House of Commons portcullis
House of Commons
Session 2006 - 07
Publications on the internet
Public Bill Committee Debates

Draft Housing (Tenancy Deposit Schemes) Order 2007

The Committee consisted of the following Members:

Chairman: Mr. Greg Pope
Betts, Mr. Clive (Sheffield, Attercliffe) (Lab)
Cox, Mr. Geoffrey (Torridge and West Devon) (Con)
David, Mr. Wayne (Caerphilly) (Lab)
Davies, David T.C. (Monmouth) (Con)
Duddridge, James (Rochford and Southend, East) (Con)
Fabricant, Michael (Lichfield) (Con)
Follett, Barbara (Stevenage) (Lab)
Hoyle, Mr. Lindsay (Chorley) (Lab)
Lepper, David (Brighton, Pavilion) (Lab/Co-op)
McCafferty, Chris (Calder Valley) (Lab)
Marshall-Andrews, Mr. Robert (Medway) (Lab)
Munn, Meg (Parliamentary Under-Secretary of State for Communities and Local Government)
Rogerson, Mr. Dan (North Cornwall) (LD)
Shaw, Jonathan (Chatham and Aylesford) (Lab)
Spellar, Mr. John (Warley) (Lab)
Stunell, Andrew (Hazel Grove) (LD)
Syms, Mr. Robert (Poole) (Con)
James Davies, Committee Clerk
† attended the Committee

Fifth Delegated Legislation Committee

Wednesday 7 March 2007

[Mr. Greg Pope in the Chair]

Draft Housing (Tenancy Deposit Schemes) Order 2007

2.30 pm
The Parliamentary Under-Secretary of State for Communities and Local Government (Meg Munn): I beg to move,
That the Committee has considered the draft Housing (Tenancy Deposit Schemes) Order 2007.
For some years, the Government have been aware of bad practice by a minority of landlords and agents regarding tenants’ deposits. Last year, there were about 1.7 million assured shorthold tenancies—the standard tenancy in England and Wales—to which tenancy deposit protection applies. In 85 per cent. of those tenancies, 1.4 million tenants had paid a deposit. In England, that averaged £700 per tenancy, which is a big investment that tenants are entitled to receive back if they keep the rented property in good condition.
In recent Government surveys, 17 per cent. of tenants questioned felt that some or all of their deposit had been unfairly withheld. That equates to 246,000 deposits, and if just one half of those deposits, averaging £700, had been unfairly withheld, that would amount to £86 million. We would all miss £700 if it was not returned to us, but in some cases severe hardship results.
We decided, with cross-party agreement, that itwas time to provide statutory protection for tenants’ deposits through amendments in Committee and on Report in the other place to the Housing Bill, which became the Housing Act 2004. Landlords and agents will be able to choose between the custodial scheme and one of the two insurance-based schemes to protect their deposits, or they could use a mixture of all three if they have many deposits.
Mr. Lindsay Hoyle (Chorley) (Lab): Can the Minister help me? In most cases, charities provide the deposit. What benefit will the order bring to charities, which put so much of the money in? Perhaps she can give us the figure for the amount provided by individuals, and the amount provided by charities.
Meg Munn: Clearly, the protection of deposits will benefit charities because, provided the tenant leaves the property in good order, the money can be returned at the end of the tenancy. I do not have the figures to hand, but I may be able to respond to my hon. Friend later.
I shall describe how the schemes will work. Under the insurance scheme, the landlord or agent will hold the deposit, as now, and pay a fee to the scheme administrator who will ensure against any failure on the part of the landlord to repay such part of the deposit that should be repaid to the tenant. There are two insurance-based schemes.
Tenancy Deposit Solutions Ltd. is a partnership between the National Landlords Association, which sponsors the scheme, and Hamilton Fraser Insurance, which will administer it. It caters primarily for landlords, although letting agents can also join the scheme. Its fees for landlords and agents were announced last week.
James Duddridge (Rochford and Southend, East) (Con): For the sake of clarity, will the Minister outline those costs, because I am concerned about them?
Meg Munn: I will happily come to that.
The second of the two insurance-based schemesis the tenancy deposit scheme, which builds on a voluntary scheme that was established in 2003 to provide dispute resolution and complaints handlingfor the letting industry. It caters primarily for agents, although landlords can also join. Its fees for agents were announced on 1 February. Fees for landlords are expected to be announced soon.
The custodial scheme is run by the Deposit Protection Service. Its parent company is run by Computershare Investor Services plc, which has successfully delivered the Australian state of Victoria’s custodial tenancy deposit scheme for the past eight years. In this scheme, the landlord or agent pays the deposit into the scheme and the interest generated by the deposit pool pays for the running of the scheme. A percentage of the interest is returned to person—the landlord or tenant—who is entitled to the deposit at the end of the tenancy. The scheme is free to use by landlords and agents.
Each scheme will be supported by a free-to-use alternative dispute resolution service, funded by scheme providers. That is a statutory requirement under schedule 10 to the Housing Act 2004. The Act provides stiff penalties for those landlords or agents who fail to protect their tenants’ deposits in a scheme or who fail to provide their tenants with details of how their deposit is protected.
First, the landlord or agent will be unable to regain possession of the property using the usual “notice only grounds” available in respect of assured shorthold tenancies if they have either failed to protect the deposit within 14 days of receiving, or failed to provide the prescribed information to the tenant within 14 days of receiving the deposit. Secondly, if the court directs a landlord or agent to pay the deposit into a scheme and he or she refuses, the court must order the landlord to pay the tenant three times the deposit amount.
Getting the message across to tenants, landlords and agents is crucial to the success of tenancy deposit protection. We are employing a range of media to publicise it. Simple, easy-to-understand leaflets are available in eight languages and an advertising campaign will run across national, regional, ethnic minority and trade press and online until May 2007.
Secondly, a landlord or agent in the insurance-based scheme would be able to frustrate a tenant’s efforts to resolve a dispute by not bothering to indicate how they wish a dispute to be resolved at the end of the tenancy, thereby forcing the tenant to take the dispute to court. Thirdly, a requirement for the insurance-based schemes to protect deposits, even if the landlord has transferred protection elsewhere and the scheme is not receiving any membership fees, is commercially not feasible for an insurance-style scheme. We have acted on those concerns and brought forward three corresponding amendments to schedule 10 to the Act throughthis order, together with some minor consequential amendments. I will explain each of the three main changes in detail.
The first change is the single claim. The Act currently requires joint agreement for release of the deposit from protection at the end of the tenancy in the custodial scheme. If one party cannot contact the other to obtain joint agreement on the apportionment ofthe deposit—for example if the tenancy has been abandoned—the only recourse is for that party to go to court to release the deposit. The proposed amendment to schedule 10 will allow a landlord, agent or tenant to make a single claim application to the scheme administrator for all or part of the deposit to be paid to him when joint agreement is not possible.
At the end of the tenancy, the claiming party should try to obtain agreement from the other party regarding the release of the deposit. However, if after a periodof 14 days they cannot contact the other party, the claiming party can submit a single claim to the scheme administrator together with a statutory declaration which must include the information that is set out in the order about the tenancy and the communication attempts that have been made by the claiming party to reach agreement. It must also make clear why a single claim is being made.
The scheme administrator will immediately send the application and statutory declaration to the last postal address they have for the other party. If the scheme administrator receives no response, they will pay the amount of the deposit applied for to the applicant.If the other party does respond, and objects to the applicant’s claim, the dispute will have to be resolved before the administrator pays out the disputed part.
The second change is to make the use of alternative deposit resolution automatic for disputes in either scheme when both parties are still able to contact each other but one or other is refusing to communicate how the deposit should be paid out, or how they wish any dispute to be resolved. This change is applicable for both schemes. As the Act stands, when the landlord and tenant cannot agree who is entitled to the deposit at the end of the tenancy, but one of the parties does not indicate whether they wish to use alternative dispute resolution or the courts, the default position is that the dispute must be resolved through the court. That places the parties in no better situation than before the Housing Act was passed, so the changesnow require the parties to indicate to the scheme administrator how they wish any dispute over the deposit to be resolved. If the whereabouts of both parties is known, and if one party has agreed to resolve the dispute through the scheme’s free alternative deposit resolution service, but the other party has failed to indicate how it wishes to resolve the dispute, the scheme will treat the non-communicating party as having agreed to use the alternative deposit resolution. That will encourage the parties to stay in contact with each other and enable the majority of disputes to be resolved more cheaply and quickly than through the courts.
The third key change deals with a situation in which either a landlord or a scheme administrator wishes to cease protecting a deposit through an insurance-based scheme even if a tenancy is not at an end. Schedule 10 of the Act requires an insurance scheme to continue to protect its deposits until the end of the tenancy and when the deposit has been repaid even though a landlord might want to use an alternative scheme, or the scheme might wish to expel a landlord—for example, if they have breached scheme rules ornot paid their membership fees. That is a highly undesirable and unintended situation for a commercial insurance organisation. The order amends schedule 10 to allow a landlord to secure the deposit in one of the other schemes, and for the scheme administrator to end protection of the deposit before the end of the tenancy.
James Duddridge: The Minister is going through the detail, but I want to take her back to the broader picture. Are only shorthold tenancies covered or are other types of tenancy, too? Are the Treasury’s rent-a-room schemes covered? They would include a key group of people who are staying in accommodation only for the short term.
Meg Munn: I understand the hon. Gentleman’s desire for his questions to be answered, but the proposal is a bit technical and I can see that hon. Members are struggling to follow some of the technicalities. If he will allow me, I will continue with my explanation and answer his questions later if I do not do so in my response.
In addition to the three key changes, the order includes a small number of amendments; it clarifies what notices need to be served and how service of the notices is effected; and it expressly allows the schemes to provide for the adjudicator under the alternative dispute resolution service to decide whether it should consider, or continue to consider, a case. Although the alternative dispute resolution may be the default position, the adjudicator will have the discretion to decide whether to proceed or continue with a case referred to it.
Long-standing problems exist in the private rented sector with respect to the protection of tenancy deposits, so we have introduced measures to address the problem. Concerns were expressed about how schedule 10 worked and we have addressed them to improve the running of the deposit schemes.
My hon. Friend the Member for Chorley raised the issue of charities. We do not have specific numbers;the deposits they pay now on behalf of vulnerable tenancies are not protected but, under the new arrangements for tenant and deposit protection, they will be.
Mr. Hoyle: The Minister suggested that people would get interest on the money that they put in at the end of the bond? Will interest be given to charities in the same way if they have provided the bond?
Meg Munn: That is certainly my understanding of it. One of the benefits of the proposal is that the interest is protected. Clearly, if part of that deposit has to be paid to a landlord because of damage to a property or for any other reason relating to the tenancy—for example, unpaid rent and so on—the interest relating to that proportion of the deposit will go to the landlord. The tenant, or the charity that has paid on behalf of the tenant, will get the benefit of interest when the deposit is returned.
The hon. Member for Rochford and Southend, East asked about the cost of the scheme. As I set out, the custodial scheme is free to join. If a landlord or an agent wishes to retain the deposit—that is, not give it over into a custodial scheme— they can join one of two insurance schemes, so essentially there are three options. There is a custodial scheme, which is free and the deposit is handed over, or an insurance scheme, where the landlord or agent holds on to the deposit.
The tenancy deposit scheme costs are as follows. There is a standard joining fee for landlords, of which there are two types. One is for landlords who belong to the National Landlords Association and another for those who do not. A landlord who does not belong to that association will pay a joining fee of £58.75 and a deposit protection fee per deposit, including VAT, of £30. They will also pay an annual renewal fee, including VAT, of £14.70. The joining fee for landlords who belong to the association is £47; their deposit protection fee per deposit is £26 and their annual renewal fee is the £14.70 that it would be if they were not in the association. The hon. Gentleman raised some other points. If he will bear with me, I will come to them later.
Mr. Geoffrey Cox (Torridge and West Devon) (Con): Let us suppose there is a landlord who—and I should declare an interest in that I occasionally let out a cottage that I own—makes available a house once every year for a couple of months. How would the fees apply to that person? Many in my constituency occasionally let out properties but they do not do so all the year round.
Meg Munn: That goes to the point raised by thehon. Member for Rochford and Southend, East that only assured shorthold tenancies are covered bythe legislation. If the hon. and learned Member for Torridge and West Devon subsequently wants to clarify his point by contributing to the debate, I will be happy to respond in more detail in my closing remarks. In summary, this order will improve the working ofthe Housing Act. I therefore commend it to the Committee.
2.48 pm
Mr. Robert Syms (Poole) (Con): The Minister started by talking about the Housing Act 2004, which I spent many happy hours in various Committee rooms going through. This is the unfinished business of that Act and has taken some while to come about. Although I came here today with an open mind, having heard the explanation, I am not very happy with what is being suggested.
Most landlords, small letting organisations and small businesses providing property to people who cannot now get it through social housing, are trying to make a profit. Inevitably there is going to be some tension in the relationship between landlord and tenant. However, I think that the majority of landlords are good. There are of course a few rotten applies, but this is a perfect example of a few rotten apples being used to put a paraphernalia of bureaucracy and cost on small businesses. Therefore we are not happy with what is being suggested. I would much prefer voluntary arrangements. This order is a sledgehammer to crack a nut. I have to say that my colleagues and I are going to vote against it.
2.49 pm
Mr. Dan Rogerson (North Cornwall) (LD): My party’s view is opposite to that of the hon. Gentleman. However, I have to say that he is showing remarkable consistency as there has been a lot of change in recent Conservative policy. I note that he served on the Committee that considered the Housing Act 2004 and that he expressed similar concerns about this scheme.
There has been a huge amount of debate in the housing sector. It is clear that there have been problems, which is why the order has been brought forward. It is not just about protecting the tenants; it is about protecting the landlord, too. Often, tenants on low incomes who have been able to put together a deposit will later rely on it to move to a further tenancy. Losing some of that money as a result of a dispute with their landlord in their first tenancy will endanger their ability to move on speedily and effectively. The deposit is also there to protect the landlord’s interest, so anything that makes that more efficient and ensures that the landlord’s interests are protected—as well as those of the tenant, of course—will, I hope, ensure that both parties to the tenancy are protected.
It has taken a great deal of time for the order to come forward. The National Association of Citizens Advice Bureaux published a report in 1998, in whichit identified this issue as a growing problem. The Government’s response at that time was not encouraging in that they felt that it would be difficult to introduce a scheme and found all sorts of reasons why it could not happen.
The Minister has already referred to the Housing Act 2004 and, in its Committee stage, my hon. Friend the Member for Kingston and Surbiton (Mr. Davey) and the former Member for Ludlow, Mr. Matthew Green, proposed the introduction of such a scheme by moving a new clause. Unfortunately, the Government did not accept that new clause, so we lost an opportunity at an early stage to send a message to Shelter and Citizens Advice, for example, that the Government were prepared to take on their concerns and act. Subsequently, the Government reviewed their position and relented and the 2004 Act was amended to provide for the scheme to come forward. We have had to wait a long time for the order, but there is a great deal of support out there for it. Many organisations have been campaigning on this issue for many years.
Given that there are two types of scheme, will the Minister tell us what proposals are there to monitor the two, compare their effectiveness and ensure that there is best practice in terms of efficiency and saving money and that there will be the swiftest processing of any claims to ensure that both tenant and landlord get the best from the system?
My party supports this scheme, which is long overdue. We regret that it has taken so long to reach this stage given the Citizens Advice report in 1998. We will support the order.
2.52 pm
James Duddridge: I apologise if I did not declare an interest earlier. I rent a small property in central London.
I am concerned about this debate. Providing affordable housing is essential. I have never understood why there is a tradition of pushing people, culturally, into home ownership in the United Kingdom. It is essential that we retain a healthy rented sector. I do not want to move back to the bad old days, when absentee landlords would abuse their position. It is important that people moving away from the pensions industry feel able to invest in property to rent out and feel secure when doing so.
The order follows a long line of changes in legislation, including increases in stamp duty—making buy-to-let flats more expensive—increased costs when selling, and changes to freehold and health and safety in respect of houses in multiple occupancy. Forgive me, Mr. Pope, I appreciate your indulgence as I am straying off-piste. None the less, although the order will not make a significant difference to the background I have described, I wonder whether, when added to all the other elements, it will make a difference in reducing the supply of affordable housing for rent.
I am glad that the Minister said that the excellent rent-a-room scheme, which allows people to rent a room, is not included. However, I am concerned about other types of tenancy beyond the assured shorthold tenancy. I am not an expert in this area. My hon. and learned Friend the Member for Torridge and West Devon raised some issues about short-term lets, but those were on the basis of an assured shorthold tenancy, so I suspect that they would be included.
Michael Fabricant (Lichfield) (Con): For the sake of clarity, will my hon. Friend confirm whether he is renting or renting out a property in London?
James Duddridge: I am renting out a property in central London. I apologise if I was not clear.
The Minister went through the annual costs, but there is also the cost of the extra bureaucracy of landlords filling in forms. She rightly said that bad landlords are a minority but all landlords will face the cost of the bureaucracy and the lost opportunity cost of the interest that they would have received on the deposit in the past. Assuming that they were making a reasonable profit, that profit would have to be made elsewhere by including it in the rent. Therefore, there will be a cost to existing tenants.
Mr. Rogerson: I am interested to hear support forthe private rented sector, which I am sure that many Committee members will agree is an important and perhaps undeveloped part of the housing market in this country. Does the hon. Gentleman feel it is right for landlords to profit from deposits—in other words, to take the interest from tenants? Would he rather see that than have scheme by which tenants are able to get the interest on their deposit back?
James Duddridge: I was not passing judgment, but rather stating, as a matter of fact, that if the landlords take the interest on the deposit—although it is the tenants’ money—it represents part of the overall profit that the contractual relationship deems necessary. It might be more efficient for them to retain that interest rather than pass it on the cost of losing it and increasing the price of the underlying rent. It is much more simple to express the costs in the underlying rent.
Turning to implementation, will the Minister explain what will happen in place of shorthold tenancies, particularly in places such as central London, where they are rolled over year after year? If a shorthold tenancy and a deposit were put in place yesterday, or indeed last year, on renewal, will the arrangement be subject to the order or will only brand-new shorthold tenancies be covered? I thank you very much for your indulgence, Mr. Pope.
2.57 pm
Mr. Clive Betts (Sheffield, Attercliffe) (Lab): Along with the hon. Member for Poole, I too served on the Committee of the Housing Bill, which became the Housing Act 2004. It is interesting, as the hon. Member for North Cornwall said, that much has changed in Tory policy—or at least the veneer of Tory policy—in the past few months. However, one element appears to remain consistent.
The hon. Member for Poole was against a tenancy deposit scheme on a statutory basis then and he remains so today. He is in favour of a voluntary scheme, despite the fact that we had a good argument in Committee. I have been looking back through the Hansard records, which showed that there had been a pilot of a voluntary scheme before the Committee discussed whether a statutory scheme should be brought in. That pilot concluded that the scheme worked, as a pilot when landlords chose to join it. However, because it was voluntary for landlords to choose whether to join the scheme at the pilot stage, the reality was—surprise, surprise—that most landlords chose not to join it. Only those landlords who were well behaved and responsible chose to join and therefore the scheme worked as a voluntary scheme on that basis alone.
It was clear from evidence heard at the time, and remains true, that there was a real problem out there. Surveys of tenant attitudes were done before the Committee investigated the matter and they found that 20 per cent. of tenants felt that at the end of their tenancy, the deposit they had put down had been unreasonably withheld. Tenants may be wrong in those accusations, but that is what they felt. They also felt that they had nowhere to go.
The reality is that for many years, tenancy deposits have been a rip-off. Landlords have treated them as part of their rent and as something that they can keep as a right. Tenants have shrugged their shoulders and accepted that as well. There has been the route to the small claims court, but that is time consuming and relatively expensive and much more difficult for many tenants to go through than it is for a landlord.
This order, and the Act on which it is based, are about restoring a balance of power between landlord and tenant. It will provide real protection for some of the poorest and most vulnerable people in our society. At the same time, it will offer real protection for landlords who are badly treated. If the tenants mistreat the property during the course of the tenancy, landlords have nothing to fear.
The order is about dealing with the bad landlords in this world. The good ones will find that they get to keep the deposit if the tenant has indeed caused damage to the property. There is nothing to fear in that regard. Therefore, there is nothing in the measure that should lead to fear about reducing the supply of private rented accommodation. People have only to look around our major cities, including London and my own city of Sheffield, to see that the supply of private rented accommodation is increasing at present. Nothing in the order or in the 2004 Act will push us in the opposite direction.
The scheme has led, and will lead in future, to a better balance between landlords and tenants in resolving issues. Because the scheme exists and because landlords know at the beginning that there is a method of resolving disputes, that will lead to better behaviour on both sides, in the knowledge that there is a fair system for resolution.
The scheme is right in principle and I support the order because it attempts to get the right practical measures in place to ensure that that principle works. Ultimately—the Tories are consistent on this matter and others as well—when push comes to shove, they will side with the wealthy rather than with the poor and with the powerful rather than with the powerless. It is as true on this issue as it is in respect of many others. The Opposition have demonstrated their true position on these matters again this afternoon.
3.1 pm
Mr. Cox: First, I apologise for not being here at the beginning; I was detained while travelling.
May I begin by saying that I sympathise with the intent of the order? As with so many regulations that have been introduced, I do not think that anybody wishes to doubt the true and sincere intent to protect vulnerable people. I have no doubt about that. One often sees regulations being introduced for that purpose. However, I am concerned about what the practical consequences will be.
The hon. Member for Sheffield, Attercliffe is on a different planet from me—
Mr. Betts: Thank God!
Mr. Cox: The hon. Gentleman may be glad about that. However, I say that from our experience of housing and housing shortages. The hon. Gentleman represents an urban constituency and I represent a very rural one—the second largest in England. I ask him to accept that, in my rural area, people’s experiences, of the kind that he is describing—those who desperately need housing and cannot afford to get on the property ladder—are increasingly that they cannot find private rented accommodation within their reach. Housing benefit provisions usually do not cover the full rent.
Countless times, I have seen people from rural areas in my surgeries—as the hon. Gentleman will have seen in his—saying, “We just can’t afford private rented housing.” There is such a shortage of such housing in the rural area that I represent that we are in desperate straits in respect of getting any kind of acceptable housing at all. The hon. Gentleman and the Minister may tell me that my concern about this scheme is misplaced, in which case I shall be relieved. However, my concern is genuine and is, I ask Labour Members to understand, solely about whether the order will make private rented housing even more difficult for families to find in the sparsely populated rural area that I represent. If I could be persuaded that the order would not make more scarce an already very scarce resource in my constituency, I would be prepared to lend my tentative support to a scheme such this, but I am deeply concerned that it will lead to private rented housing becoming more scarce still.
I ask the hon. Member for Sheffield, Attercliffe to accept the truth that Torridge and West Devon is one of the most deprived areas in the south-west. The hon. Member for North Cornwall, whose constituency is adjacent to mine, will have had similar experiences. I do not see too many disputes arising over the deposits, but I do see desperate families afflicted by a want of adequate housing, utterly distraught at the conditions in which they find themselves.
Mr. Betts: I was not implying that there are not housing shortages in some areas. The issue is whether the measure will add to that shortage. It provides a easier method of dispute revolution at the end of a tenancy. There is a method now, but the small claims court is relatively complicated and time-consuming. The hon. Gentleman ought to reflect on that point. Even if there would be a slight impact on the supply of housing, we must consider whether that is an excuse for denying the important rights of tenants.
Mr. Cox: I reflect on those two matters. I said at the beginning that I acknowledge the case to be made for some kind of scheme because it is despicable when deposits are retained by landlords and not returned to the tenant in circumstances that are not justified. That is clearly wrong. It places on tenants a difficult burden when trying to recover their deposits. I am not sure whether the small claims court could not be made more simple to use for tenants. A special procedure could be operated in the small claims court possibly with the assistance of Citizens Advice, which is tremendously helpful in my constituency to people who are so affected.
I am concerned that particularly in rural areas in the south-west it is by far the preference of people who own properties to use them for holiday lets. That is one reason we have such a shortage of private rented accommodation. It is more profitable to let property for holidays, and it is much easier to do so. People have more protection if they do so because the occupiers are frankly unlikely to trash the place or abuse it. The danger is that the measure will tip more landlordsin small villages and sparsely populated rural communities into not making rented accommodation available for vulnerable people. I see the matter from that specific perspective. The problem might not exist so much in urban areas such as that represented by the hon. Gentleman.
Mr. John Spellar (Warley) (Lab): Will the hon. Gentleman give way?
Mr. Cox: Let me complete the point. I shall then give way. I hope that the Minister will accept that my current opposition to the scheme is based on a genuine concern that is related specifically to what I experience in my constituency. I am concerned that landlords will be deterred by the cumbersomeness of the scheme and the fees that they will have to pay. Will the fees be reflected in the rent? Will the fees for the insurance scheme mean that the landlords, by one means or another, will put up their rent? If the scheme results in an increase in rent, it will afflict the very people that the regulation is intended to protect—those who cannot afford rented accommodation and whose housing benefit does not cover it.
Mr. Spellar: Yes, but the hon. Gentleman is putting the cart slightly before the horse. He talks about those who cannot afford to buy, but one reason they cannot afford to buy is that private renting is forcing up the price as landlords are buying more property on a buy-to-let basis. There would have to be a balancing exercise if, as he anticipates, there will be a reduction in houses to let. They will then be put out into the market and help to lower the price. However, in many ways that is rather superfluous to what is an administrative matter. The best way to deal with the imbalance between supply and demand is to build more properties in the area.
Mr. Cox: I agree that we should build more properties, certainly in rural areas. Since I have entered this place, I have been a consistent advocate for building houses, particularly in villages. The problem is that the regional spatial strategy in most regions tends to focus on larger towns and conurbations.
Mr. Spellar: Will the hon. Gentleman clarify whether that is official Conservative policy?
Mr. Rogerson: Will the hon. Gentleman give way?
Mr. Cox: Not now.
That is the fear that I have. The costs will deter landlords from making that type of accommodation available, which could lead to rent increases. I am not convinced that it will lead to the universal benefits of those whom I represent and that is why I currently intend to vote against.
3.10 pm
David Lepper (Brighton, Pavilion) (Lab/Co-op): May I first declare an interest, which differs from the one declared by the hon. Member for Rochford and Southend, in that I rent a flat in London?
James Duddridge: Not mine.
David Lepper: I am happy to accept that clarification. I am one of the three MPs who represent a city. My constituency of Brighton and Hove has, I believe, the highest proportion of people living in privately rented accommodated outside London. I am not sure whether it is a case of being on a different planet, but all too frequently my work involves tenants who feel, rightly or wrongly—usually rightly—that they have been done out of the return of a deposit to which they have a right. I know that many of my constituents, and agencies in my constituency, such as Citizens Advice, will welcome the proposals.
My contribution will be brief because my hon. Friend the Member for Sheffield, Attercliffe has said most of what I would have wished to say. However, I believe that my local authority was part of the voluntary scheme that we have been talking about this afternoon. The scheme worked quite well, but as my hon. Friend has said, it was the good landlords, for whom no scheme is needed, who chose to join up rather than those who had deprived many of my constituents of the deposit to which they felt they had a right at the end of their tenancy.
Even in the 10 years that I have been in the House, we have heard again and again from Opposition Members that this or that legislation on the rights of tenants and leaseholders will lead to a shortage of properties becoming available, and higher rents or service charges. Again and again, as far as I can tell, that has not happened. We are seeing the same scare tactics this afternoon.
I welcome the proposals on behalf of many of my constituents and other residents of the city of Brighton and Hove, who will now feel that they have extra protection.
3.13 pm
I do not currently rent accommodation. However, many years ago, when I was renting, I had to pay a deposit on a gas bill because the gas company was concerned that we might disappear without paying the bill. It was a significant amount to pay when I was not on a very large wage. I remember negotiating with the gas company to pay us interest on the deposit, which was better than what I would have received from a bank. In that case, we wanted to give them more money rather than less.
This is an important issue. I welcome the comments made by the hon. Member for North Cornwall, and the support that he offered. He asked how the schemes would be monitored. The Department has a contract governance mechanism to ensure effective operationof both schemes, which includes regular meetingswith scheme managers, a monthly performance management regime, and an annual review of performance. The performance regime has strict service levels by which the service providers must abide. I hope that that reassures him.
The hon. Member for Poole maintained his position of preference for a voluntary scheme. I can do no better on that point than support the comments of my hon. Friend the Member for Sheffield, Attercliffe, not just because he is my neighbour—in more senses than one—but because he has followed the issue, and he argued powerfully for the position that we are adopting. Support also came from my hon. Friend the Member for Brighton, Pavilion, who likewise has a lot of experience of the private rented sector.
Michael Fabricant: For the sake of clarity on a matter that is of some concern to Opposition Members, will the Minister tell us how she is the neighbour of the hon. Member for Sheffield, Attercliffe in more senses than one?
The Chairman: I advise the Minister that she does not need to answer that question.
Meg Munn: Only in the sense that our offices in Sheffield are near each other. I am sorry if that disappoints hon. Members who thought that there might be a more interesting answer.
The hon. Member for Rochford and Southend, East raised a number of issues. He asked about the additional bureaucracy that the proposals will entail. There should be a process whereby all good landlords and letting agents set out the details of the tenancy, such as arrangements for rent payment and so on, at the outset of a tenancy. The proposals require only a small additional amount of work in that process. We are trying to protect both parties. Hon. Members have rightly said that there should be a balance whereby the vulnerable in society are protected, and I agree with that. However, the proposals also provide a means for landlords to protect their position. It is a minor matter to include the additional steps in the pro forma documents that a tenant completes at the outset of a tenancy. Should landlords not wish to pay anything to enter an insurance scheme, they can consider the custodial scheme, which is free.
Roll-over of tenancies and when the proposals will come into force were also mentioned. Only deposits relating to assured shorthold tenancies entered on or after the 6 April 2007 need to be protected; continuing tenancies will not be covered unless there is a new agreement. If a new assured shorthold tenancy is created, however, the deposit protection scheme will apply.
I take seriously the concerns that have been raised by hon. Members about the number of tenancies in the private rented sector, and whether there will be a reduction in their supply. The hon. and learned Member for Torridge and West Devon questioned whether more support would be given to people entering holiday lets rather than shorthold tenancies in his part of the country. The private rented sector was £2.3 million in 2003-4 and is now £2.6 million, so we believe that the measure is unlikely to deter people from offering tenancies, as my hon. Friend the Member for Sheffield, Attercliffe said.
Mr. Hoyle: The hon. and learned Member for Torridge and West Devon made a point about people wanting to use holiday lets. The reality is that people try to have holiday lets in the summer and renting tenants in the winter. Such people want it to be easy to get rid of tenants when they have the prospect of earning extra money in the summer—they want the best of both worlds.
Mr. Cox rose—
Meg Munn: May I speak for a moment before giving way? I do not know whether what my hon. Friend said is the case. However, we know from our experience of speaking to local authorities in Cornwall, for example, that many deposits are not repaid when properties are expensive to buy. That sometimes happens to European seasonal workers who have little or no English, so this is an important issue that affects the whole of England.
Mr. Cox: Does the Minister agree that it does not require very much more to induce landlords who make property available in the private rented market to do something else with their property, particularly when housing benefit, which can in itself be a deterrent to private renting, is involved? In my constituency, it is easy to let a property for 10 months of the year on the holiday market. Does she accept that in rural areas, which perhaps does not include Sheffield or other urban areas—
Mr. Hoyle: Lancashire?
Mr. Cox: And Lancashire. In rural areas, where landlords have a choice, the likelihood is that they will turn to the easy availability of renting on the holiday market.
Meg Munn: I do not accept the hon. Gentleman’s premise. The private rented sector has increased. The scheme is supported by key landlord and agent organisations because they see the benefit of a regulated, easy-to-operate scheme that protects all parties.
Mr. Rogerson: I am grateful to hear that the Minister consulted local authorities in Cornwall, because housing has been a problem in the area. Does she agree that, in rural areas such as Cornwall, there is pressure to convert holiday lets and hotels into flats for let? In fact, we are seeing the opposite process to that outlined by the hon. and learned Member for Torridge and West Devon—there is a reduction of holiday beds andmore people in the buy-to-let market. The enabling legislation—the Housing Act 2004—has been in position for three years and was a strong signal to landlords. However, it has not deterred them.
Meg Munn: I entirely agree with the hon. Gentleman, who clearly knows what is happening in Cornwall better than I do. He is absolutely right in that the order has been signalled for three years, so people thinking about renting out properties will have taken it into account.
I want to clarify one or two points that I am concerned have not been made quite as clearly as necessary. The order does not include the rent-a-room scheme and refers only to assured shorthold tenancies. I gave the fees for the insurance scheme for landlords and, for the sake of completeness, it might be helpful for me to clarify the fees for agents. Some landlords choose to place their rented accommodation with agents who then conduct all the relevant processes on their behalf. Agents who are members of accredited organisations pay £100 per branch, excluding VAT, to join. The deposit protection fee is £20 per deposit, excluding VAT, and there is an annual renewal fee of £50. The corresponding fees for unaccredited agents are £150, £30, and £75.
My hon. Friend the Member for Chorley made a point about charities. The payment of interest is a matter for the landlord when a tenant’s deposit is placed in a custodial scheme; that is when the landlord holds on to the money but insures against it. I hope that that clarifies the situation.
James Duddridge: Again on the issue of costs, the Minister mentioned an extensive media campaign involving television and press. Will she give an indication of the additional costs involved in that?
My second point may be a red herring, but the Minister can correct me if it is not the case: what would it cost the Treasury in deposits paid to local authorities that rent out properties for social housing through the private sector? Presumably, an inflated cost will result from the extra burdens being carried by the private sector. The cost of renting accommodation from a local authority that uses the private sector will go up. Presumably, there will be a knock-on cost for the Treasury. The Minister is looking slightly confused, so perhaps I have got that wrong. Perhaps she will clarify the matter.
Meg Munn: I was looking slightly confused because I am not sure to what situation the hon. Gentleman is referring. The issue is about arrangements for assured shorthold tenancies, and I am not clear that the circumstances he described are covered.
I do not have the figures for advertising costs but, as for any scheme, it is important that people are awareof it and that people comply. There will be other mechanisms that will have minimal costs by which landlords who are part of organisations can be made aware of the scheme. As the hon. Member for North Cornwall said, the order has been signalled for some time, so there should in any case be an awareness that the scheme is coming into being.
Question put:—
The Committee divided: Ayes 10, Noes 4.
Division No. 1 ]
Betts, Mr. Clive
David, Mr. Wayne
Follett, Barbara
Hoyle, Mr. Lindsay
Lepper, David
McCafferty, Chris
Munn, Meg
Rogerson, Mr. Dan
Shaw, Jonathan
Spellar, rh Mr. John
Cox, Mr. Geoffrey
Duddridge, James
Fabricant, Michael
Syms, Mr. Robert
Question accordingly agreed to.
That the Committee has considered the draft Housing (Tenancy Deposit Schemes) Order 2007.
Committee rose at twenty-eight minutes past Three o’clock.

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2007
Prepared 8 March 2007