Private Rented Sector

Mark Prisk Excerpts

Thursday 29th November 2018 Westminster Hall

[Mr Mark Prisk (Hertford and Stortford) (Con)]

It is a great pleasure to follow the Chair of our Committee, the hon. Member for Sheffield South East (Mr Betts). When I was a Housing Minister, I looked at the issue of crooks running beds in sheds and, often, human trafficking alongside. I entirely agree: seize the asset, take the money off them and make them pay for what they are doing.

On the broader issue, the hon. Gentleman made a very good set of recommendations about the Committee’s report. Six months on from the report’s publication and the Government’s response, this is a good time to step back and look at where the Government have got to and at the market as a whole. As the Chair of the Committee pointed out, one in five households lives in rented accommodation. There are many reasons for that—some economic, some demographic and some social. Although many people would clearly prefer to own their homes, we should not ignore the fact that, certainly in my experience, an increasing number of young people prefer to rent. Theirs is a generation that expects to have two or three careers, never mind jobs. It is a generation that rents its music rather than buying it as old fogies—I nearly said the wrong word—like me did. Their expectations are different. When we form policy, we need to think about that generation, too.

As the Chair of the Committee said, the vast majority of tenants said during the inquiry that they were satisfied. We should not overlook that. However, the gap between the majority of homes and the very worst has increased, so I have no hesitation in supporting the Homes (Fitness for Human Habitation) Bill, introduced by the hon. Member for Westminster North (Ms Buck). That will help us to root out the worst offenders.

Put simply, reform of the sector is needed, but it should be focused. We should not be tempted into pretending that every landlord is out to exploit their tenants. That helps no one. We need a consumer-led—tenant-led, so to speak—rental market. That means we need clarity about services and charges, fair dispute and redress arrangements for when things go wrong, greater choice and a more modern housing stock. It means we should encourage the building of more homes for rent and the rectification of substandard homes. It also means—this addresses the point made by the right hon. Member for East Ham (Stephen Timms)—that local authority enforcement needs overhauling so it is consistent and effective. I will come to that in a moment.

One of the report’s key themes was the respective rights of landlords and tenants. One of the main benefits of the Tenant Fees Bill is that it will help to clarify the role of landlords and letting agents. Alongside reforms to money laundering, that will help the market and improve the way it works for people. Our report also sought clarification of the law concerning people’s rights and obligations, including those of tenants. I welcome the reference in the Government’s response to publishing easy-to-understand “how to” guides for tenants. That is good, but we may also need consolidation. We need the law itself, not just the words that describe it, to be made simpler.

Equally, we legislators should all recognise that laws and regulations are sometimes limited in what they can achieve. They certainly stop bad practice, but they are not good at changing the culture of a business sector or promoting best practice. For that, we need people in the sector themselves to change—we need the practitioners to raise their game. That means we need qualified letting and managing agents who are committed to high standards.

What needs to happen? First, we should require anyone working in lettings and property management to be qualified. Members of the public might be amazed that that is not the case already. Secondly, the scope of those qualifications should not be imposed by the Government but should be agreed jointly with the industry and consumer representative bodies—I think of the Consumers Association as a good example—and forged with professional bodies such as the Institute of Residential Property Management and the Royal Institution of Chartered Surveyors, of which I am a fellow.

We should also grandfather across existing qualifications and ensure that they are part of the new process. We cannot afford to create a new barrier for people who have already committed to being professional. Indeed, there is a shortage of good, qualified people in residential property management for some of the blocks our constituents live in. We do not want to create a problem there, so grandfathering across existing qualifications would be sensible.

Thirdly, qualifications need to recognise not only different roles and levels but the different demands of the private rented sector and the social housing sector. Essentially, what matters is that people are competent to perform their roles financially, technically and of course legally. I also want a culture of continuous professional development to be adopted in the sector so that people keep up to date. Together, those elements, which build on the report, would help to change not only who works in the sector but the standards they maintain. I would be grateful if the Minister specifically addressed those points.

We heard about the standard of buildings and the housing stock, which is a big challenge. It is right that we rectify and improve the bad buildings we have now, but we need to do more than that—we need to build more modern homes to rent. That is why in 2012-13, when I was Housing Minister, I actively promoted a new model—the build-to-rent market. Having attracted billions from pension funds and long-term institutions, that market has blossomed in the past five years. More than 117,000 homes—modern, purpose-built homes that are available on long-term leases and provide services to tenants—are under construction or available to let. As it matures, that market will offer an even broader range of homes and rents, and provide greater choice for tenants seeking an alternative to the old housing stock. I hope the Minister confirms that the Government are committed to continuing to support the build-to-rent sector.

The Committee’s report also highlighted the need for effective enforcement by local authorities, which was touched on earlier. We received evidence—it was some of the most concerning we received—that there is not only a low level of enforcement but huge variability between councils in similar areas. For example, the Residential Landlords Association told us that in 2016-17, although more than 105,000 complaints were made by tenants, councils prosecuted just 467 people. That is less than one tenth of 1%. I appreciate, as Members said, that prosecution is not the sole enforcement action, but it is a pretty good indicator. At less than one tenth of 1%, something is not working.

Enforcement is hugely variable, too. There are 32 London boroughs. One of them—Newham—is responsible for 60% of prosecutions. The Committee heard that six out of 10 councils did not prosecute a single landlord in 2016. David Cox from ARLA Propertymark told us—this is in the report—that laws are passed but they are just not enforced. Part of the problem is a lack of money. That is why we asked the Government to ensure that councils have the money to enforce both current and future regulations.

However, as the hon. Member for Sheffield South East highlighted, this is not just about money; clearly, it is also about local political priorities and political leadership. That is why I strongly support the Committee’s suggestion that there should be a benchmarking scheme. That should be introduced, funded and run by the Government and managed through the Local Government Association. Councils should publish data about the number of complaints they receive, how they are resolved and prosecutions so all of us—our constituents included—can compare the enforcement levels of councils in similar areas. Will the Minister update us on what progress has been made with the LGA on that issue?

[Teresa Pearce (Erith and Thamesmead) (Lab)]

My constituency is in two boroughs with very different approaches. In 2016-17, one had to spend £5 million on temporary accommodation. For that borough, trying to end any sort of tenancy—no matter how bad the landlord—is counterintuitive, because it would then have to house the tenants but it does not have any housing stock. This issue is to do with political will and resources, and doing something about the private rented sector, but it is also about finding safe premises for people to live in—it is about supply, too. Does the hon. Gentleman agree that the situation is very complicated?

[Mr Prisk]

The hon. Lady is absolutely right. I think it is complex, which is why benchmarking solely on prosecutions is too narrow. She is right to say that it is a constant challenge for councils to judge the resources available, but the different levels of enforcement—even between neighbouring councils in similar areas—suggests to me that the system is not working.

My last point is about whether the report and the Government’s response are in danger of being overtaken by technology—something that both the Committee and the Government will want to come back to, I think. For example, online services such as Airbnb are creating completely new ways for people to find somewhere to stay, ostensibly and originally when travelling on holiday. Equally, the web is now enabling the emergence of a grey market in informal serviced lettings.

I have seen examples of both in my constituency. No one is quite clear about how to define such activity, let alone whether it can be regulated. At what point does an Airbnb letting, which was initially for one week but then becomes two weeks or four weeks, become something more formal? Should those platforms, which enable the transaction, be defined as letting agencies in law?

Some would reasonably say, “Do not interfere, do not meddle”—it would be my natural instinct to say that—but as we tighten up the regulation of the private rented sector, the danger is that the crooks will shift into these emerging markets, creating the potential for the next property scandal. All of us in this place, but the Minister in particular, will need to decide how to ensure that any changes we make are future-proofed.

Does the technological nature of the transaction matter or do we just focus on making sure that we have modern, up-to-date consumer rights? How do we shape the regulations so we do not stifle genuine enterprise? Can the Minister tell us what the Government are doing to think about that? She is always looking at the picture in the round, as any good Minister does, but can she tell us whether the Government would be prepared to look at the issue and whether we as a Committee should consider it in the future?

There are a number of crucial areas where the reform of the sector could make a positive difference not only for tenants, but for landlords. The report sets out a clear way forward, and I look forward to the Minister’s response.

--- Later in debate ---

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to join my former colleagues on the Communities and Local Government Committee to debate their excellent report. I can genuinely say that I miss the Committee; if the Committee members know that I have been moved on to the Procedure Committee instead, they will understand quite how much I miss them. The reports we did together on the Committee were very useful and thought-provoking, and the contributions by hon. Members today are indicative of the attitude they take to their work on the Committee.

The report is an excellent piece of work that highlights many issues within the private rented sector in England. I suppose I must be missed from the Committee too: when I was on it, I would try to make comparisons with Scotland, where we have done a huge amount of work in the private rented sector in recent years. I notice that there are some good points of comparison that, if I were still on the Committee, I might have added to the report. I hope to highlight some of those issues here; I know the Minister has come to visit Glasgow before and spoken to some of the professionals in Scotland, so she will understand that there are things we have done in Scotland that may be of use in England also.

I start by mentioning the Private Housing (Tenancies) (Scotland) Act 2016, which came into force on 1 December 2017 and is coming up to its first birthday. The Act made a number of changes within Scotland: it moved tenancies to being open-ended, so that rents were more predictable and there was protection against excessive rent rises, and it included an ability for local government to introduce local rent caps for rent pressure areas, which is important when we see rents spiralling out of control in some places.

The 2016 Act also introduced comprehensive and robust grounds for repossession for landlords, which could only happen in 18 specified circumstances rather than because the landlord felt they wanted to take the property back; they had to meet those tests as well, so that gave protection to both tenants and the landlord. Disputes between tenants and landlords can now be heard in a new specialist tribunal that we brought in to handle them, which is a useful thing for everybody all round.

We also ensured that letting agents have to register and adhere to a code of practice, which goes some way towards what the hon. Member for Hertford and Stortford (Mr Prisk) said about professional qualifications and skills; if there is a code of practice in place at least, then that gives some professionalism to those companies.

I very much agree with what the hon. Member for Hertford and Stortford said about qualifications. An awful lot of people who end up being landlords in the private rented sector did not start out that way. They may have bought a flat as a younger adult and then moved on but kept it and tried to use it to earn rental income, and they may not quite understand their obligations and responsibilities. For a while, buying flats and renting them out became a quick way of making money. A bit more needs to be done to make sure that landlords understand all their obligations.

[Mr Prisk]

I agree with the hon. Lady about codes of practice, and I am keen to support them. However, I have come to the conclusion that we need to be clear that someone cannot operate in this market unless they have the qualifications. It is rare for me to say something like that. Does she accept that mandating qualifications is actually a stronger move than introducing a code of practice?

[Alison Thewliss]

Yes, and I am interested to see how that proposal develops. I certainly think it would be useful: it would reassure tenants to know that their landlord had some kind of qualification to put a roof over their head. It might get rid of some of the more criminal elements in the sector as well.

All landlords have to be registered in Scotland—there is not the hotch-potch of local registration mentioned in the report—which means that, if they step out of line, they can be banned. We have had problems in my constituency, slightly like those mentioned by the hon. Member for Harrow East (Bob Blackman), of tenants being exploited and lots of people being crammed into one flat. Govanhill in my constituency has a very large private rental sector and lots of rogue criminals. The hon. Member for Sheffield South East (Mr Betts) suggested that “rogue” sounds a bit more casual; I certainly feel that “criminal” is the better word.

In May 2018, five landlords were struck off the landlord register for renting substandard properties, and a further nine were struck off and banned in September 2017. That is all publicised and goes in the press, so there is no doubt about who those landlords are, what they have been up to and the conditions that their tenants have been living in. The Govanhill enhanced enforcement area gives council officials the right of entry into properties if there is any suspicion that they are not up to standard. On their first inspection, only 21 properties met the Scottish repairing standard. When they came back for a subsequent inspection, 175 properties met the standard, so there had been a clear improvement through that process.

Giving local authorities the power to enter flats and do those assessments is quite important in making sure that standards are met. It also gets around the issue of some local authorities not having the political will to do things. If everybody has to be registered across the board, that is at least a first step from which prosecutions can follow, if required. However, I do not think it has been in force for long enough in Scotland for us to be able to tell whether there are postcode lotteries, because housing varies quite substantially in my constituency and in other parts of Scotland as well.

I draw the House’s attention to the Nationwide Foundation’s report on vulnerability among low-income households in the private rented sector in England, because it makes for very interesting reading. It mentions that the proportion of privately rented properties failing to meet the decent homes standard has been falling, but that the number of such properties has actually increased. Numbers and proportion are quite different here. It also highlights, as other hon. Members have mentioned, that most properties that failed had a category 1 hazard—a severe or immediate risk. It should frighten us all if people are in such terrible conditions that their lives could be at risk. I urge the Government to do a bit more to make sure that properties meet those standards.

I also urge the Government to do more on revenge evictions, which our legislation in Scotland has militated against. It is something that we have managed to act on. Generation Rent also produced a very interesting briefing on this. It mentioned that, in 2017, 12,711 evictions by bailiffs happened under the accelerated process under section 21 of the Housing Act 1998, but that that is likely to be the tip of the iceberg. An awful lot of those people will not go through the court process, so we do not necessarily know how many people have actually been evicted. It also points out that two thirds of private renters have no savings. If someone with no savings has just been evicted, the last thing they will want is to go through a court process. They will just not have the means to do so, so they will try to find somewhere else as quickly as they can and move on. We need a better understanding of how many people face evictions through this process.

Moving towards a national database with better data gathering on this issue would be useful in informing what happens next, and the Government ought to think again about that. I am interested in hearing what the Minister says about the things that the Government did not accept from the review. The Committee will continue to push those suggestions, because they are good and solid. We particularly need to protect people from revenge evictions.

Private renting is a growing sector, with more and more people who are more and more vulnerable, including families. It is not only young people renting a flat for a while. There are people who live their whole lives in the private rented sector now because there is a severe shortage of housing in some parts of England. We need to look at how we can better protect those people. The hon. Member for Sheffield South East and others made clear that the cumulative effect of introducing legislation on legislation is that the protections are not where they should be. People need those protections so that they can have some certainty in their lives. Not having that certainty has a huge impact on people’s health, wellbeing and prospects, and particularly on children if they have to move quite a lot. We need to make sure as best we can that people are protected.

Lastly, I very much agree with the hon. Member for Hertford and Stortford about lettings from companies such as Airbnb. The Minister would do well to consider that further, because there could be an emerging gap in the market and we need to somehow make sure that there is protection within regulations.

[Sarah Jones (Croydon Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. This is an important debate, and we have heard some really helpful contributions. I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for securing it and for his leadership of the Select Committee, and I thank the other Committee members who are here. All have raised important points.

I should be clear at the outset that, as hon. Members might expect, the Opposition agree with the Committee’s assessment that the majority of landlords are good. I do not think anybody questions that. They play an important role in the housing system and in our society. However, as the Committee’s report illustrates, the situation faced by a growing number of private renters is intolerable. Most of us here today will see in our constituency surgeries—I certainly do—the horrible things that too many people have to endure. That includes the 800,000 privately rented homes with at least one category 1 hazard, landlords cutting off electricity to vulnerable tenants, and letting agents demanding hundreds of pounds to do things such as view a property.

We need to keep in mind all the time what private renters want, and that needs to be the test for policy makers. I think there are two things: first, people want to rent a property fit to be called a home; and, secondly, they want the same rights and redresses enjoyed by consumers in lots of other areas of society. For many, the private rented sector undoubtedly fails those two tests. Standards at the bottom end of the market are poor. As Opposition Members have said many times, people have more rights when buying a fridge-freezer than when renting a property.

The report identifies some important failings in Government policy that have led us to this point. I will look at two broad areas: the lack of intervention and enforcement, and the imbalance of power between tenants and landlords. On the first, as the report demonstrates, outdated legislation and a lack of enforcement mean that the current system of setting and enforcing standards does not work. We agree that the current legislation is overly complicated. It has built up over many years and has become somewhat hard to navigate and dated. Penalties are not strong enough to deter bad practice, and fines are too small to incentivise legal action in the first place.

We have already heard about the Homes (Fitness for Human Habitation) Bill introduced by my hon. Friend the Member for Westminster North (Ms Buck). However, the Government could have helped its provisions to become law years ago by accepting Labour amendments to the Housing and Planning Act 2016. The fact that so little enforcement action is taken is all the proof we should need that the system is broken. As we have heard, Advice4Renters estimates that just 0.1% of landlords letting non-decent homes are prosecuted each year.

The Guardian revealed today that nine out of 10 local authorities failed to issue a single civil penalty notice against a landlord or letting agent last year. It is impossible to deny that the billions of pounds of cuts faced by local authorities have affected their ability to enforce through environmental health and trading standards. I accept the argument that we also need leadership in local authorities, but the extent of the cuts has been very significant and must inhibit what local authorities can do. The fines being so low means that there is neither a deterrent for bad landlords nor an incentive for councils to take action. We share the disappointment expressed by the Local Government Association and others that the Government ignored the Select Committee’s recommendations to improve enforcement through increased fines and powers.

The report was right to express concerns about the situation with landlord licensing schemes. I have seen the positive impact of such schemes in my own borough, where Croydon Council has issued more than 30,000 licences. It is wrong for the Secretary of State to hold a veto over councils wanting to tackle rogue landlords. The Secretary of State has blocked councils such as Redbridge from introducing borough-wide licensing. There is a clear contradiction: Ministers talk about standing up for renters, but their actions prove otherwise.

Let me turn to the imbalance in the private rented sector. The report is clear about the things that need to be done to make the rules fit for purpose and to ensure that they are enforced more, but there are deeper structural issues in the private rented sector. The Committee rightly points out that we cannot draw a clear line and say that there is a small minority of rogue landlords and everyone else is perfect. That would oversimplify the issue and ignore the structural problems that mean that a landlord does not have to be rogue or even breaking the law in any way to make tenants’ lives difficult. There is an imbalance that no court or enforcement authority can solve, because it is part of a system that is fundamentally skewed against private renters.

The system is stacked most heavily against those at the very bottom—that is clear. Permitted development and abuse of the local housing allowance in lockdown properties make a mockery of planning and welfare rules. That is a symptom of a broken housing market. We are failing so badly to build the homes that the country needs that the Government are essentially saying, “Anything will do.” Tenants, left with little or no choice, pay the price, but yet again the Government ignore the Committee’s valid recommendations on this topic.

We could talk more about what needs to be done about landlords refusing to rent to people on benefits. That issue comes up repeatedly in my constituency. I know that Shelter is trying to take some legal cases through the courts to affect that. I will not talk more about that now, but it really is heart-wrenching in constituency surgeries.

Retaliatory evictions are a real concern. They have been talked about today and were rightly raised by the Committee. When 44% of renters say that they will not negotiate over disrepair for fear of eviction, and when charities are having to warn people that raising a complaint might get them evicted, that is a structural failure in the system. We agree that the current protections are nowhere near robust enough to avoid retaliatory evictions or punitive rent rises. I have seen this happen to my own constituents, as we all have. Labour would go further than the Committee’s suggestion of extending the time limit for protecting tenants from section 21, which the Government seem not to be observing anyway. If we say that section 21 is unfair for those who have made a complaint, why do we accept it for those who have not complained? No-fault evictions are at the heart of the imbalance between tenants and landlords and should be scrapped entirely.

The Government have admitted that they need to do more. They say that they want to rebalance the relationship in the rented sector and give tenants access to redress. But given the record of the Government in relation to renters, people would be right to be sceptical. Consultations, calls for evidence or plans to introduce measures such as a housing court, ombudsman schemes or letting agent regulation are worth very little if they do not result in action. The Department has a bad record in terms of turning consultations into legislation: 185 housing consultations have been launched by the Department since 2010. Too often, consultation fails to translate into anything substantial.

The Government recently announced plans to look at introducing three-year minimum tenancies, which then appeared to be quietly dropped. There is little point in a housing court or ombudsman if tenants do not have rights to protect in the first place. The Department’s record on private renting so far has been to talk tough but under-deliver. The Government have blocked Labour’s proposals to amend the Tenant Fees Bill so that deposits could be capped at three weeks’ rent. As we have discussed, that would mean an average saving of £575 for tenants across England and £928 in London. The current six-week cap has the potential to cost tenants more: we know that the majority—more than 50%—of landlords charge four weeks’ rent as standard, so it would end up increasing people’s deposits and not saving them money.

[Mr Prisk]

The hon. Lady is setting out her party’s views on various issues. A number of people who are good landlords are very anxious about future rents. Would it be Labour party policy in government to cap them or index them?

[Sarah Jones]

As I was about to say, we would introduce three-year tenancies, and it would not be possible to increase rents above inflation over that period. It is a matter not of setting what the rent would be, but of people having more security in a tenancy and more ability to understand the level at which the increase would happen over that longer period.

[Mr Prisk]

I take it from that that there could be no tenancy shorter than three years.

[Sarah Jones]

It is interesting that the hon. Gentleman should say that, because we are looking at developing our policies in this area and have also said that we want to scrap section 21. We need to look at how that would work and what the conditions would be. It is really important to stress, though, that we are not saying that people should have the right to remain in their home indefinitely if, for example, they are not paying their rent or are, in other ways, causing disruption or antisocial behaviour. That is absolutely not the point of what we want to do. There will always be a need for a landlord to be able to evict tenants who are not paying their rent or who, for whatever reason, should not be in the property.

We need to find the middle ground. At the moment, there is a problem, particularly in London, and I have seen it in Croydon. When we talk to renters organisations such as Generation Rent, they talk of a cycle whereby people are being evicted for no obvious reason. For example, a landlord might not be an expert landlord, as we have talked about. Someone may have inherited a property or have moved out of London. They might have a property and not really know what they are doing. They might decide to move back in or they might decide to do something else with the property. Then we have a group of people who are constantly having to move because they are being moved on through section 21 evictions, or we have people who cannot afford the rent increases, so they are also having to leave through section 21. An imbalance of power is our starting point when we are looking at policy development. I hope that that answers the hon. Gentleman’s question.