six months of costs and no income are, as I have demonstrated previously, more than sufficient punishment to make unworkable the avoidance strategies that so vexed the Minister and to meet the objectives of the Bill.
To be frank, a prohibition on renting out for 12 months is an impractical and disproportionate sledgehammer level of overkill that does not belong in a Bill that creates a set of checks and balances to produce a new, fairer environment for property rental. It also works against its own objective by artificially restricting the availability of property that is available to rent. That is why I feel strongly that this amendment is proportionate and needed. I will listen carefully to what any others and the Minister have to say, but I may need to test the opinion of the House in due course.
My Lords, I speak to my Amendment 59. I am grateful to the Minister for the time that she spent with me and a representative of the Shared Owners’ Network after Committee, when we discussed in further detail the problems facing shared ownership leaseholders in blocks that have been blighted by the cladding disaster. This amendment is needed to protect shared owners, who are accidental landlords, from the financial problems that they will face if they are unable to finalise a sale after issuing a ground 1A notice.
Many shared owners, of course, continue to live in the property which they half-bought from the registered social landlord. Many shared owners have simply had to move to get on with their life; they have been unable to sell the property in the meantime, so they have sublet. Shared owners are allowed to sublet—they have to get permission from their RSL to do this—but the rent that they receive from the subletting may not actually be enough to cover their costs, with the mortgage, the rent, the service charge and the insurance charges on a block affected by the cladding disaster. Those costs may well exceed the local market rent.
Many shared owners who have been subletting for a number of years have seen their financial situation considerably weakened, with many effectively losing hundreds of pounds every month as a result of subletting. These are people who employed all the professional people that they should have employed when they bought the property owned by a registered social landlord. They took every precaution available to them and bear no responsibility at all for the problem that has engulfed them.
When we met, although she expressed sympathy for this group, the Minister could not offer any mitigation for the unsustainable costs which a 12-month ban on re-letting would create for these shared owners. This is not a satisfactory outcome for a cohort who qualified for an affordable home because their income was not high enough to buy on the open market; this was their first step on the ladder. The Minister argued that the proposed ban protects tenants, but it fails to protect shared owners who are actually also tenants.
Shared owners face a much riskier sales process with the Bill. They have to give four months’ notice to their tenants, and that means they have no certainty at all that the offer to buy the flat will actually result in an exchange, or indeed a completion. Shared owners have to give the first option to buy their flat back to the registered social landlord so they can find another shared ownership owner, and there are strict qualifications, so they are fishing in a relatively small pool. Prospective buyers need to meet the criteria for shared ownership, and that means that the risk of a failed sale, even at a late stage, is actually much higher for a shared owner, and particularly high if you are selling a flat in a block with unsafe cladding.
Should a sale fall through, as is frequent, particularly for these types of properties, shared owners, like other landlords under the Bill, face the prospect of a 12-month void when they will be banned from re-letting their empty property and forced to cover its costs without any rental income.
These people never planned to become landlords. It was not part of their vision at all. They will have had no ability to plan for this outcome or make provision for extended void periods. This will become completely unaffordable for the vast majority of shared owners who, as I have said, are not as financially resilient as other leaseholders, otherwise they would have bought a property on the open market. They will have to pay for the property they now live in, as well as the property they have been unable to sell.
Of course, they will continue to market their property for sale after the first sale has fallen through, but facing the mounting unmet costs of an empty property will actually put their homes at risk of repossession if they fall into arrears, as is very likely. Also—and this is worse—it puts incredible pressure on them to accept any offer from a buyer as soon as possible, even if the offer is below the RICS pre-sale valuation. If they do that, due to the rules of the scheme, they will have to compensate the registered social landlord for the loss of value on their share, as well as losing out on their own share. So, the unintended consequence of the 12-month ban on re-letting is that it puts shared owners selling a property on the back foot, unable to wait for a suitable offer at a fair market value.
It is just not acceptable to punish shared owners who have had to become accidental landlords, including as a result of the building safety crisis, and have already suffered considerable financial harm. In her correspondence, the Minister explained that shared owners would have the option to ask their provider whether a buyback would be possible rather than leaving the property empty.
This could provide a solution, but it will need the Minister to make some changes, As the Minister knows, buybacks are currently very much at the discretion of the registered provider. At the moment they have only limited access to funding to do this, using either their own funds or recycled capital grant funding.
If the Minister is unable to accept my amendment, will the Government ring-fence some of the dedicated funding to registered providers in its affordable homes programme so that they can swiftly buy back properties from those shared owners who fail to sell after issuing a ground 1A notice? This would enable housing associations to add to the stock of affordable property to rent at well below the cost of a new build and avoid leaving a property empty. If the Minister can neither accept the amendment nor give that guarantee, I am minded to test the opinion of the House at the appropriate time—probably next Monday.