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Westminster Hall

Thursday 6 November 2008

[David Taylor in the Chair]

Rented Housing

[Relevant documents: Eighth Report from the Communities and Local Government Committee, Session 2007-08, HC 457, and the Government response, Cm 7326.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Helen Goodman.]

2.30 pm

Dr. Phyllis Starkey (Milton Keynes, South-West) (Lab): In opening this debate, I should like to put the report in the context, first, of the work of the Select Committee on Communities and Local Government and, secondly, of the wider situation. While the report was being written, and certainly subsequently, a great many other reports have been published and there have been other developments that relate to the topic.

To put the report in the context of the Committee’s work, it follows our earlier report on the affordability and supply of housing which focused largely on the housing numbers that are needed for affordable ownership, although it also recognised the additional numbers that are needed for affordable renting. Of course, we all know that home ownership is incredibly important and that the majority of people, if they do not already own a house, aspire to home ownership. That is not everyone, however, so it is extremely important to look at the social and private rental sectors which, between them, cover 30 per cent. of the housing stock and meet crucial housing needs. That is why they were the subject of the report.

The report was published in May 2008. We began the inquiry in autumn 2006, and held a total of seven oral evidence sessions and went on three visits. Our first visit, to an inner-London housing estate, was organised by my hon. Friend the Member for Regent’s Park and Kensington, North (Ms Buck). We are grateful to her for organising meetings with a variety of tenants so that we could understand the problems that private sector tenants face in that part of London, although I am sure that the experience is relevant to other inner-London areas. Secondly, we went to the north-west, to Manchester, and looked, among other things, at city-centre housing developments and one of the pathfinder areas. Thirdly, we went on a visit to the Netherlands. It was extremely interesting to see how its social housing organisations operate, and we drew particular attention to a couple of lessons from the Netherlands experience in our report.

I should briefly mention other relevant reports and documents: Professor Hills’s review on the future of social housing; the Cave review of the regulation of social housing; the Housing and Regeneration Act 2008; the Rugg review of the private rented sector, which is more recent; and the housing Green Paper. Of course, we have had the turbulence on the financial markets and the credit crunch since publication, so those developments are not reflected in our report. Clearly, the credit crunch has had a very serious effect on the
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housing market overall, but the Committee would insist that, despite the difficulties that people currently experience in buying houses and the effect on the rental sector, the underlying housing need, for both ownership and rental housing, remains unchanged. The Committee’s recommendation that the Government fulfil their targets on new house building and, especially, that they deliver 50,000 more social rented properties, therefore still applies, although we recognise that the targets are now much more difficult to achieve.

I should like briefly to outline the key findings of the report and a couple of general findings, then go through tenants’ experiences. I shall then make specific comments about social rented housing and private rented housing, as well as housing providers, and make some general conclusions. The two key general findings were, first, to remind the Government, if they need reminding, that rented housing is an important part of housing provision. The Committee thought that Government policy has up to now rather favoured the interests of owner-occupiers, and that it needs to give greater attention to the needs of tenants in both the social and private rented sectors. Secondly, the Committee wanted to stress the point that if we are committed to everyone having the opportunity of a decent home, at a price they can afford, within a sustainable community, that must apply both to people who rent and to those who buy.

Some of the experiences of tenants are shared across the social and private rented sector, but we recognise that there is huge variety of experience in both sectors, and that there are often big geographical variations. There is a general feeling that there is a view out there among the public, and perhaps in government, that renting is second best and, in a sense, a default option, and that ownership is what everybody aspires to. That is especially applicable to the private rented sector, parts of which have an image of being poor quality and of offering not many rights, and definitely not something people would want to be in if they could manage to be in their own home.

There are reasons why rental housing is an extremely sensible option for people, either throughout their lives or during certain phases. Most obviously, younger people at the beginning of their professional lives often want to move quite frequently from one area to another. It is not sensible for such people to get into home ownership; the rental sector, especially the private rented sector, gives those rather more mobile individuals the freedom to move around without the high transaction costs that people incur if they get into ownership and selling. The rental sector is also an option for elderly people who do not want the responsibility of maintaining a property. It also provides the option for many people on a low income of a decent home with security, which they would not be able to get in any other way.

We asked for rental to be recognised as a valid and valuable option, and highlighted various ways in which the experience of tenants could be improved. Certainly, it is important for social rented tenants that their housing is within mixed communities. The Hills report, I believe, highlighted the severe problems that arise when social rented housing is concentrated in areas with no other form of housing tenure, especially given that the shortage of social rented housing tends to mean that tenancies are offered only to families or individuals in extreme need, many of whom are extremely vulnerable. There
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tends to be a great concentration of problems, which reinforce one another and reinforce disadvantage, if we do not have mixed communities.

In the private rented sector, tenants feel strongly that the regulatory regime needs to be strengthened, particularly at the lower end. Several organisations pointed out that demand exceeds supply at that end of the sector, so the market does not work: individuals have to take whatever is on offer because there is not enough affordable private rented accommodation. That does not apply at the top end of the private rented market, which can operate well.

Mr. Philip Hollobone (Kettering) (Con): I commend the hon. Lady on the Committee’s report and good works. While she is encouraging thoughts of Leonard Rossiter as Rigsby in “Rising Damp”, will she comment on the number of empty properties across the country? I believe that the latest figures for England put the number at something like 670,000, of which 80 per cent. is in the private sector. Does she agree that the Government’s target to reduce the number of long-term empty properties by 25,000 by 2010 is inadequate, and that it will not go nearly far enough to address the problems that she is rightly highlighting?

Dr. Starkey: The hon. Gentleman tempts me into studies that the Committee has not done. The Housing (Empty Dwelling Management Orders) (Prescribed Exceptions and Requirements) (England) Order 2006 allows local authorities to refurbish and make available empty properties that are not being used. The Committee has considered the need to examine that issue in future. When we do so, we will report to the House. At present, we do not have any detailed evidence on the matter.

I caution the hon. Gentleman against thinking that simply bringing empty houses into beneficial use would solve the problem, as the number of such houses is not sufficiently large. He gave us a snapshot figure that may include houses that have been empty for a relatively short time. Obviously, there will always be some empty houses that are being bought and sold or whatever. Therefore, it is an issue, but, numerically, it is not that important.

Jeremy Corbyn (Islington, North) (Lab): My hon. Friend must be aware of the shortage of rented accommodation in the private sector, and of the way in which the exorbitant rents are often paid for through housing benefits. That means that we end up with a huge public sector subsidy to a private sector market, which is often providing the low-standard, if not disgraceful, accommodation for people in desperate need. Does she not think that we need to consider the rent levels that are being charged, particularly to the most vulnerable people? Such people end up in a benefits trap simply because they are in private rented accommodation.

Dr. Starkey: I am coming on to that point later on, so I will be grateful if my hon. Friend waits until then for my answer.

In fact, my next point is about housing benefit, which was highlighted by my hon. Friend, and it backs up what he said. The tenants in Regent’s Park and Kensington,
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North experience a problem that is particularly prevalent in London, and it may also apply in some other inner-city areas. There is a huge shortage of social rented accommodation. Councils are discharging their responsibility to house homeless families by using the private rented sector in which the rents are exorbitant, often for former council properties. The effect for the tenant is to trap them in worklessness, or at least in not working more than the 16 hours a week they are permitted to work without losing benefit. One tenant gave us a very graphic description of the insecurity that such a practice raised, which we have included in the report. She said that she had to be careful about the amount of work that she was doing. Were she to trigger the removal of housing benefit, she would be left paying a rent that was clearly out of her reach and that would require her to become a minor stockbroker to be able to pay. It is unsatisfactory that housing benefit in such a situation encourages, if not obliges, people not to work. That obviously needs to be sorted out. Moreover, councils are paying large amounts of money to private landlords.

Mr. David Drew (Stroud) (Lab/Co-op): My hon. Friend will know that there have been changes to the way in which rent allowances work. We are now looking at a much wider geographical area, and I am experiencing the other side of the problem. People who used to receive a much higher level of housing benefit have been told that that benefit has been capped, and there is a difference between what they can pay and what the landlord is charging, so they face homelessness. There is therefore another side to the matter. We need to consider how to manage the changes, and it shows how complex housing benefit has become.

Dr. Starkey: Absolutely. I am sure that the Minister will have noted that point and may respond to it in her speech.

The tenants to whom we spoke raised another point related to the social rented sector. There is an overall shortage of social rented properties, particularly of family-sized houses, which is partly a reflection of the right to buy. Obviously, the attractive properties are more likely to have been bought. In some areas, it is family housing that has been bought under the right-to-buy scheme, and it may even have moved on to subsequent owners. Councils are then left with a lot of smaller properties, including flats. As a result, many families with children are trapped in council properties that are too small. Councils are unable to offer them alternatives, so their only option is to leave social rented housing and move into the private sector, which they are not keen on doing because of the lack of security of tenure.

Finally, the private and social rented sectors need to increase the involvement of tenants in the management of their homes. The Tenant Services Authority was formed after the inquiry finished, and the Committee recently conducted a pre-appointment hearing with the chief executive and the chairman. The TSA will start to address the issues soon.

Andrew George (St. Ives) (LD): The hon. Lady will know that I joined the Committee right at the end of the production of its report. Is there sufficient evidence to expand the point alluded to by the hon. Member for Stroud (Mr. Drew), namely the disjunction between the
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local reference rent, as set by the rent officer—and the implications that such a rent has on the level of housing benefit that is payable—and the actual rents that are charged in the private sector? There is a big mismatch there. Does the hon. Lady accept that the significance of the poverty trap that she was talking about earlier is partly to do with the lack of gradation in the way in which housing benefit is made available?

David Taylor (in the Chair): Order. Interventions should be short. Members have an opportunity to make a speech later.

Dr. Starkey: I do not think that we heard much evidence on that specific point, although the Committee made a recommendation in relation to the single-room restriction for young people. The Minister has been listening to the interventions, and may seek to respond to them.

Let me summarise the main points that came out of our work on the social rented sector. The Committee strongly reiterates its previous recommendation that an extra 50,000 social rented homes are necessary every year significantly to reduce the backlog in demand. Building rates are still below that level, and the recent credit crunch has made the situation even worse. The consequences of the shortage of supply include what has been described as residualisation, to which I have alluded. If an individual is to be offered a social rented tenancy, they have to be in extreme need, which can lead to a concentration of individuals and families with extreme need in social rented housing, and has consequences for others who live in that area, as it reinforces disadvantage.

Mobility within the stock is extremely low. Tenants who are in a property which may be okay but not appropriate for their needs, either because their family has expanded or contracted or because their employment has altered, find it difficult to move to another property. The Committee wants the Government to explore every possible option to try to ensure that they meet the need for 50,000 extra social rented homes a year. Such an increase could come through planning gain, arm’s length management organisations, and councils themselves.

Section 106 agreements are incredibly helpful in levering in private money to subsidise social rented and shared ownership housing, in addition to direct housing grant. We were concerned that some section 106 agreements have resulted in too high a proportion of new social housing being built as flats, when accommodation for families is usually what is required. We also believe that the Government should take action to ensure that new affordable housing is directed at the areas of greatest need, and not simply in the areas in which the developers choose to build market housing, although that may be the area of greatest need.

We believe that reforms are needed to enable councils easily to reinvest right-to-buy receipts in the construction and acquisition of new homes, and that the Government need to review the effect of right-to-buy sales on individual neighbourhoods. We drew that lesson from the experience in the Netherlands, which has a similar scheme to right to buy for social housing sales, but where localities agree to a strategy. If there is a shortage of social rented family homes, for instance, in a particular area, restrictions are put on the right to buy for that type of property. The scheme does not allow any particular type of property in great demand for social renting to be sold on the private market and lost to social housing.

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We commend that scheme to the Government as a system that could be used where appropriate. In fact, we also suggested that the Government consider another aspect of the Dutch system, namely giving financial guarantees to social housing providers to mitigate their risks in non-core and income-earning activities. We are pleased that the Government have accepted that recommendation and agreed to look at the Dutch experience to see whether it is applicable here.

We also suggested that there is a need for measures to ensure the more efficient use of existing social rented stock and greater encouragement and support for social tenants who wish to downsize. Elderly people are often quite happy to move out of their social rented property into more suitable sheltered housing, freeing up a family home, but the right social rented properties might not be available for them to move into, or they may need help with moving costs. The latter would be a good investment if it freed up a family home.

We believe that the Government should make more progress with national mobility schemes and choice-based letting, and that they need to build on the decent homes programme, which has been extremely successful in upgrading social rented properties, to ensure that ongoing maintenance of social rented stock occurs at a standard that maximises supply and minimises the cases in which social properties are left vacant because they are in an appalling condition and the council does not have enough money to bring them up to standard.

In the medium to long term, the Government and the wider social rented sector must come to a conclusion about what they believe the role of the sector to be. Is it, as at the moment, simply to provide accommodation for those in the greatest need, or is it to be bigger than that and provide a much wider range of people with security of tenure and the chance to improve their livelihood? Unless the Government answer such philosophical points, we cannot come to a conclusion about how many more social rented houses we need and how important they are in terms of funding.

Mr. Drew: I happen to be in an area that considered large-scale voluntary transfer and rightly rejected it. As a result, we now face the punishment—I put it no more weakly than that—of having some £6.8 million a year taken from our rents and put into a central pot. That is a source of aggravation for my constituents. There may well be some simplification in how the sums are managed, but it looks like a punishment to local authorities whose housing remained in local authority ownership, so Government must quickly resolve the problem.

Dr. Starkey: Indeed. I shall come on to the housing revenue account. The social rented sector covers housing associations, arm’s length management organisations and council properties, and there are advantages to all three.

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