Private Rented Sector

Meg Hillier Excerpts

Wednesday 25th June 2014 Commons Chamber

[Emma Reynolds]

We are calling for a three-year tenancy. We think that we need to change the culture of short-termism that has developed around the private rented sector. We certainly draw a lot of inspiration from the excellent work done by Shelter, and many of its proposals are a feature of our proposals.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I draw Members’ attention to my entry in the Register of Members’ Financial Interests. Does my hon. Friend agree that we need to encourage longer-term landlords, such as the former owners of the New Era estate in Hoxton, which has just been sold on? Tenants there are facing huge rent increases. Many people have lived there for over 20 years and felt that they had security, but that is no longer so certain. Does my hon. Friend thus agree that the long-term tenancies are important?

[Emma Reynolds]

Absolutely, which is why we would legislate for long-term tenancies. We simply do not agree with the Government that a voluntary approach is appropriate. Longer-term tenancies are simply not coming about, so the people my hon. Friend talks about face great insecurity.

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[Emma Reynolds]

There are problems with rent arrears, notably in the social housing sector. Many people are, for the first time in their lives, finding it difficult to pay their rent and finding themselves in arrears because of the Government’s callous bedroom tax.

Our reforms will be good for tenants, but they will also be good for landlords, and it will be essential for us to provide the right safeguards for them. The vast majority of landlords in England are small landlords with one or two properties, and they regard their extra house as a pension pot. They are interested in the increase in the value of their property over time, and in finding good tenants who pay their rent on time and treat the house like a home. We want to work with landlords to ensure that we get the balance right, but we also feel that tenants deserve extra protection and longer-term tenancies.

[Meg Hillier]

Will my hon. Friend give way?

[Emma Reynolds]

I am going to make a bit of progress, because many Members on both sides of the House rightly take an interest in this issue. I will stop talking about the Secretary of State, because he seems to be becoming slightly annoyed about it.

Let me finally deal with the third element of our proposals. We will ban the charging of letting agents’ fees to tenants. Too many letting agents charge extortionate fees every time there is a change of tenancy.

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[Nick Boles]

I will give way in a moment.

Now Labour Members are trotting it out for rental housing. It is difficult to say in which area their approach is more flawed.

[Meg Hillier]

This is not a throwback to an old era of problems; it is going back to an old era where there was security for tenants. Leaving aside the proposal of my hon. Friend the Member for Wolverhampton North East (Emma Reynolds), what are the Government doing to encourage long-term landlords who provide homes that are just for letting, not for future sale, so tenants can have a long-term future and have the security that my hon. Friend is talking about?

[Nick Boles]

In that old era, the amount of rental property in the country had fallen to 8%. It is now up at 18% because there has been investment in the sector; it is an environment in which people want to put their money.

Government Members recognise that there are some cowboys operating in the private rental sector. Some landlords are trigger-happy in terminating tenancies, using any excuse to turf out a responsible tenant who has just had the temerity to complain about some aspect of the property. Some letting agents and property management companies are greedy, gouging hard-pressed tenants for disproportionate fees without prior notice. That is why we are making letting agents publish all their fees in a prominent place and join an approved redress scheme, so that tenants can get a fair hearing and proper compensation. It is why we are developing a model tenancy agreement that landlords and tenants can use if they want to enter into a longer tenancy agreement.

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[Nick Boles]

The hon. Lady will understand that obviously private owners of properties have some rights to decide who they let their property to, but I feel that it would be very strongly in the interests of all private landlords to work closely with people who are in receipt of local housing allowance and ensure that they too can access properties in the private market.

We will do nothing to undermine confidence in the long-term prospects of the rental market and drive away the institutional investors we need to expand the number of rental properties and improve their quality, but that would be the precise effect of the rent controls that the Leader of the Opposition proposes.

I hope hon. Members will forgive a brief foray into basic micro-economics, but I do think it is important in this debate. Owners of properties have a choice: they can either sell them and invest the money elsewhere, or rent them out. The more institutions we can persuade to invest in owning and renting property, the more options will be available to would-be tenants and the more likely it is that those who want longer tenancies with predictable rent reviews will be able to find landlords who are willing to offer them.

If, however, investors in rental property think that their costs may increase while their rents are capped, they will do one of two things: they will either insist on a much higher rent up front, increasing the costs tenants face, or they will decide to sell the property into today’s buoyant housing market and invest the money elsewhere. The hon. Member for Wolverhampton North East is a highly intelligent woman and a much better economist than I am. She knows that this is the reality of the rental market, so why has she come to the House today with such an obviously idiotic policy? There are reasons.

[Meg Hillier]

Does the Minister not recognise that this growth in the number of individual landlords investing in the way that he has just described is one of the reasons why tenants have such insecurity? What are the Government doing—he is in government now—to encourage longer-term institutional investors to invest in properties that are solely for rent long term, so that tenants can get longer-term security?

[Nick Boles]

I am grateful to the hon. Lady for her intervention, as it is what I think is known as a soft ball, because this Government have of course done a great deal more than previous Governments to pull institutional investment into this sector. We have already identified in excess of £10 billion of equity that people are looking to invest in this sector. We have a £1 billion Build to Rent fund. We have £3 billion of guarantees for the private rented sector. The precise point here is that we will have some chance of pulling institutional long-term investment into higher-quality rental property if such investors have confidence that the rules of that market are not going to suddenly change and they are not going to suddenly find themselves being faced with unpredictable costs and capped rents. That is how we get institutional investment in, and it is precisely the opposite of what the Labour party is proposing.

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[Frank Dobson (Holborn and St Pancras) (Lab)]

We last debated private rents on 24 March, and at that time I and other London Members pointed out that ordinary Londoners were being priced out of the city. I do not mean the City where they play with money; I mean the great London conurbation. That is because there has been a total failure in the housing market, be it buying or renting. Increasingly, ordinary people can no longer afford either to buy or to rent in London, and the situation is still changing for the worse. Prices and rents are still going up and, if the Evening Standard is to be believed, according to a recent headline rents in London are rising eight times faster than wages. Rents are continuing to outstrip wages.

[Meg Hillier]

Nowhere is that truer than in my constituency of Hackney South and Shoreditch, where private rents are out of the reach of many people, who are unable to live in the borough. Does my right hon. Friend agree that the resulting higher population churn causes real damage to the strength of our local communities?

[Frank Dobson]

I entirely agree with my hon. Friend.

Things generally have been getting worse, but there has been one enormous change for the better: the Labour party’s commitment to regulating rents and providing security of tenure in a way not proposed for a very long time. I am delighted to welcome this development, although personally I would go rather further. However, it is the right thing to do, it is popular, certainly with Londoners, and it is an approach that works.

We had the “less than GCSE” economics lecture a few minutes ago on the merits of encouraging investment in the private sector, and how it would be damaged by regulation. That ignores all the European evidence. Germany and Switzerland have a heavily regulated private sector, including rent regulation, and they have the highest proportion of people living in the private rented sector. They live, generally speaking, in rather good quality private sector flats and houses, certainly better than the average here. People in the Netherlands, where the first rent that anyone can charge is set, are better housed than most people in Britain. We simply cannot go on with the current situation—ruinously high rents—under this Lib Dem-Tory coalition.

Last year, the average weekly rent in London was 51% of average weekly pay. It is now 55%, which is clearly ruinous for tenants.