Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence

Memorandum by Shelter (DHB 20)


  Shelter is a national campaigning charity that provides practical support and innovative services to over 100,000 homeless and badly housed people every year. Approximately one-third of our clients live in the private rented sector. This work gives us first hand experience of the problems experienced by private tenants. We have also carried out extensive policy and research work in this area. In 2001, with the support of the Joseph Rowntree Foundation, we established an independent commission to look at the problems of standards and supply in the sector (a copy of the Commission's report is enclosed). We welcome the opportunity to submit evidence to the Committee and hope that the inquiry will generate consensus about how the draft Bill should be strengthened before it is presented to Parliament later in the year.


  This memorandum focuses on Parts 1, 2, 3, 4, 6 & 7 of the Bill and the measures we believe should be added to it before it is formally presented to Parliament. To summarise, Shelter:

    —  Strongly supports the proposed licensing scheme for houses in multiple occupation (HMOs) and hopes the scheme can be extended to include additional properties which we believe pose a significant risk to the health and safety of tenants.

    —  Supports the selective licensing of private landlords in areas of low demand in order to raise housing standards.

    —  Welcomes the new Housing Health and Safety Rating System.

    —  Strongly supports the changes to the Right to Buy which will help to retain valuable social housing in areas where it is desperately needed.

  In addition, we hope that Ministers will be persuaded to add the following measures to the final Bill before it is formally presented to Parliament:

    —  A requirement that all private landlords are "fit and proper" persons to manage property to ensure that minimum management standards are met across the sector.

    —  The statutory regulation of tenants' deposits and other fees, including a national Tenancy Deposit Scheme with independent arbitration when disputes occur.

    —  Measures updating the definition of statutory overcrowding.


  Much of the draft Bill focuses on the private rented sector (PRS). The PRS is home to 2.2 million households in England. At just 10 per cent of the country's housing stock, this makes it the smallest PRS in the western world. Independent research carried out for Shelter estimates that its failure to meet housing need may be adding as many as 10,000 households to the annual affordable housing requirement.[4] At a time when the shortage of affordable housing has reached crisis levels in many parts of the country, we believe the sector could make a much stronger contribution to meeting housing need by increasing the availability of affordable accommodation for key workers and providing decent homes for those on low incomes.

  According to the 1996 English House Condition Survey, 31% of private tenants live in poor conditions. Shelter therefore strongly supports the measures aimed at improving standards in the sector, particularly those targeted at HMOs. However, we hope the Bill's publication will provide an opportunity to broaden out the debate to look at how these measures can be harnessed to a wider strategy to modernise the sector that includes the fiscal reforms needed to increase supply, as recommended in the report last year of an independent commission established by Shelter with the support of the Joseph Rowntree Foundation.[5] A strategic duty on local authorities to encourage good landlords, assist those who are not meeting their responsibilities and encourage investment in the sector would be an important first step.


  Shelter supports the replacement of the Housing Fitness Standard with the Housing Health & Safety Rating System (HHSRS), and a rigorous new enforcement regime. We particularly welcome the clear link the proposed new system makes between housing and health. Poor quality housing can pose serious risks to health and in some cases put the lives of occupants at risk. For someone suffering from physical or mental illness, sub-standard housing may damage their chances of recovery or worsen their condition. Poor conditions can also undermine development of children. The new HHSRS will enable local authorities to collect data and identify much more effectively than now the links between poor housing and ill health.

  Shelter's experience is that the assured shorthold tenancy regime can make it difficult to guarantee an improvement in conditions for private tenants. The intervention of the local authority can sometimes encourage landlords to evict the tenant, either to avoid undertaking the works required or because the tenant has made a complaint. It is essential, therefore, that local authorities develop a pro-active approach to improving the quality of private rented accommodation. We believe that the existing duty, section 605 of the Housing Act 1985, should be strengthened by requiring local authorities to address conditions in the private rented sector in a more strategic way.

  While we support the "risk assessment" approach set out in the draft Bill, we believe a set of absolute minimum standards should be included for physical conditions in HMOs. Given the significantly higher fire risks in HMOs, these standards should include minimum requirements on fire safety of both the property itself and furnishing contained within it.


  Shelter has long campaigned for legislation to improve health and safety in HMOs, and so we welcome the introduction of a national licensing scheme. The current legal framework is confusing and easily evaded. Although they can already set up a local registration scheme, few local authorities have the resources to actively search out unfit HMOs. Those that do are not helped by a Court of Appeal decision that a group of students living together should be seen as a single household, which means their home can't be regarded as an HMO.[6] Although some may argue that licensing is an unnecessary regulatory burden, the truth is that this regime will not require responsible landlords to do any more than they should be doing already. The fees and paperwork required are minimal. Only landlords running sub-standard accommodation or exploiting their tenants have anything to fear from the new regime.

  Over 1.5 million people live in HMOs in England and Wales, more than half of whom are under the age of 30. Many are vulnerable young people living independently for the first time. The conditions they live in are often unhealthy and sometimes dangerous—adults living in bedsits are six times more likely to die in a fire than those living in comparable single-occupancy houses.[7] The 1996 English House Condition Survey showed that 20% of HMOs are in a poor condition, requiring urgent remedial works. There are no universally applied standards for fire safety or amenities, and because most occupants have little or no security of tenure, they stand every chance of losing their home if they ask their landlord to undertake repairs or improve safety.

  The new and much clearer definition of an HMO, outlining the circumstances in which a person is, or is not, to be regarded as "occupying" a house, and the circumstances in which persons occupying a house are, or are not, to be regarded as forming a "single household", will help ensure that the health and safety of a greater number of tenants can be more readily safeguarded. The obligation for landlords to obtain a licence for larger HMOs will give environmental health officers a much better chance of uncovering those with defects and ensuring that they are brought up to a satisfactory condition. It should also help guarantee proper management standards, and give tenants greater confidence to raise concerns when standards are not maintained.

  However, we believe that there is a strong case for expanding the scope of the mandatory scheme to include all HMOs of either three or more storeys or occupied by four or more adults, rather than just those with three or more storeys and five or more occupants. The evidence is that the risk of injury or death as a result of fire increases significantly in properties of three or more storeys. In 1997, DETR research found that 52% of HMO fire deaths occurred in buildings three or more storeys high, even though only 16.5% of households at that time lived in such buildings.[8] The risk to life is even greater still when fire death rates in HMOs over three storeys are compared with similar single-occupancy houses. An adult living in a bedsit house of three or more storeys is almost 17 times more likely to be killed in a fire than an adult living in a similar single-occupancy house. We believe that these findings justify requiring landlords to obtain a licence for all HMOs with three or more storeys.

  As originally proposed in the Government's consultation on HMO licensing,[9] we also believe that the licensee of an HMO should be placed under a general duty of care to ensure the health and safety of the occupiers. This duty could be modelled along the lines of the duty of care under health and safety legislation. It would not be an onerous duty, but would be an important preventative measure, particularly in ensuring standards in smaller HMOs in those areas where the local authority chooses not to exercise its discretion to require smaller HMOs to be licensed.

  Shelter's key concern about HMO licensing is that tenants are not made homeless as a result of landlords withdrawing from the market or being refused a licence. Measures to regulate landlords must take account of the risk that, in response, landlords may choose to end a tenancy or stop letting altogether. At present the Bill contains no measures to help tenants in this situation. This should be remedied by requiring local authorities to have robust policies in place for securing accommodation and providing advice and assistance to tenants at risk of homelessness in these circumstances.

  We also have some specific concerns about the practical consequences of the "no rent payable" provision in Clause 67. In principle, if a property does not meet the standards necessary for a licence to be granted, then the local authority should take over its management under the terms of an interim management order. If this happens, Clause 67 will not take effect and rent will be payable by the tenant to the local authority. In practice, however, local authorities may be slow to take action under their new management orders powers. Potentially, this has two consequences.

  Firstly, it makes it more likely that unscrupulous landlords will evict tenants so the property falls outside the scope of the statutory licensing scheme, thus avoiding the risk of having all rental income stopped. This underlines the need for local authorities to have effective policies in place to ensure that those who are displaced can access alternative accommodation. Secondly, tenants who are ignorant of the requirement for the property to be licensed and continue to pay rent and claim Housing Benefit are likely to be subject to a subsequent decision by the local authority to reclaim the over-paid Housing Benefit. They will not, however, be in a position to reclaim the rent from the landlord. It is therefore essential that consequential amendments to regulations are brought forward, making it clear that any Housing Benefit paid for properties that were subject to Clause 67 should not be reclaimed by the local authority.

  We hope that pre-legislative scrutiny will provide an opportunity to resolve these outstanding issues, and to consult with local authorities to ensure that HMO licensing can be implemented as soon as possible after it has been passed by Parliament.


  Shelter recognises the importance of addressing the factors behind neighbourhood decline. We therefore support the introduction of discretionary powers to allow local authorities to introduce a licensing regime for private landlords in areas of low demand and other areas where standards in the PRS need to be raised. In particular, we welcome measures to ensure that landlords in these areas are "fit and proper" persons, so that those with unspent criminal records or who fail to meet the test of management competence, for example as a result of having been found guilty of harassing or unlawfully evicting tenants, are excluded from holding a licence. We are, however, concerned that the draft Bill contains unacceptably wide powers for local authorities to prescribe conditions of licenses in respect of both landlords and tenants.

  As with licensing for HMOs, it will also be important that tenants are not made homeless as a result of landlords withdrawing from the market or being refused a licence, and that they are not liable to repay overpayments of housing benefit resulting from the landlords failure to obtain a licence. Robust policies for securing accommodation for those who may be displaced and further consequential amendments to the Housing Benefit regulations are again important here. More broadly, we believe that all private landlords should be required to meet minimum management standards (see below).


  In the two decades since it was introduced, around 1.5 million sitting tenants have exercised their Right to Buy. Although, the majority of these tenants have benefited from the scheme, it is also clear that, alongside the failure to invest in new affordable housing, the Right to Buy has been a major factor in the declining number of lettings becoming available to those in housing need. In London, for example, the annual number of lettings has fallen to an all-time low —around 35,000—a third below the level of 1996-97. In our recent report, Time for a change: Reforming the Right to buy[10], we estimated that, if Right to Buy sales continue at their current rate, a further 4,000 fewer lettings would be made in 2005-06 by local authorities in London and the South East than is the case currently. This loss of lettings is simply unsustainable.

  Shelter therefore welcomes the recent reduction in the maximum Right to Buy discount in the 41 local authorities specified in the Housing (Right to Buy) (Limits on Discount) (Amendment) Order 2003. These areas were identified as experiencing severe housing pressure as a result of having both high levels of homelessness and high property values. We hope that the reduction in the maximum discount will reduce the number of lettings lost in these areas, and believe there is a very strong case to extend the reduced discount to other local authorities experiencing high levels of housing pressure. However, additional measures are needed to discourage the activities of property companies abusing the Right to Buy and to help retain lettings for those in housing need. We therefore support the measures in the draft Bill as further steps towards achieving these aims.


  Shelter welcomes Clause 153, which extends the qualification period to five years. As well as helping to retain lettings for those in housing need, the longer qualifying period would help ensure that the Right to Buy benefits those who have been tenants for a number of years—one of the original intentions of the scheme—rather than those who have only recently become tenants.


  Shelter welcomes Clauses 154, 155 and 156, which extend the discount repayment period and relate the discount repayable to a proportion of the property's re-sale value, rather than the amount of discount actually received. The longer period offers leaseholders an incentive not to leave the communities they live in, helping to ensure that another one of the key policy aims of the Right to Buy—bringing greater stability to deprived communities—is met. Recently published research by Heriot Watt University[11]has shown that a number of private companies are exploiting the Right to Buy to build up property portfolios in areas of high demand. Private companies are much less likely to want to get involved in under-lease arrangements if the property cannot be formally sold on to them for more than five years. This measure should reduce the attraction of deferred resale deals, and therefore help retain lettings for those in housing need.


  The draft Housing Bill is the first major housing-related legislation to be brought before Parliament since 1997. We hope that pre-legislative scrutiny will provide an opportunity to add other important measures to the Bill before it is formally presented to Parliament.


  The draft Bill introduces the concept of "fit and proper" landlords in areas where selective licensing is introduced (see above). The stated aims for selective licensing are to ensure that landlords meet minimum management standards and that those who do not meet these standards are excluded from letting.[12] The intention is to tackle the problems caused by irresponsible landlords and anti-social behaviour where this is contributing to low demand and neighbourhood decline.

  By its very nature, selective licensing is only designed to operate in a limited number of areas. However, neglectful landlords are not confined to unstable neighbourhoods—they are just as likely to be operating in high demand and relatively cohesive areas. Although their activities may not be contributing to low demand or obvious neighbourhood instability, they may be causing localised problems and delivering a poor quality of service to tenants. It is therefore inconsistent not to require landlords operating in these areas to meet the same standards of management competency as landlords in less stable areas.

  Shelter believes that—as consumers—all tenants should be entitled to a decent standard of service from their landlord. This is especially important because, particularly in high demand areas, the sector is often used to house vulnerable tenants who have little choice or alternative housing options. We therefore believe that the opportunity provided by this legislation should also be taken to modernise the sector by ensuring that, in line with the Government's objectives, all landlords are required to meet minimum management standards.

  We are conscious of the need not to over-regulate the sector and accept that extending licensing to all landlords may not be practical. We believe a national scheme based on a statutorily approved code of management practice would strike an effective balance between regulation and the need to ensure that standards are met. Such a scheme would protect tenants and the wider community, support and encourage good landlords and improve the reputation of the sector. It would not be a burden on the majority of landlords but it would ensure that basic management competencies are met across the board.

  Extending the "fit and proper" concept to all landlords in this way was a key recommendation of the Commission established by Shelter with the support of the Joseph Rowntree Foundation.[13] It is supported by a wide range of interest groups including a number of bodies representing landlords and we hope that pre-legislative scrutiny will provide an opportunity to consider expanding the measures in the Bill along these lines.


  Research has shown that that 70% of the 2.2 million tenants in the private rented sector have paid their landlord a rent deposit at the start of their tenancy. The average deposit is around £510, and it is therefore estimated that landlords currently hold a total of around £790 million in deposit monies. This money is currently completely unregulated. Although most tenancies end without dispute, around 20% of households say that part or all of the deposit from their most recent tenancy was unreasonably withheld. The only way for tenants to recover their money if it has been unfairly withheld is to bring proceedings in the county court. In response to these concerns, the Government introduced a pilot Tenancy Deposit Scheme (TDS) in 2000, to establish whether it was possible to tackle these problems through voluntary regulation.

  The pilot scheme has been extremely worthwhile in developing a model that meets the needs of tenants, landlords and their agents. It has explored and tested different means of protecting deposit monies and developed an independent adjudication service under the auspices of the Independent Housing Ombudsman to deal with disputes, and has shown that a TDS can work in practice. Unfortunately, however, because it was only voluntary, few private landlords have participated in the scheme. This has also made it impossible to demonstrate that the scheme can be self-financing.

  Shelter has always maintained that statutory regulation of deposits would be the most effective way of ensuring that all deposit monies are dealt with equitably and fairly. This approach is also supported by a wide range of sector representatives, including the British Property Federation and the Association of Residential Letting Agents. We therefore welcome the suggestion in the recent consultation document, Tenancy Money: Probity and Protection, that because of the poor take-up of the voluntary scheme, legislation may now be required.[14]

  Recent statements by Ministers indicate their willingness to adopt a statutory approach. The period of consultation on the Government's proposals ended on 28th February 2003. Subject to the outcome of this consultation and pre-legislative scrutiny on the draft Bill, this provides an ideal opportunity to draft the necessary provisions in time for them to be included in the full Bill when it is presented to Parliament. By signing Early Day Motion 843, over 100 Members of Parliament have indicated their support for the scheme's inclusion in the Bill.


  Clauses 123-128 refine the existing legislation on overcrowding in HMOs. Although it will be possible to assess and tackle hazards resulting from overcrowding in other types of accommodation under the new HHSRS, the hazard score will continue to be used alongside the current statutory overcrowding standards which date back to 1935. These standards are in urgent need of modernisation. As Ministers have pointed out, our understanding of the need for space and privacy has come a long way since then, and yet the legislation remains unchanged. The effect on the health, education and well-being of the half a million households estimated to be overcrowded by the Survey of English Housing can be very severe.

  The risk of transmission of respiratory and infectious diseases as well as mortality and death rates are highly correlated with overcrowding. Longitudinal studies into the health impacts of poor housing have shown that overcrowding alone in early childhood can significantly increase the odds of developing severe ill-health, including heart disease and bronchitis in later life. It has also been linked to emotional problems that can cause developmental delays and bed wetting among children, and can affect children's educational attainment. Living in cramped conditions can make it hard for children to read or do their homework, and disrupted sleep patterns can mean they do not get the rest they need, all of which means they can fall behind in school.

  We therefore hope that Ministers will take the opportunity afforded by the draft Bill to address the issue of overcrowding not only through the new HHSRS, but by updating the present statutory definition and strengthening the legislative framework along the lines proposed in Andy Love MP's recent Housing (Overcrowding) Bill.[15]

4   Shelter's Submission to the Spending Review 2002. Back

5   Private renting: A new settlement; the report of an independent commission established by Shelter with the support of the Joseph Rowntree Foundation; Shelter, (May 2002). Back

6   Barnes v Sheffield City Council, Court of Appeal 1995. Back

7   Fire risks in HMOs (DETR 1997). Back

8   Ibid. Back

9   Licensing Houses in Multiple Occupation-England, DETR (April 1999). Back

10   Time for a Change: Reforming the Right to Buy , Shelter (Sept 2002). Back

11   Exploitation of the Right to Buy Scheme by Companies by Professor Colin Jones (Heriot Watt University) in March 2003. Back

12   Selective licensing of private landlords: A consultation paper, DTLR (2001). Back

13   Private renting: a new settlement, Shelter, (May 2002). Back

14   Shelter has produced a detailed response to Tenancy Monies: Probity and Protection. Back

15   Shelter has produced a detailed briefing on the Housing. Back

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