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12 May 2009 : Column 221WH—continued
I am very conscious that the debate has focused in particular on the funding of the private rented sector. The sector will, of course, continue to be funded primarily by the rent paid by nearly 3 million tenants to about 1 million landlords in England alone, at a level freely agreed by both parties, as part of the tenancy contract. In some cases that rent will be funded, of course, from housing benefit, which is now local housing allowance. However, the primary contractual relationship remains that between the individual landlord and tenant. The private rented sector is not primarily dependent on the public purse and is proving relatively robust in the face
of the shocks that have recently affected owner-occupation. As I have already mentioned, that is one of the strengths of the sector.
Of course—and the hon. Lady dramatically gesticulates about how she might disagree with me on that last point—private renting cannot be insulated from some of the impact of the global downturn, and we have all heard and read of instances of tenants of private landlords becoming subject to repossession proceedings. That is an important part of the remit of my Department. We must keep a careful eye on repossession statistics to make sure that we establish a range of policy responses to minimise the number of repossessions. I think that the hon. Lady alluded to the fact that currently data suggest that buy-to-let landlords are no more likely to be affected than other mortgage holders, and that just 0.1 per cent. of landlords are affected. However, because of the need to protect tenants as well as property owners in those cases, that needs to be monitored very closely, and that is what we are doing. In a few instances, tenants have faced eviction at very short notice—sometimes just a few days—through no fault of their own, when their landlord’s property has been repossessed. That is unacceptable. I am very much aware of the anxiety, hardship and distress that that situation can create, and we are actively looking at what can be done to tackle it.
As I have said, we would like the private rented sector to thrive, expand and offer a housing solution for a growing number of those who are unwilling or unable to buy in the current market. The main theme of the hon. Lady’s speech was the important role that buy-to-let can play in the financing of the private rented sector. Buy-to-let has accompanied an improvement in the quality of homes in the private rented sector—particularly flats. The English house condition survey shows that the proportion of “decent” homes in the sector rose to 55 per cent. in 2007. It is still low, and we still want to do something about it, but that rate of improvement exceeds the rate in the owner-occupied sector. Mortgage lending to fund buy-to-let has, as the hon. Lady said, fallen dramatically in the changed market of recent months but, as rental yields gently rise, in response to the supply-and-demand dynamics, the sector will, I think, prove attractive to professional investors and landlords.
Lorely Burt: I agree with everything that the Minister has said so far. The problem is that there is huge demand for buy-to-let mortgages, huge demand from tenants, and huge demand from people who want to make the business of buy-to-let their business, but there is no money. The funding has virtually dried up. I hope that in the closing minutes of the debate the Minister will deal with that problem and some of the suggestions that we have made for freeing up a little funding so that the sector can carry out its important function.
Mr. Wright:
The hon. Lady was right on cue there with what I want to suggest. She will be aware of the creation in December 2008 of the Homes and Communities Agency, a powerful national agency working locally with different providers in a flexible way to try to address the needs—the housing and regeneration—of communities. I have said that a key role in housing provision belongs to the private rented sector, so the Homes and Communities Agency has a legitimate interest in it. On that basis, and in that context, I hope that the hon. Lady will join me in welcoming the agency’s launch on 1 May of its private rented sector initiative.
That will also form a key part of the package of proposals in our forthcoming response to the Rugg review. I shall make sure that the hon. Lady is aware of that when we publish our response.
The “expressions of interest” process that the HCA has launched could address the points identified by the hon. Lady. Potentially, it will attract significant investment into the housing market by encouraging institutions to fund new homes specifically for private rent. That is important, because, as I have mentioned several times, I want the private rented sector to grow, expand and thrive. I do not necessarily mean that it should increase as a proportion of the existing housing stock. The hon. Lady knows as well as I do that we need more homes. I want to know how to encourage build-to-let and what the mechanisms are by which we can do that, and thus increase the number of homes rented out in the private sector.
The objective of the private rented sector initiative is to create an opportunity for investors such as pension funds to enter the private rented sector on a large scale. That has not happened in this country before, but it is a great opportunity. The reason why I think so is that this point in the economic cycle, where there is strong investor appetite for low-risk investment with a focus on income distribution and a longer-term investment horizon, is the right time to expand the private rented sector and consider its possibilities. The HCA seeks to work with financial institutions and other investors to develop a long-term funding model for new private rental housing in England. It anticipates that the potential investment could come from sources such as pension funds or overseas investors, which have not traditionally been involved in UK residential letting.
The private rented sector initiative could have the potential to help kick-start stalled development schemes and lead to a significant increase in high-quality new homes for rent. The hon. Lady will be aware of the £400 million announced by the Chancellor in the Budget to help kick-start stalled developments and make sure we have the housing delivery that the country needs. The private rented sector could play a part in that.
Lorely Burt: Is the Minister saying that the new initiative will provide funding for buy-to-let for those individuals whom I have referred to, who are already the backbone of the buy-to-let industry in this country, and who are being starved of funds? Alternatively, is he referring to a hands-off management company funded by pension funds and other investors in large-scale long-term developments?
Mr. Wright: As to the prospect of the HCA providing mortgages for buy-to-let investors, it is early days, but I should have to say that that is not probable. One thing that we are trying to do is encourage, as much as possible, large-scale institutional investment. However, smaller landlords have a role to play as well. As I mentioned, it is important in the funding model that we should take into account the scale, and the variety of scale, in the private rented sector.
I welcome the debate, which is an important one. At a time of major change the private rented sector has the opportunity to grow in importance as part of our overall housing supply and housing offer, and to increase in professionalism, scale and quality. I look forward to working with the hon. Lady and others to make sure that we can realise that vision.
2 pm
Sitting adjourned without Question put (Standing Order No. 10(11)).
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