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24 Jun 2008 : Column 7WH—continued
to promote greater institutional investment in the private rented sector”.
I want to spend a moment examining that proposition. Ever since the sector was liberalised in the 1980s there has been an imperative to get serious, respectable, long-term institutional funds invested in property for rent. If quoted companies and pension funds would invest in that sector of the market, that would provide responsible and stable institutional funding, underpinning or replacing the rather fragile investment to which the right hon. Gentleman referred. Of course they would employ good agents to manage the property—possibly registered social landlords. That would generate additional investment in housing.
The right hon. Gentleman focused on HMOs in Oxford, but I hope that he will forgive me if I consider the slightly broader aspect of his debate—the regulation of the private rented sector—rather than wandering around Headington, Cowley, Blackbird Leys and other attractive areas in his constituency. When the Conservatives left office 11 years ago most of the spadework for the new framework for the private rented sector had been done. We had consulted the Council of Mortgage Lenders, the British Property Federation and the City, and the response was very positive. There was all-party support for a new fiscal regime for what were called real estate investment trusts. There were models for the approach in other parts of the world, and this country pioneered investment trusts for shares. A REIT is in effect an investment trust for property.
After some delay the Government took the debate forward, and I give them credit for that. We had the Kate Barker report, and then in March 2004 the Treasury produced a consultation paper, which stated at paragraph 1.14 that a real estate investment trust
“structure in the UK would therefore set a challenge for the industry to encourage development of new housing, which could...be managed within”
a REIT structure. It continued:
“Improvements and expansion to this sector could enhance efficiency and flexibility in the housing market”
“The Government is keen to encourage greater renewal in the property sector, and the development of new...residential buildings”.
Finally, it said that the Government wanted
“to stimulate greater development activity in the residential market providing a vehicle into which new properties can be converted and managed more efficiently.”
It is a matter of deep regret that some two years after the Finance Bill 2006 changed the regime for REITs, there has not, to my knowledge, been a single REIT investing in residential property. There have been several REITs, but they have been for commercial property, where there is not the same demand for fresh investment. If one wants to invest in commercial property there are many vehicles for that, and there is no shortage of institutional capital for commercial property as there is for accommodation for rent. Why has the Kate Barker vision not been achieved? Why have the Government’s ambitions, as described in the passages I quoted, not been secured? Will the Minister now kick-start the debate to get respectable institutional funders engaged in the market, to the benefit of those who need good-quality accommodation for rent?
The right hon. Gentleman referred to the review of the private rented sector that the Government have announced. I am not absolutely convinced that the issue of increasing investment and supply is at the top of its agenda. The fourth in a series of bullet points asks:
“Given the recent regulatory changes, what more should or could be done to ensure a professionally managed and quality sector to meet demand pressures?”
I do not think that that quite takes the trick as to the urgency of reviewing the fiscal regime and restarting the dialogue with potential investors to get things going.
I have a brief final point to make. We need to harness the resources of the private rented sector much more effectively than we have so far, to help those in desperate housing need. Many local authorities have developed a dialogue with their private landlords, who have rent deposit schemes, rent guarantee schemes and the like. All too often, however, local landlords are still reluctant to take nominees. I hope that the Minister will do all that he can to promote a wider and deeper partnership between local authorities and responsible private landlords, to make sure that good-quality accommodation is made available to those who are confronted with homelessness, and that there is not exclusive reliance on the social rented sector. I wonder whether it is time to dust down a scheme called HAMA—housing associations as managing agents—by which the local authority or housing association takes a lease on a property owned by a private landlord and guarantees the private landlord the income stream from the rent, vacant possession when he wants the property back, and the return of the property in the same good condition as when it was leased.
The scheme has much to commend it. The landlord gets a reliable tenant with a guaranteed income stream, namely the local authority, and, crucially, the tenant, who may well be vulnerable, gets a responsible managing agent, namely the housing association or local authority. It seems to me that there is merit in driving forward that scheme, or re-activating it if it is not being used as extensively as it might. Given the amount of property overhanging the market, some of it might be acquired using back-to-back finance from the local authority.
I welcome this debate. There is a case for reconsidering the regulatory regime; it is somewhat ramshackle. I have no objection to the sort of review proposed by the right
hon. Gentleman, but given the state of the housing market, a review of regulation needs to be accompanied by radical measures to increase supply.
10 am
Dr. Alan Whitehead (Southampton, Test) (Lab): I was anxious to be present at this debate, although I apologise to you, Mr. Benton, and to hon. Members that owing to Committee commitments, I cannot be present for its entirety. I congratulate my right hon. Friend the Member for Oxford, East (Mr. Smith) on securing this debate. I shall add a few thoughts to his excellent contribution.
The problems in my right hon. Friend’s constituency are problems that I share in mine. Communities and streets in his city and mine change in character over time as a result of how homes change in use. Often, landlords purchase properties, undertake no work on them whatever and change their character completely by placing six or seven people in them, where perhaps a family or two or three people had lived there before. That has an effect on the property not only in terms of the change in management, the exterior view and how it fits into the community around it but in terms of the planning aspect, how many cars are outside and how the health and safety arrangements and environmental health are managed. It has a variety of effects in areas that, if not for that change of use, would be the proper province of our planning laws.
Mr. Andrew Smith: I am prompted to intervene by my hon. Friend’s reference to parking. I do not know whether this is the case in Southampton—I imagine that it is—but parking is another problem in what are often dense residential areas. The solution is often the introduction of a residents parking scheme. Under such schemes in Oxford, each of the residents of multiply occupied houses is entitled to apply for a permit, and then we wonder why there is not enough space on the road to park all the cars. It is because they are crowding out other residents.
Dr. Whitehead: My right hon. Friend makes a strong point. If half the residents who move into such a property have cars, the number of cars on that property doubles, as does the number of spaces required to park them if there is no off-road parking, with the effects that he described.
I should say immediately that it is not that steps have not been taken in recent years to recognise how rented accommodation affects communities and how tenants in rented accommodation, and indeed good landlords, can be protected properly. I take on board the suggestions made by the right hon. Member for North-West Hampshire (Sir George Young), who emphasised that a good and viable rental sector must operate in order to fill the needs of a section of the population, and that the landlords of those properties need reasonable circumstances in which to rent them. I suggest that the Housing Act 2004, among other things, created circumstances that benefit good landlords and disbenefit the occasional bad landlords who, unfortunately, purchase properties with no thought for how they might be managed and then simply let them run down, with the consequences that I have described.
The tenant deposit scheme has benefited good landlords and tenants alike, and has worked well. Under the registration system introduced in the Housing Act 2004,
good landlords can be licensed and participate in arrangements to ensure that properties are well maintained as far as health and safety and environmental features are concerned. I suggest, however, that those schemes do not take into account a good proportion of what any member of the public realises to be homes in multiple occupation. That is a central feature of this debate. A house occupied by six or seven people is, by anybody’s reckoning, a house in multiple occupation, yet in law it may not be, depending on what kind of law is applied.
The Housing Act 2004 introduced a new definition, for registration purposes, of a house in multiple occupation: it is a house in which a number of people live who are unrelated to each other, whether or not they live as one household. Under planning law, a house in multiple occupation must be divided into separate flats, and each person in that house must have separate services. Otherwise, in most circumstances, the house is regarded under planning law as a house in shared occupation and not a house in multiple occupation.
That means that virtually all student houses in cities such as Oxford, Southampton and Brighton are not regarded as houses in multiple occupation for planning purposes, when everybody can see that they are. A landlord who wishes to purchase a property and move in six or seven people—they may well be students, although I do not wish to make any anti-student comments, because it is extremely important that students have somewhere to live in the cities where they study—can do so without making any changes to the house or being subject to any planning regulation whatever.
A full registration under the Housing Act 2004 makes it possible to register smaller HMOs under the definition in the Act. As my right hon. Friend said, there is still some concern about whether the registration of a whole city is what was envisaged under the Act’s special registration arrangements, or whether particular red-lined areas of HMO stress might instead be the concentration.
The effect on Southampton can be seen in terms of those two possibilities. It is certainly true that Southampton has areas of high HMO stress. On one street, for example, some 55 out of 75 homes are now HMOs. In one small estate, built relatively recently in my constituency, out of 25 houses, 19 have now been purchased as HMOs, and as a result the whole nature of the estate has changed rapidly within just a few years. In Southampton, out of an estimated 12,000 HMOs, only 500 are registered under the Housing Act with its current definition.
If we were to align the definitions in the Housing Act with those in planning, and recognise that in reality there is a change of use when a house is purchased and placed under the sort of management that I have described, matters could be very different, and local authorities could regulate to a much greater extent how that change takes place. Of course, that would place an onus on local authorities to institute a sensible planning framework in which those changes could be reflected. They would also have to address questions about, for example, the number of HMOs in a particular area relative to properties in other kinds of use and about planning arrangements.
The simple fact that planning and housing legislation were aligned would not mean, of course, that all local authorities would have to put in place those arrangements. Many local authority areas have a low HMO density, so it would not make much sense, and would serve no great
purpose, to have an excessive regulatory regime in such areas. However, to provide local authorities with the ability to say to a landlord, “You need planning agreement for your proposed changes; we will not necessarily withhold it, but we will consider their wider effect on the community first,” would represent a modest but important change to the regulation of this market.
Ms Barlow: Would it not be useful to consider housing needs as well as the HMO density? I come from a city with more than 10,000 people on the waiting list, and a large number of families in my area are living six to a two-bedroom flat, for example, and need larger properties. The size of properties on offer is also important.
Dr. Whitehead: My hon. Friend makes an important point, and we ought to consider the economics of many such arrangements: seven people paying fairly substantial sums per room in a property where they live and share facilities will always effectively outbid a family under the same sort of circumstances. I do not blame landlords for choosing that route—that is the economics of their housing arrangement—but nevertheless it changes the complexion of neighbourhoods. Furthermore, families who might otherwise reasonably expect a house to be available on the rented market find themselves excluded. Although it is important that the rented market overall is kept healthy, surely it is not right ultimately that such distortion should be endemic, as it appears to be, in the rented market.
Modest changes in the way that local authorities can consider the operation of HMOs would be widely welcomed in many towns and cities across the country. I welcome the Government’s recent announcement of a review of the presence and effect of HMOs, and I hope that consultation papers will follow. If that ameliorates the situation, I will welcome it greatly. None of the suggestions heard today are panaceas that will return communities to an imagined past in which people skipped down the street happy and contented, with their front walls beautifully kept up and hedges trimmed. However, they might change the circumstances under which people view their communities, so that everyone—be it those living in student houses, rented properties, either as families or individuals, or owner-occupiers—can live in greater harmony, understanding the circumstances applying to each of their forms of tenure. If we can make that change, we will have taken a very welcome step forward for housing and communities.
10.15 am
Lembit Öpik (Montgomeryshire) (LD): Once again, I welcome the Minister to our weekly Westminster Hall housing debate. Life would not be the same without it—indeed, I propose that even during recesses we set aside one and a half hours a week to have these conversations. I also congratulate the right hon. Member for Oxford, East (Mr. Smith) on raising this debate, which we have had before under other circumstances, but which has been brought into sharp focus today. I wish to challenge the Minister on matters that we discussed during proceedings on the Housing and Regeneration Bill, when the Government made it quite clear that they were resistant to further regulation of the private rented sector. That sets the context for this debate.
HMOs are obviously an important element of the overall housing stock, and without them the pressure on that stock would be even greater. However, HMOs are also home to some of the most vulnerable tenants, including those with mental health problems, drug or alcohol dependency and learning difficulties. Furthermore, occupants of houses comprising bedsits are six times more likely to die as a result of fire than adults in an ordinary house. Some 35 per cent. of all fire deaths, and 39 per cent. of all fire injuries, occur in HMOs. In 2001 alone, more than 22,500 fires broke out in HMOs resulting in 116 deaths and more than 4,700 injuries. A risk assessment on fire safety in HMOs carried out by Entec for the then Department of the Environment, Transport and the Regions concluded that in houses converted into bedsits the risk of death is one in 50,000—six times higher than in comparable single-occupancy houses. However, in bedsits comprising three or more stories, the risk is one in 18,600—16 times higher than in single-occupancy houses. Those figures are really quite shocking.
Ms Barlow: I have worked extensively with Sussex fire brigade on the problem of fires in HMOs and had experience of a terrible fire in an HMO in Hove before becoming an MP. Does the hon. Gentleman think that the statutory introduction of fire sprinklers in HMO conversions and new builds would solve some of the problems?
Lembit Öpik: The hon. Lady speaks from personal and tragic experience in her constituency and makes a very sensible point. Her strategic suggestion is that regulation is required to reduce the risk of death and injury resulting from fires in HMOs. I am sympathetic to such an idea.
Why are the Government willing to preside over such a differential in relative risk between single-occupancy houses and those under state regulation, and the private rented HMO sector? Are the Government really not willing to legislate? In the Minister’s defence, Britain is in the grip of a housing crisis. We need to be more imaginative in finding solutions to that problem, and that means increasing housing density and making the most of brownfield development and the maximum use of the UK’s 850,000 empty homes. However, we must recognise that the Government are under pressure, because although the Minister is unlikely to admit it, if they were to regulate HMOs and deal with overcrowding, it would add to the housing crisis. If accommodation density were reduced to improve its quality, the people displaced from such overcrowding would necessarily have to join the homeless list. I am sympathetic to the unspoken argument that the Government have to address, but we must recognise that they have a choice: either they can tacitly accept that the absence of regulation is, in some ways, necessary if the housing crisis is not to be exacerbated; or, more courageously, they can admit that because the private rented sector plays such a vital role by providing homes for more than 2 million families, it is difficult to see how one can square the circle.
My second question is therefore whether the Minister is willing to be candid and to acknowledge that one consideration, limitation and resisting factor to such regulations is the Government’s private acceptance that to introduce them would make the homelessness problem
even worse. There is no shame in admitting that. If the Minister were to say so, I do not see how it could be harmful, because after all, successive Governments have done exactly the same. If the Government do, and the Minister can, admit it, however, we can start talking about what we can realistically do to use the private rented sector—regulated, as it could be—as part of the solution, while handling the difficulty of causing more displaced individuals and homeless people. If we can improve the image of the rented sector by encouraging best practice and making the most of new legislation, the benefits for Britain’s housing market could be significant. The benefits for the residents would be unquestionable, but more than anything, we could seriously start to close the differential between houses and homes under state regulation and those in the private rented sector, which as right hon. and hon. Members have pointed out, remain largely unregulated.
I want to think about some specifics and to ask the Minister three further questions. The tenancy deposit scheme that was introduced in the Housing Act 2004 offers real opportunities for landlords and tenants—the issue has been touched on indirectly already—because it will protect both the reputations of good landlords and those tenants who might have had bad experiences. It will also encourage landlords and tenants into the sector. The scheme should be not an encumbrance but a promoter of good practice and a safeguard for tenants and landlords if problems arise. As far as I can see, however, it has not had a very wide take-up. Does the Minister have a view on that? If so, does he agree that we should more assertively drive that very useful element of the 2004 Act, which the Government introduced, in order to improve the relationship between landlords and tenants and to give landlords more confidence to rent out their property, even if they have previously had bad experiences? That could release accommodation and improve the situation.
The Minister may know that with one quarter of the energy that we use in this country being consumed in our homes, the Liberal Democrats believe that energy efficiency in the home is fundamental to tackling climate change. As part of the drive to create homes that are more energy-efficient, we would introduce a scheme to reassure householders that standardised packages will improve energy efficiency. We propose an energy mortgage: a long-term loan, secured on the property and repaid through the household’s energy bill. Such a “warm home” package would normally ensure that the householder’s energy bill falls by at least as much from the reduced energy use as it rises to pay for the energy saving package. Does the Minister have a view on that? It would take away the large up-front cost when the money was invested and ensure that it was paid back in a sensible and measured long-term way. It sounds like common sense to me, and I cannot see how the Government can achieve their environmental targets unless they take on a similar scheme. I hope that the Minister will say whether he has any sympathy with that Liberal Democrat proposal.
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