My Lords, I draw attention to my housing and property interests as on the register. This Second Reading provides an opportunity to review the current state of the PRS—the private rented sector—and to consider the impact on this sector of the Renters (Reform) Bill. Does the Bill address the key problems facing renters and, if so, will it fix those problems?
Let us take a quick look at the private rented sector today. By the late 1980s, the PRS accounted for only some 9% of the nation’s homes. Then, in the early years of this century, the sector dramatically doubled in size to around 20% of the stock, and it achieved this growth without building virtually any new homes.
Two factors propelled this extraordinary turnaround. First, the Housing Act 1988 removed rent controls and security of tenure for new shorthold lettings. This created a profitable opportunity, enhanced by low-interest buy-to-let mortgages for investors: today, there are 2.3 million private landlords. Despite tax and regulatory changes to dampen this phenomenon and the recent interest rate hikes, the PRS has continued to sustain its new-found size, bolstered by the shortages that have pushed up prices and rents.
The second big change, which has led to today’s dependency on the PRS, was the demise of council housebuilding. At its peak, local councils regularly
accounted for some 150,000 to 200,000 new homes built in a single year. The housing associations have only ever built a fraction of these numbers. Along with council house sales under the right to buy, now approaching 2 million homes sold, the social housing sector—that is, councils plus housing associations—has suffered a huge decline. It has gone from around 34% of the country’s housing stock to just 17% today. Those who would have looked to the social housing sector in the past must now turn to private renting instead.
Has this switch from social housing to private renting been a success? Although PRS rents are higher and security is lower, the PRS has provided a satisfactory home for many. But the switch has not helped with the nation’s biggest housing problem: supply. There are simply not enough homes to go around. Building new homes has not kept pace with increases in households. PRS landlords do not build new homes, with the exception of a valuable but modest program of build-to-rent and purpose-built student accommodation; rather, private landlords have inevitably outbid others, particularly first-time buyers, to acquire existing properties. Critics argue that this has inflated house prices and led directly to a reduced number of people being able to become home owners. We are left with acute housing shortages, which only a big expansion of social housing can fix.
However, the Bill does try to address other serious criticisms of the private rented sector. These criticisms are, put simply, that landlords can—and some do—take advantage of the acute housing shortages and lack of options; and that the power imbalance between landlord and tenant means that renters have had to put up with rents that absorb half their incomes, with poor conditions and appalling service, all because they have nowhere else to go. Underpinning this imbalance is the constant threat—whether articulated or not—of retaliatory eviction, whereby the landlord can get rid of a complaining tenant through the notorious Section 21 no-fault eviction route.
The Bill takes some important steps to correct the landlord-tenant imbalance. It does not have much to say about the affordability of rents, because it is a fundamental characteristic of a private rented sector that rents are set by the market. As economists frequently tell us, tough rent controls could lead to an exodus of landlords. While a gentle reduction in the size of an overextended PRS could rebalance the sectors, too many landlords exiting the market at the same time because of controls on rents would create chaos. However, the Bill does seek to block rent increases in excess of market levels, to stymy an underhand way of forcing a tenant out when no legitimate grounds exist.
On other matters, the Bill has some valuable ingredients. Landlords will have to meet a set of decent standards, which will be established to address poor conditions such as cold and mould. Renters will all have access to a new ombudsman who will handle complaints and will be able to levy quite serious fines for incompetence and bad behaviour. As in Scotland, Wales and Northern Ireland, a register will be available online: a property portal will be maintained of all PRS properties, covering their compliance with legal requirements, to enable prospective tenants to check for health and safety features, and so on. The Bill will also make it more difficult for landlords to refuse a tenancy for those with a pet.
All these changes empower tenants in helpful ways. However, there are modest changes, which your Lordships’ scrutiny may achieve, that would amend the Bill for the better. There is also a desperate need for energetic enforcement. In addition, renters need a good online advice service to explain all their rights and responsibilities —one is being developed by the TDS Charitable Foundation.
However, a cloud hangs over what was the centrepiece of the Bill: the fundamental issue of renters’ security—their consumer protection against arbitrary evictions. As well as particular concerns about lettings to students, there are at least three further issues here. First, new grounds for possession will allow landlords to get the property back for a family member’s occupation or their own, or because they are selling. This means, perhaps inevitably, that any private sector tenant could still be evicted through no fault of their own. These are understandable grounds for repossession because a sector based on private investment has to enable the investor to sell up at some point, but could this change be made less sudden and less painful?
Secondly, the new measures to speed up the gaining of possession in arrears cases introduce some tough changes that may have gone a step too far. This needs exploring.
Thirdly, the biggest problem with the Bill is not content but implementation. The all-important ending of no-fault Section 21 evictions is now to be delayed until such time as the Lord Chancellor reports that the county courts are likely to process cases speedily. This could take a long time and, with no fixed date and no backstop for triggering the end of Section 21, the central plank of the Bill is missing.
In conclusion, the doubling of the size of the private rented sector and the halving of the social housing sector has exacerbated shortages and led to some cases of poor performance and exploitation of tenants. The Renters (Reform) Bill introduces some welcome measures, for which the Government deserve full credit, to redress the landlord/tenant imbalance. But last-minute government amendments to delay the ending of no-fault evictions for an indefinite period have led to anger and frustration from tenants’ representatives, such as Generation Rent and the Renters Reform Coalition. Perhaps the Minister can head off a Lords rebellion on this issue by indicating a willingness to address this concern, alongside more modest changes to a Bill that is worth having but could be much better.
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