Private Rented Sector

Nick Boles Excerpts

Wednesday 25th June 2014 Commons Chamber

[The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)]

It is a great pleasure to find myself doing combat with the hon. Member for Wolverhampton North East (Emma Reynolds). I hope that you will forgive, Mr Speaker, a brief further reference to “Game of Thrones” but I now know what the hound must have felt like when he faced Brienne of Tarth. I suspect that not everyone in the House will get that reference, but I recommend that Members look it up. It is intensely flattering to the hon. Lady. I feel sure that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Keighley (Kris Hopkins), who is the housing Minister, as a distinguished former soldier, would have been better equipped to fend off her attacks, but he is speaking at the Chartered Institute of Housing in Manchester. I know that he would like to be here.

The Leader of the Opposition’s motion follows a pattern that is becoming wearily familiar to hon. Members. I find myself wondering whether it is even becoming a little trying for you, Mr Speaker, although I am sure that you would never let it show. The pattern unfolds like this. The Opposition begin by identifying some real problems affecting people in the communities we all represent. Every Member knows from their constituency surgeries that irresponsible landlords and rapacious letting agents do exist. Every Member wants to deal with them. The Labour party then proceeds to slander an entire industry by claiming that the problems it has identified are an almost universal experience and that irresponsible and rapacious behaviour is typical business practice. After years of policy commissions and conference debates in which Labour Members worked themselves up into a righteous lather denouncing the horrors of capitalism, they then disinter a mouldy old policy from the 1970s, spray a bit of shiny new paint over it and present it as a solution to all the ills of the modern market economy. We have seen them follow that script in relation to energy bills.

[Several hon. Members]

rose—

[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.

[Luciana Berger]

Can the Minister tell the House when this model tenancy agreement might be available for use and for our constituents to benefit from?

[Nick Boles]

Our approach in government, unlike that of the last Government, is to consult the industry and tenants before we produce things. Therefore, I am happy to tell the hon. Lady that some time this summer she will see this model tenancy agreement. That is also why we have published the well-received “How to rent” guide that will empower would-be tenants and why we are developing a code of practice to drive up standards in the industry.

[Jeremy Corbyn]

The Minister will have heard my intervention on my Opposition Front-Bench friend. Can he confirm that the Government are prepared to take action to prevent racist discrimination by agencies and to stop agencies simply banning anyone in receipt of any state benefit even applying for a tenancy?

[Nick Boles]

I am grateful for that intervention because I entirely share the hon. Gentleman’s outrage at the suggestion that these practices are taking place. As the hon. Member for Wolverhampton North East (Emma Reynolds) said, there are already powers to deal with that, but it is important that they are used and enforced, and I hope very much that local authorities and police forces around the country will look closely at any evidence presented to them by “Panorama” or anyone else.

[Fiona Mactaggart (Slough) (Lab)]

The question from my hon. Friend the Member for Islington North (Jeremy Corbyn) was not just about race discrimination, but about discrimination against tenants who depend on benefits to pay their rents. Is there any remedy for that?

[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.

[Graham Jones (Hyndburn) (Lab)]

The Minister is making a fundamental point: he is saying that rents are indexed to capital values. Is that correct?

[Nick Boles]

I am not saying anything as complicated as that. I am a bear of a fairly simple brain, and I am simply saying that if someone cannot control their costs and is faced with capped or controlled revenues, that is a very risky environment and there are lots of other places where they can put their money, and we will see rental property returning to how it was until the housing legislation was changed: falling as a contributor to our economy.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

The Minister said one of the factors that will give confidence to institutional investors is longer-term tenancies. However, the other issue, which he has not touched on at all, is of course reputational damage because of the difficult end of the rental market constantly receiving lots of very bad publicity. If he wishes to attract institutional investors, would it not be sensible to do more to deal with that reputational issue?

[Nick Boles]

I agree with the hon. Gentleman in that, as in any industry, this industry will want to drive out the cowboys because they undermine the industry and people’s confidence in it, but we do not do that by imposing blanket controls that apply to both good providers and those few who upset the whole thing for everybody else.

[Mr Slaughter]

Is the Minister’s problem not that he sees this entirely from the landlord’s point of view and does not see the power relationship here? The reality for tenants in my constituency is that they are paying a fortune, often for very substandard properties, and cannot complain because they might be evicted. Is not the game given away by the Minister’s colleague the Housing Minister telling landlords “Well, if somebody’s on benefit, just evict them.”? Does the Minister support that?

[Nick Boles]

I do not accept anything that the hon. Gentleman says, but then I never do. The fact is that the interests of his constituents who are tenants are best served by having more investment coming in, to produce rental property of a higher quality supplied by professional companies that they then will be able to access.

We have to ask ourselves why the hon. Member for Wolverhampton North East has come to the House with this policy today. The first reason is that her boss, the Leader of the Opposition, wants to be seen as the man who will stand up to business and impose his will on the unruly forces of the market. He is not much interested in housing, and, lucky fellow that he is, it is a very long time since he needed to find a flat to rent, so he does not much care if the policy will work; he just wants a policy that will beef up his brand as the scourge of British business, and on that at least he has definitely succeeded.

The other reason lies deep in the DNA of the Labour movement. It is addicted to compulsion and control. From Douglas Jay, who thought that the gentleman in Whitehall knows best, to Nye Bevan, who wanted to know if a bedpan dropped in a ward in Tredegar, to Ed Miliband, who wants to decide how much rent should be charged on every property in the country in three years’ time, the instinct is the same: to make people do the things they want them do in the way they want them to do it. So they ignored the fact that, without Government intervention, average tenancy lengths have increased by 6% to reach an average of more than 21 months—without Government legislation. They block their ears to the majority of young people—still a very important group of tenants—who say that they value the flexibility of existing tenancies and do not want to be bound up in a three-year agreement. They draw a veil over the awkward truth that the Royal Institution of Chartered Surveyors, which the hon. Member for Wolverhampton North East claimed was helping her to devise a benchmark for her rent controls, is doing no such thing and opposes the policy.

Last year, the Communities and Local Government Committee, chaired by the ever-wise hon. Member for Sheffield South East (Mr Betts), who is unfortunately not with us today, conducted a review into the private rented sector. It concluded that it did not

“support rent control which would serve only to reduce investment in the sector at a time when it is most needed. We agree that the most effective way to make rents more affordable would be to increase supply, particularly in those areas where demand is highest.”

Perhaps the Chair of the Select Committee is not in the House today because he did not want to face the embarrassment of disagreeing so intensely with his own party’s Front Benchers. The approach that the Committee suggests is the right one.

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

On a point of order, Mr Speaker. Could you ask the hon. Gentleman to tell us whether he warned my hon. Friend the Member for Sheffield South East (Mr Betts) that he would be mentioned in this debate?

[Mr Speaker]

It is the normal courtesy so to notify. A simple nod of the head will suffice if the Minister did notify the hon. Gentleman.

[Nick Boles]

I entirely apologise—I did not know that that was the practice, and I should have. I assumed that the hon. Gentleman would be here because he is the Chair of the relevant Select Committee. I will write to him straight after the debate to apologise for having referred to him without warning him.

[John Stevenson (Carlisle) (Con)]

I bring to the House’s attention my declaration in the Register of Members’ Financial Interests. Is the Minister surprised that the Opposition’s motion makes no reference to the supply of housing, an increase in which would transform the market for all sectors—privately owned, social housing and private rented?

[Nick Boles]

My hon. Friend is exactly right, and he brought that insight to the Select Committee review that led it to draw such intelligent conclusions. The Select Committee’s approach is the right one. It is the core of the Government’s strategy, and I would even go so far as to call it a central plank in our long-term economic plan. I therefore urge Members to oppose the motion.

[Several hon. Members]

rose—