Renters (Reform) Bill

Lord Marlesford Excerpts

2nd reading
Wednesday 15th May 2024 Lords Chamber

[Lord Marlesford (Con)]

My Lords, I declare my interests in the register as a Suffolk farmer with rented residential properties.

I will focus primarily on the rural implications of the Bill. I start from the premise that it is the role of the state to protect tenants—as it is to protect consumers, investors, savers, employees and everyone else—from abuse or exploitation. Of course, there are bad landlords, and they should be firmly and severely dealt with, but I am with the noble Earl, Lord Lytton, and the noble Lord, Lord Frost, in that I do not accept that to allow tenants and landlords to enter into mutually agreed contracts is wrong.

During the 1960s and right into the late 1980s, rural housing was subject to severe constraints on both tenancies and rents. Rents set by rent officers were extremely low, often providing zero return on capital, and cash flow was so fragile that there was no surplus to finance the proper maintenance—let alone improvement and modernisation—of rural dwellings. Farmers were advised to sell all the housing they did not need for their own employees. The supply of affordable housing accommodation withered and its condition deteriorated.

As mechanisation advanced, farmers found themselves with a surplus of housing. The big leap forward came with the introduction of the assured shorthold tenancy in 1988. John MacGregor was then the Secretary of State for Agriculture and Nick Ridley was the Secretary of State for the Environment. The AST gave security by mutual agreement to both tenants and landlords for initial fixed terms of six, 12 or 24 months, with annual rent reviews and the ability to continue leases on a rolling two-monthly basis. The AST has worked very well for 36 years. It has greatly reduced the proportion of inadequate rural housing, yet Clause 1 of the Bill abolishes AST. This is inexplicable. Section 21 of course needs reform—no legislation that could be described as no-fault eviction can survive—but that does not justify throwing the baby out with the bathwater.

Significantly, the Government seem to have recognised the folly by modifying the Bill in the Commons to allow a fixed term of six months. If that is legitimate, why not 12 months, with the continuation of a two-monthly basis? There are market forces the Government do not seem to understand. The long and troubled journey of the Bill through the other place has already become a deterrent to the supply of affordable housing. Supplying housing for rent is now a key diversification for farmers, at a time when agriculture in Britain and elsewhere is in crisis due to falling yields and prices; it is a very relevant factor.

Affordable housing needs a clear definition. Traditional government guidance that rents should be no higher than 30% of gross tenant income is a valid test. Wise landlords would apply clear financial tests in selecting tenants. Landlords cannot be expected to subsidise tenants whose job insecurity—of whom there are many—makes them vulnerable to being unable to fulfil their rental obligations. The Work Foundation at Lancaster University claims that in 2023 1.4 million people were in severely insecure work and were living in privately rented accommodation. This is why it is better to subsidise tenants rather than houses. That is the role of housing benefit. To subsidise rents would mean that changes in tenants’ circumstances would result in tenants getting either more or less than they needed. This has profound implications for public finances.

Rents are a return on capital. Housing supply in the private rented sector depends on adequate rents. It is unlikely that a gross rental return of much less than 3%, from which the costs of maintenance and administration have to be deducted before arriving at any taxable profit, will produce much more housing for letting.

The Bill proposes an ombudsman to adjudicate between tenants and landlords. This may be a sound idea, provided that it is not a signal for the return of the rent officer. There is no justification for also retaining the First-tier Tribunal system in addition to the ombudsman. Membership of the ombudsman scheme will be mandatory for private landlords; I hope the Minister will offer some guide on the expected cost to landlords. The ombudsman will collect a great deal of information about both landlords and tenants. Surprisingly, the privacy implications have not been spelled out, and this aspect does not seem to have been raised in another place. We will have to deal with this in Committee. It would be quite wrong to publicise details of all individual leases. There can be no obligation on landlords to make such information public. Provided market rents are not exceeded, landlords should be entitled, at their discretion, to offer lower rents to particular people for good reason.

My overall concern is that the Bill has not been properly prepared or fully debated before it came to your Lordships’ House. It is crucial that this important and potentially useful legislation should not be enacted with details of crucial aspects of its administration left to secondary legislation at a later date—we simply cannot legislate like that. That would mean regression from increasing private sector supply of good housing and fair rents to the bad old days of bureaucratic domination. An overall consequence could be the taxpayer having to finance an increasing supply of housing for rent, with little hope of the resources to do so. Frankly, the problem I see with the Bill is that it is a superficial political solution to a tough economic and migration challenge.