Renters’ Rights Bill [HL]

Lord Kennedy of Southwark Excerpts

Committee: 1st sitting (Hansard): House of Lords
Friday 18th November 2016 Lords Chamber

[Lord Thurlow (CB)]

My Lords, I thank the noble Baroness, Lady Grender, for tabling the Bill. I declare my property holdings as set out in the register of interests. As personal background, I have spent over 35 years working in the property market as a chartered surveyor, most of it on the commercial side, specifically in development letting, investment and funding. There is a close relationship between commercial and residential when dealt with in bulk.

Who is principally affected by the clauses of the Bill? It is the lowest earners—the most vulnerable, in that sense. It is no coincidence that Shelter has briefed on this, and I think it is tragic that that was necessary. It is students in higher education who have to go to their place of education. It is students who become jobseekers and have to move again. It is a transient group. It is immigrant labour that goes to wherever the work is; there is no shortage of that, apparently. And it is my daughter; in fact, this week both my daughters have applied to rent residential accommodation, and they are learning all about the bumps in the road that we are discussing.

This is the era of social mobility. The world has moved on and the working population is much more mobile. People may move several times, particularly in the early steps of their working lives. They are unlikely to buy, we know that; they rent, and the housing provision must respond. I am afraid the evidence suggests that dishonest or at the very least questionable practices are rife. I thoroughly endorse the list of the noble Baroness, Lady Grender, and in fact I think the list is considerably longer than we were given. Only regulation would prevent this.

The problem is that, as we have just heard, it is difficult to identify what might be fair and what is spurious. The list is growing. In fact, I have with me the small print from one of my daughters’ contracts with a national firm of estate agents. The small print, which is smaller than I can read with these new glasses of mine, identifies seven different specific items, several of which I as a practitioner in the marketplace think are spurious. It is shocking, with non-refundable payments and refundable payments that, as we know, are sometimes not refunded. The people affected by this have very little recourse—they do not have the wherewithal or the experience, and they are dealing with an institution. Every time they move, we have heard, they pay again: £1,500, a month’s gross salary for many people. For the dishonest agents, if I may be so bold, it is low-hanging fruit. It is an important revenue source. I am sorry to say that, but I am afraid it is probably true. Rents are not going to rise because these costs are transferred to landlords; that is not how economics works. Rent rises because of supply and demand. If there are not enough flats to go around, the rent goes up, and if there is a surplus, the rent comes down.

I am not one-sided on this. The list of fees is not all bad, as we have also heard. Landlords need deposits and references. However, the clever instrument in the Bill is that the Secretary of State is given the right to approve those fees that are considered fair. An adequate supply of housing would stifle spiralling costs, and competition for tenants would trim the fees. However, the shortage of government support for new rental development, particularly in the social housing sector, means that the private sector fills the gap. There is a new product in the parlance of property, the private rented sector. It does not sound very new but it is new in that context, and it refers specifically to the bulk development of residential property that is exclusively built to rent. It is designed to rent, not for sale. It is not for sale after two or three rental periods; it is designed for long-term renting. Services are engineered into the architecture.

This is a new product which some other countries already enjoy and have done for a long time, but our market has never embraced it in the private sector. There are tens of billions of pounds now looking at this market in the UK. It is happening. Sites have been acquired, developments are being processed and planning is being obtained. They are being built in bulk and they will deliver tens of thousands, at least, of new residential units.

I have spoken to Legal & General, a well-known and respected investment manager. It has allocated more than £100 million for this sector. It will finance and own it itself and wants to completely re-engineer the whole rental model. It wants it to be tenant-friendly, and thinks it can be done to provide it with a worthwhile return. It is possible, and the Government should applaud it.

Existing legislation is just not fit for purpose. It is creaking and, with the scale of new development on the horizon, must be updated. There is design of the highest standards, with the quality services I referred to and everything there for the tenant, but who will find the tenants? The letting agent, unless the organisation owning the property is big enough to run that in-house. It is tragic that this product, for want of a better description, could be brought to its knees in reputational terms by spurious fees and up-front costs frustrating the mobility of labour. The scale of this new prospect deserves our attention, and the Bill is a vital step in preparing for it.

To conclude, the Government have a choice: ignore it and play to the unscrupulous—I fear it is as simple as that—or support this initiative, update the law, give it teeth, stamp out unacceptable practices and protect the most vulnerable. Any Bill improving the lot of those in need is to be welcomed; this is one.

[Lord Kennedy of Southwark (Lab)]

My Lords, I should first declare that I am a councillor in the London Borough of Lewisham and a vice-president of the Local Government Association. I fully support Amendment 1, moved by the noble Baroness, Lady Grender. It replaces what is presently in the Bill with a more detailed provision to further protect tenants and, we hope, avoid a rogue letting agent getting around the Bill. I am particularly pleased to see the reference to deposits in subsection (3). As the noble Lord, Lord Thurlow, said, the amendment also gives flexibility on what should or should not be treated as a premium by giving the Secretary of State power to make regulations to set that out. Importantly, it also allows the Secretary of State to set by regulation the maximum amounts that tenants may be asked to pay; a welcome flexibility here.

I also endorse the general comments made by the noble Baroness, Lady Grender. As she said, housing is an issue that we have debated many times and will continue to do so: the cost of housing, up-front costs, fees, the lack of social housing, the cost of rent in the private sector, et cetera. The noble Lords, Lord Shipley, Lord Best and Lord Thurlow, all made contributions that I endorse. The noble Baroness, Lady Gardner of Parkes, expressed some concerns and reservations about the clause and the amendment in particular. I do not agree with her: these fees and charges can be abused and tenants taken advantage of; the amendment seeks to address that. I particularly endorse the comments of the noble Lord, Lord Thurlow, who spoke about the effect that supply and demand has on the housing market. As he also said, at present, the legislation is not fit for purpose. I fully endorse the amendment and hope that we get a positive response from the Minister.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I thank noble Lords who have participated in the debate on this amendment, particularly the noble Baroness, Lady Grender, for so ably moving it and making some very significant points in relation to this. The Government are clear that the majority of letting agents provide a good service to tenants and landlords—that is our starting point. The Government also know how important housing affordability is and the challenges faced by some tenants, in terms of consumer protection. We have introduced a number of measures to help to tackle this issue. Since 1 October 2014, for example, it has been a legal requirement for letting and managing agents in England to belong to one of the three government-approved redress schemes. Those schemes offer a clear route for landlords and tenants to pursue complaints, weed out the cowboys and cowgirls who give agents a bad name, and drive up standards.

While landlords and letting agents are free to set their own charges, they are prohibited from setting unfair terms or fees under existing consumer protection legislation. We have gone further; in May 2015, under the Consumer Protection Act, we introduced transparency measures that require letting agents to publicise a full tariff of their fees, whether or not they are a member of a client money protection scheme or which redress scheme they are a member of, prominently in their offices and on their website. For the first time, a fine of up to £5,000 has been introduced for agents that fail to do this.

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[Lord Bourne of Aberystwyth]

The noble Baroness will have heard me say very clearly that we are awaiting the outcome of both the working groups looking at the issue. They will provide important evidence and will have looked at this issue in far greater detail than I have, so I anticipate looking at that when we have the report. I want to take this away and consider it further. I am not opposing the amendment; I am expressing reservations. The noble Baroness and other noble Lords have raised some important issues. I will take this away: we really do need to see the evidence. I hope noble Lords will understand that this is an evidence-based approach that I want to be pragmatic about.

[Lord Kennedy of Southwark]

Is the Minister going to address the comments made by the noble Lord, Lord Thurlow, about supply and demand and rent levels? All noble Lords accept that we have a major housing crisis in the country now. I live in Lewisham and when I look in estate agents’ windows I am always shocked at the level of rents now charged in that part of south-east London. Very modest houses can now command extortionate rents and people are just driven out of the area.

[Lord Bourne of Aberystwyth]

The noble Lord will have previously heard me and the noble Lord, Lord Thurlow. There is an issue of housing supply across the board. There is no question of that: it has been a problem for successive Governments and we have to address it. It is not as simple as addressing a particular part of the problem: it is across the board. There are challenges in all the sectors: private rented, social rented and owner occupied. This is not a straightforward issue and we have to be careful that any changes that we make do not have impacts elsewhere. I therefore want to reflect on this in a positive way and consider all the evidence.

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[Lord Tope (LD)]

My Lords, I shall speak also to Amendment 3. In doing so, I declare my interest as a vice-president of the Local Government Association.

The Housing and Planning Act enables the making of regulations governing electrical safety checks, and Clause 3 of the Bill would make such checks mandatory. Amendments 2 and 3 seek to ensure that letting agents acting on behalf of landlords are compliant with regulations that are introduced. Where a letting agent was employed by a landlord to deal with the maintenance of a property, the amendments would ensure that the landlord could enlist the letting agent to ensure the upkeep of their responsibilities in relation to electrical safety checks. The amendments are intended to clarify and provide assurance to landlords and letting agencies regarding their responsibilities while seeking to ensure that electrical safety checks place no undue burdens on landlords and that they are kept in line with gas safety checks.

We have debated electrical safety checks many times in your Lordships’ House, most particularly during the passage of what is now the Housing and Planning Act and during the Second Reading of this Bill on 10 June this year. During that time we have all quoted many important figures demonstrating the priority that needs to be given to electrical safety checks. We all welcome and support the mandatory checks for gas safety, carbon monoxide and so on, but the reality is that more deaths in the home are caused by electrical fires than by gas. Therefore, it remains a mystery to us why electrical safety checks are still not mandatory. The Bill proposes that they should be.

At Second Reading on 10 June, some six months ago, the Minister, the noble Viscount, Lord Younger of Leckie, said:

“We plan to conclude further research as soon as possible”.—[Official Report, 10/6/16; col. 988.]

Given that six months have now elapsed, I hope that the Minister will be able to give us some information about the progress of that further research. I know, for instance, that a working group has been set up, that it has been meeting to look at this matter and that it is nearing the conclusion of its work. Therefore, I hope that the Minister will be able to say to us today that the Government intend to use the enabling provisions in the Housing and Planning Act and that they will produce draft regulations.

If the Minister is able to confirm that the Government will be producing draft regulations, I wonder whether he can give us any indication of when we might expect them. If I may say so, “shortly” would be very much more welcome than “in due course”. Over the years, some of us have learned to interpret what “in due course”, “shortly”, “in the fullness of time” and so on actually mean. So “shortly” would be very welcome but a precise indication would be even more so.

Also at Second Reading, my noble friend Lord Palmer of Childs Hill—we should perhaps make it clear that that is the Lord Palmer to whom we have been referring in this debate—spoke, among other things, about the frequency with which electrical safety checks should be carried out, suggesting every five years. In his reply, the Minister said:

“Maybe that should be four or three”.—[Official Report, 10/6/16; col. 989.]

An average tenancy in the private rented sector has now increased slightly and is four years. Electrical Safety First, which has given excellent safety briefings in support of this issue over the years and for this debate, and most of the industry and stakeholders believe that every five years strikes the right balance with regard to all the interests concerned and given the current turnover in the private rented sector.

Checks every five years in the private rented sector would align it with HMOs in England as well as with legislation being introduced in Wales and what is already in place in Scotland. It would therefore seem sensible for England to follow suit. Will the Minister therefore confirm that the Government now accept that the appropriate frequency for mandatory checks should be five years—more frequently when desired, but mandatory for five years? We have debated this subject many times, and I suspect that this will not be the last debate on the subject. I beg to move.

[Lord Kennedy of Southwark]

My Lords, I will be very brief, as I am conscious of the time. I fully endorse Amendments 2 and 3, tabled by the noble Lord, Lord Tope. The noble Lord has a track record in campaigning for electrical safety in the private rented sector, and I pay tribute to him for that. As we have heard, the amendment seeks to ensure that letting agents acting on behalf of landlords can be enlisted to ensure that they meet their statutory responsibilities. As the noble Lord also reminded us, we have protections for gas and carbon monoxide poisoning through checks, and it is only right that we get electrical safety checks on the same statutory footing. I fully support both amendments.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord, Lord Tope, for moving these amendments and the noble Lord, Lord Kennedy, for his brief contribution. If approved, these amendments would require the Secretary of State to introduce regulations requiring landlords and/or their agents to ensure that electrical safety standards are met in their rental properties. I am conscious that many noble Lords, rightly, feel strongly about electrical safety—I also pay tribute to the noble Lord, Lord Tope, for his campaigning role on this—and that it has raised considerable debate. I also know that Shelter has campaigned on this; I pay tribute to its role.

Yet again, the Government are taking a measured and pragmatic approach. As noble Lords have appreciated, we have taken an enabling power in the Housing and Planning Act 2016 that allows us to introduce requirements on regular electrical safety checks in rented properties at a future date. It has also been stated, correctly, that we have established an electrical safety working group and are working with experts from across the sector to fully assess whether regulations are needed and, if so, to determine the detailed options for regulation. It would therefore not be appropriate for me to say, “These are the regulations that we will bring forward” or to give a date when we will bring them forward, because we are awaiting the report. The working group has met twice, is due to meet again in the coming weeks, and it is due to present its reports to Ministers by the end of this calendar year.

Six months is an appropriate period in this regard; it is entirely right that on something of this nature we look to a working group to report in a six-month period, and that is what we are doing. The Government will then need to consider it and will of course do so—it is an important issue. I am afraid that I cannot give an undertaking about when regulations will come forward if they come forward. I will not say “in due course”, “timely” or “coming shortly”. However, the Government take this issue seriously, and I can understand the spirit in which these important amendments have been tabled. I can provide the reassurance that the Government regard this as important and will carefully consider the report of the safety group.

However, as I said, it would be premature to commit to legislation, and particularly the scope of any legislation, before the working group has concluded its research and before we have had a chance to look at it and consider what is appropriate in the light of that research.

[Baroness Grender]

My Lords, again it will not surprise the House to hear that I am minded to accept Amendments 2 and 3. This is a Government leaning on the rented sector for support, like leaning on a walking stick that has woodworm, damp and dry rot. We need to improve the rented sector to meet the needs of people over at least the next decade, if not two. Shelter’s research states that one-third of privately rented homes in England do not meet the Government’s decent homes standard, while almost one-fifth pose serious health and safety hazards. The lack of compulsory electrical checks plays a significant part in that.

As I conclude on the final part of this amendment, I would like to pay tribute to Electrical Safety First, which has been campaigning, along with my noble friend Lord Tope, to bring about these changes. More widely, I would like to thank Debrief and its petition, Generation Rent, Shelter, Crisis and Citizens Advice, all of which supported the Bill. I would also like to thank Hull City Council, which yesterday passed a motion at full council supporting the Bill. The motion was proposed by Liberal Democrat Councillor Charles Quinn and supported by Labour councillors. I am sure that the Minister will be pleased to hear that Conservative Councillors John Fareham and John Abbott also voted in favour in Hull, because all three parties think that renters now need a fairer deal and that getting rid of up-front costs will help.

I want to take the opportunity to say that I am pleased that the earlier clause on rogue landlords received the support of the noble Baroness, Lady Gardner. That information should be publicly available in the same way that, for instance, employers who flout the national minimum wage are made public. I see no reason why information on rogue landlords cannot similarly be made public.

In conclusion, and in the knowledge that there possibly will not be a Report stage for the Bill, I want to say that we on these Benches will not let any of the issues in the Bill rest here. My colleague Tom Brake in the Commons will take up as many of them as he can. If a White Paper is to be forthcoming, we will try to ensure that all four of the substantive clauses are continued through other legislation. In particular, we will continue to pursue, with some passion and vigour, the issue of up-front costs to tenants, which is hurting tenants every day.

[Lord Kennedy of Southwark]

Before the noble Lord, Lord Tope, decides what he will do with his amendment, I want to say that I worry that the Minister’s use of the word “measured” is another euphemism for “in due course”. Will the Minister please take back to the department the strength of feeling here? Although six months may seem a relatively short time, this issue has been around for a very long time. As the noble Lord, Lord Tope, said, we really have to sort out the electrical safety check to prevent deaths. The Government have the power and we need to resolve this sooner rather than later.

[Lord Bourne of Aberystwyth]

My Lords, I fully accept that. I think the noble Lord is in danger of appearing churlish on this. I have said that we regard it as a very important issue. However, it would be premature to act before the working party has brought forward its report, which it will shortly do. As soon as it does, the Government will look at it very seriously. I do not think that that is an unreasonable approach.