Renters (Reform) Bill

Lord Thurlow Excerpts

2nd reading
Wednesday 15th May 2024 Lords Chamber

[Lord Thurlow (CB)]

My Lords, I declare my conflicts: I am a former chartered surveyor and I have buy-to-let properties, as declared and set out in the register. I began research on the Bill by trying to establish its primary purpose—what is its core objective? I know it sounds obvious, but I was not convinced; it is not clear. It was revealed as a 2019 manifesto pledge and relates to key proposals from the 2022 private sector rental report, but there is no real indication of the underlying purpose.

However, there is much good in it: the key measures to abolish Section 21, new grounds for repossession, amending rent increase provisions, the ombudsman, blanket bans, pets and other key measures. All these are interesting, helpful and, for the most part, constructive, but there is no real underlying core purpose, and none of these things needs a new Bill, particularly bearing in mind the shortage of parliamentary time. They could have been accommodated in the concurrent debates we are having on the leasehold and freehold Bill or even in the levelling-up Bill last year. I believe the real root of this should be, and indeed lies in, the shortage of housing and, in this case, of properties to rent, as we have heard particularly eloquently from the noble Lords, Lord Frost and Lord Adonis, and the noble Earl, Lord Lytton.

There have been numerous attempts by successive Governments to deal with housing supply—we all know that. Some imaginative ideas have been proposed to attract private finance into it, and the measure whereby Section 106 agreements were attached to planning conditions for the larger developments was quite successful. But the sale of council housing goes on, and we seem no nearer to reaching anything like the levels of new housing required to provide a sustainable balance between supply and demand. The noble Lord, Lord Frost, in his comments could not have made this clearer.

There is no point in expecting the Treasury, or the taxpayer by any other means, to finance the level of development required to meet the necessary demand. We have heard some impressive statistics. If we look back and reflect on the housing market after the Second World War, we see that tens of thousands of residential units were owned freehold by City institutions. This was an ideal scenario; they were socially responsible landlords, who invested in residential properties to meet their obligations to customers, and they were largely made up of life insurance companies and others. It is the perfect formula for housing supply: it does not involve the Treasury but comes from the private sector and is socially responsible. However, this pattern of responsible ownership was shattered by the Rent Acts in the post-war era. Rent controls arrived, and probably necessarily so, but with a sledgehammer rather than with negotiation by the City institutions.

The result was disaster for the sector. Tens of thousands of units were sold, or dumped, by the City institutions. I spoke to some of them in the early days of my career, and they explained the reasons for it. It was an avoidable tragedy for society as a whole. City investment was lost, and low-income tenants found themselves at the mercy of private landlords, many of whom were ruthless or simply uninterested in looking after their properties. The era of tenant exploitation, exemplified as some of us will remember by tales of Rachman, had begun in earnest. We must recreate an institutional market in social housing—and we can.

The long-term problem is not about rental levels; the market does that. The long-term problem is shortage of housing for rent. It is about supply and demand. Capping rentals is a catastrophic solution. The SNP-led Government in Scotland have done this; they have done the market testing for us. So many landlords have abandoned the market that one nationwide letting agency has closed its renting department permanently—and it represents an entire region of Scotland.

We can fix this problem by attracting private investment, particularly institutional investment. I am convinced that it can be done. There are examples, such as the Legal & General insurance company, which tried with great purpose and financial commitment recently not only to invest in rented housing but to build modular homes, keeping down the costs, removing layers of the development process and enabling an economic return from affordable rents. It built a factory to construct prefabrication and showed the commitment that the challenge requires. It invested millions of pounds—but I believe that it has given up on the project, sadly. I shall inquire as to why, but I suspect that the challenges were simply too great. The political commitment has been lacking.

We have heard that, when the ASTs was introduced, it was hugely successful in bringing private capital into the rental market. Initially, the private sector responded cautiously; the doubt was about whether it could trust in long-term stability and long-term freedom from political interference. The bruises of the Rent Acts have a long tail. However, ASTs have worked, as we have heard, and now the private sector is responsible for thousands of units. Sadly, the number is declining. Successive Governments have interfered, with the removal of mortgage interest as a legitimate cost, for example. Any AST landlord with a reliable tenant would not dream of serving a Section 21 notice; it is the unscrupulous few who neglect their properties and squeeze the last penny of rent from their tenants against the threat of eviction who spoil the system for everyone else. They should be the focus of this Bill and of government attention—and indeed they have their place in this Bill.

The free market must be allowed to operate with private capital. Now, the rout of private investor-owners continues, as we have heard, and more and more are selling up. The ASTs probably never replaced the provision of those early City institutions, but it was a good attempt, until political interference spotted a tempting opportunity to use it as a source of revenue. What a political mistake. The taxpayer now houses thousands of council house waiting list families and others in hotels, at public expense.

It is not all bad, however. A key positive is the reference to penalties and forfeiture to penalise bad landlords, but this is subject to a process managed by local authorities. That is a logical choice, I agree, but we all know that local authorities are strapped for cash. They are pruning their meagre resources and will have little chance of effective intervention. Without significant further central government funding, it will fail; proposals that it should be self-financing ring hollow, certainly in the early years.

Perhaps the most loudly trumpeted feature of this Bill is the abolition of Section 21. However, the government amendments have effectively delayed this by years; it may never happen under this Government.

As I explained at the beginning, the Bill at its heart should be encouraging the provision of more rental housing. We are tinkering with the details surrounding the challenge, but even the effectiveness of the tinkering has been diluted in the other place through its tsunami of amendments. We need to accelerate the supply pipeline as a priority. Wholesale investment by City institutions is required. The residential rental market needs to become an accepted, accredited investment sector in the eyes of these investors. It can be done. It has been done before. It was done 30 years ago—long after the Second World War—with shared ownership. The Government must work with these organisations and the advisory fraternity which understands it to create an investment product that will be sustainable to all parties and provide the hundreds of thousands of homes we need. It can be done.