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21 Oct 2009 : Column 257WH—continued

To return to the licensing system, there are some interesting questions about the way forward. I note the point raised by the hon. Member for Manchester, Blackley about the need to deal with specific areas and the philosophy behind the initial intention, and I know that the hon. Member for Manchester, Central (Tony Lloyd) supports it. Our view is that any approach should be proportionate and sensibly targeted. I do not have an
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issue with that. I had a pleasant trip to Manchester, for obvious purposes, not too long ago, but I am conscious that despite the changes visible in the centre of Manchester areas of difficulty remain, as in London.

Against that background, I want to ask the Minister about the Rugg review, to which reference has been made. I notice that the review's consultation had a couple of questions relating to selective licensing against criteria beyond those that exist at the moment; for example, in areas with low energy efficiency or health and safety ratings. That is fair enough, but my experience is that a lot of stakeholders have said, "It's difficult to answer that fully when we don't have the best available evidence base."

In particular, what has happened to the report commissioned by the Building Research Establishment? The Department for Communities and Local Government said that it would be published back in April. The purpose of the report was specifically to evaluate the various forms of licensing, but we have seen nothing of that. It seems strange to move on to the Rugg review without first having published the BRE report to provide an evidence base. That was the whole point, and it is the best starting point. Has the Minister seen the report? Why has it not been published, and when will it be published?

As far as one can see from the statistics available, there is a patchy pattern to how local councils are using their current power. As the hon. Member for Brent, East said, it might be a question of resources, or there may be a number of underlying reasons, but it gives further grounds for wanting the best evidence base from the BRE report. The length of time taken seems to have varied. Given that we all agree that the approach should be both targeted and proportionate, it is striking that according to the figures that I have seen-this comes from the DCLG's 2008 regulatory simplification plan-just 107 licence applications have been refused so far in England, but the system has cost landlords alone £87 million, and on top of that there must be costs to the local councils. We ought to be sure that we are getting the best possible value and that the system is as targeted and proportionate as we would all like. Will the Minister examine whether it is working as efficiently and cost-effectively as possible?

I accept that we should look for ways to improve access to funding for the private housing market. I endorse the comments of the hon. Member for Brent, East on real estate investment trusts. What is the Government's view on that point?

I believe that we are at a stage where we can sensibly review these matters. Will the Minister assure us that whatever the Government's proposals, they will maintain the principles of proportionality and targeting to ensure that help is given where it is appropriate? The interventions must not bear disproportionately on the private rented sector, because it provides flexibility and is likely to produce more flexibility in the future.

My experience and that of many hon. Members is that people require different kinds of tenure at different stages of their housing journey. As a student and a young lawyer, I lived in private rented accommodation before getting my foot on the housing ladder. That is a pattern that many people recognise. We support the bridging of the gap by encouraging intermediate forms
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of tenure that get people into a housing purchase mode more easily. However, there is still a valuable and important role for the private rented sector.

The role played by the private rented sector varies from place to place, and a one-size-fits-all model is not appropriate. My constituency is in a London suburb, where there are two types of private rented accommodation. The old terraced accommodation in the centre of Bromley would be recognised by other hon. Members who have spoken. However, there is also private rented property at the opposite end of the scale. People who come to the UK to work in the City of London on contracts of only two or three years often want to live in the traditional suburbs. A one-size-fits-all model is therefore not appropriate.

I hope that the Minister will deal with my points in his response.

10.32 am

The Parliamentary Under-Secretary of State for Communities and Local Government (Mr. Ian Austin): It is a pleasure, as always, to serve under your chairmanship, Mr. Betts. Given your expertise on this issue, I am pleased that you are sitting up there and not down here asking me difficult questions.

I congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing this debate. Anybody who listened to his speech will recognise his expertise on these matters. He should be congratulated for the determination with which he has fought to tackle poor housing throughout his political life and for the impact his campaigning had on the Housing Act 2004.

I am grateful for the contributions of other hon. Members. My hon. Friends the Members for Manchester, Blackley and for Manchester, Central (Tony Lloyd) set out in stark detail the impact that bad landlords have had in Manchester. The situation they describe is unacceptable. We should not tolerate bad landlords exploiting the poorest people in Britain. They make the lives of their tenants and others in the community a misery, while lining their own pockets with housing benefit. I have no hesitation in saying that we should be determined to drive such people out of the market.

The hon. Members for Castle Point (Bob Spink) and for Bromley and Chislehurst (Robert Neill) raised the problems that their constituents who receive housing benefit have in finding accommodation in the private rented sector. As the hon. Member for Bromley and Chislehurst said, that is the responsibility of the Department for Work and Pensions, which has been improving the administration of the system to make payments more reliable. In the past, delays have led to landlords not wanting to let to tenants in receipt of housing benefit. Landlords can choose whom they let to, and that is a business decision. Many landlords specialise in letting to people in receipt of housing benefit, although some are prevented from doing so by their mortgage conditions. I am happy to meet the hon. Member for Castle Point to discuss the matter in more detail.

With her customary eloquence and expertise, the hon. Member for Brent, East (Sarah Teather) discussed the contribution that the private rented sector makes to
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the economy. I welcome her remarks on the Rugg review. Decisions on VAT are a little above my pay grade, but I will pass on her comments. I will write to her about real estate investment trusts. The hon. Member for Bromley and Chislehurst asked about the BRE report, which will be published shortly along with further guidance on licensing of houses in multiple occupation.

This has been a great opportunity to debate the need for local regulation of private landlords. It is timely, as we are considering the responses to our consultation on the proposals we put forward earlier this year, following the Rugg review, on improving standards and professionalism across the sector. This is also an opportunity to look at the role of local authorities in licensing privately rented properties and exercising enforcement powers.

There are almost 3 million private tenants in this country. The private rented sector is vital in providing choice and flexibility at all levels of the housing market. We want to encourage a system that retains the flexibility for those living in the sector and that embraces greater professionalism without creating unnecessary burdens on landlords. We want a professional, high-quality private rented sector that is aware of its responsibilities to tenants and the wider community, while retaining the freedoms and flexibilities it needs to grow.

Achieving the right level of regulation is crucial if the sector is to operate effectively and successfully. The system of assured and assured shorthold tenancies in the Housing Act 1988 was designed to achieve a fair balance between the rights of landlords and tenants. However, problems in the sector remained, particularly in relation to the management of the poorest quality stock, which is often occupied by the most vulnerable tenants. That led to the changes in the 2004 Act for which my hon. Friend the Member for Manchester, Blackley campaigned.

The problems with the poorest-quality stock can have a significant and devastating impact on the quality of life for those who live in poor neighbourhoods. Through the 2004 Act, our strategy was to improve health and safety and to tackle the main abuses in the system. It introduced a range of initiatives to improve management standards and the condition of privately rented accommodation. In bringing forward the legislation, we took a measured view on the appropriate amount of regulation for the sector and empowered local authorities to act to secure decent standards on a statutory and voluntary basis.

The 2004 Act introduced the mandatory licensing of larger, higher-risk HMOs. Landlords who manage properties of three or more storeys that are occupied by five or more people who form more than one household require a licence from the local authority. We targeted those properties because HMOs-particularly larger ones-are often in poor condition and represent a high risk to the safety and welfare of the occupants. The 2004 Act provides for two forms of discretionary licensing: additional HMO licensing and selective licensing of all privately rented property in a designated area.

Where local authorities have identified problems with management and property condition, they have the discretion to introduce additional HMO licensing schemes to cover smaller HMOs, which do not meet the mandatory HMO licensing criteria. Local authorities may also introduce selective licensing schemes to cover all privately
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rented property in areas that suffer from or are likely to suffer from low housing demand or that suffer from significant and persistent anti-social behaviour-precisely the problems identified by my hon. Friends the Members for Manchester, Blackley and for Manchester, Central in their contributions.

So far, approval has been given to two local authorities to operate additional licensing schemes and to 11 local authorities to operate selective licensing schemes. Those schemes mean that local authorities can impose conditions on licences, such as requirements for licensed properties to be occupied by a specified maximum number of occupants, and ensure that adequate amenities are in place. In addition, private landlords will need to be identified as being fit and proper in terms of their suitability to manage the property. A breach of a licence condition is an offence subject to a fine of up to £5,000 and, if a licence has not been obtained, managing or letting a property that requires one could result in a maximum fine of £20,000.

My hon. Friends have clearly worked closely not just with my predecessors and the Minister for Housing, the right hon. Member for Wentworth (John Healey), but with Manchester city council in implementing the licensing provisions in Manchester and in obtaining the approval of the Department for Communities and Local Government to operate selective schemes in Harpurhey, Bradford and Gorton wards. My hon. Friends have successfully demonstrated that their schemes fit with the overall strategic approach on tackling problems in the local private rented sector, and I congratulate them and the city council on their work.

On the question of where the balance of decision making should lie in relation to central and local government, I want greater flexibility across the range of services that our Department oversees, and greater freedoms and flexibility at local level. My hon. Friends will know-they been intimately involved with discussions on this-that Manchester, as well as other local authorities in the region, has further proposals to extend licensing to other areas. My Department is working closely with the Association of Greater Manchester Authorities to develop a protocol framed within existing legislation in order to ensure an efficient and effective approval process for future licensing schemes.

There were two specific questions about that, one of which was why should we not completely delegate those powers to local authorities. The nature of consent regimes means that they are constantly under review and we would therefore not rule that out. While the regime is relatively new, it is important that the Department is able to check that the proposals comply with the criteria set out in the legislation. My hon. Friend the Member for Manchester, Blackley also asked whether I would confirm that licences could be extended if necessary. As he said, approval schemes last a maximum of five years, but I can confirm that licensing schemes can be extended and that they continue in force after their initial date if problems are still manifesting themselves. I hope that he will be satisfied with that assurance.

Graham Stringer: I am extremely grateful to the Minister for that response-indeed, that is what the Minister for Housing told me-but the advice I am getting from officers in Manchester city council is that such an extension is not possible without changes in primary
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legislation. Will my hon. Friend expand a little on the basis on which the time period could be extended? Again, I thank him for the commitment he has given.

Mr. Austin: I do not want to be prescriptive. We want to work with my hon. Friend and his colleagues at Manchester city council to enable them to tackle the problems in those areas. Although we must ensure that licensing schemes are operating in line with the criteria set out in the legislation, we want to learn from what is happening on the ground, what he sees happening locally and the experience of local authorities, such as Manchester city council. My right hon. Friend the Minister for Housing and I look forward to continued discussions with my hon. Friend, Manchester city council and other local authorities on the issue.

Tony Lloyd: The fundamental point is that if the advice my hon. Friend the Member for Manchester, Blackley has received from our local authority is right and there is a need for change in primary legislation, we must have certainty about the direction of travel, as we are obviously now some way into these licensing schemes. I do not expect the Minister to give an answer this morning, but will he consider whether we need legislation? Perhaps he will write to those who have taken part in the debate to confirm that point. Clearly, if primary legislation is needed, we should all look for a vehicle through which that change could be made.

Mr. Austin: Of course, I am happy to write to Members and set out the matter in more detail. The advice I have been given indicates that schemes could be extended. I will consider the matter and come back to Members with more information.

The hon. Member for Castle Point raised issues about safety in the private rented sector. The Housing Act 2004 introduced the housing health and safety rating system-HHSRS-under which local authorities can make a risk assessment of the likely impact of property condition on occupants of privately rented accommodation. If hazards are identified, the local authority has a duty to take the most appropriate action in relation to the hazard. In the most severe cases, it can issue prohibition orders, the effect of which would be to close all or part of a property. Private landlords who fail to comply with such notices can be subject to a fine of £5,000.

Although I expect local authorities to take a robust approach to the tools and powers available to them to tackle management standards in the private rented sector, we are keen to ensure that they see the provisions of the 2004 Act as a way of developing partnerships with good landlords. Doing so will enable them to play a full part in meeting housing need through raising both the physical standard of the property and the management standards. That is particularly necessary because we are concerned about the most vulnerable tenants.

The hon. Member for Brent, East raised the issue of deposit schemes, which is one of the other key measures in the 2004 Act. The requirements are for landlords to protect their tenants' deposits in a Government-authorised scheme. Those arrangements are designed to safeguard the interests of both landlords and tenants, and to ensure good practice in deposit handling, so that when a tenant pays a deposit and is entitled to get it back, he or she can be assured that that will happen.

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As I have mentioned, through the 2004 Act, the Government have acted to tackle the areas of greatest risk within the sector. Although the measures in that Act started to drive improvements, a range of bodies, including the Law Commission, Shelter and the citizens advice bureaux, continued to express concerns linked to proposals for further change. Against that background of progress on the ground and ideas for further improvement, we decided to commission an independent review of the private rented sector from Julie Rugg and David Rhodes of the university of York. As has been said, that review was published in October 2008 and highlighted the positive aspects of the sector: most landlords are good and the vast majority of tenancies begin and end with no issues arising for either party.

However, the review also identified weaknesses. Although most landlords are well-intentioned and deliver a good service, some simply do not view themselves as landlords. A minority are ill-intentioned, often deliberately exploit the most vulnerable and allow antisocial behaviour to become rife, as has been said in the debate. The review also found that local authorities are not always able to focus their resources to enable them to use the extensive enforcement powers in the 2004 Act against the worst landlords.

The Government's response to the review for consultation, which we published in May, sets out our ideas for major changes to further improve the private rented sector. We have been very encouraged by the positive reaction to the proposals, having received more than 250 responses. We are now considering those responses and will publish the results of the consultation in November.

Let me go through the main measures that make up our proposals. First, we propose to introduce a national register of every private landlord in the country to increase protection for both vulnerable tenants and good landlords. Landlords would need to include their registration number on all tenancy agreements, and they could be removed from the register if they failed to comply with the required standards. A register would enable us to identify bad landlords and to get them out of the market if they were unwilling to improve their behaviour.

Secondly, we propose full regulation for private sector letting agents. Letting and managing agents have a vital role in the private rented sector but do not currently need market expertise or professional credentials, while tenants and landlords have no realistic redress when things go wrong. To tackle those problems, the Government propose to set up an independent regulator to oversee all letting and managing agents.

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The third proposal is for improved complaint and redress procedures for tenants. For the first time, the Government will look to set up a mechanism whereby tenants are able to register official complaints about substandard landlords. If those complaints are upheld, landlords might be removed from the national register. Fourthly, we propose that there should be greater local authority support for good landlords, as well as action against poor-performing landlords.

Our proposals will provide greater support for landlords and letting and managing agents, alongside better consumer protection for tenants. Local authority enforcement activity will be enhanced and more focused, and local authorities will be encouraged to create local lettings agencies to better facilitate tenancies in the private rented sector for those in housing need, including housing benefit recipients. Local authorities will also be encouraged to ensure that their staff receive training to help them to resolve issues between tenants and landlords and to sustain successful tenancies for some of the most vulnerable members of the community.

Alongside our proposals for a national register of all landlords, we want there to be improvements in professionalism, and encouragement for those who aspire to higher standards. The most obvious way of doing that is through access to accreditation schemes. For several years, many local authorities have run successful schemes for their landlords, offering training and sharing good practice and experience through forums, as well as having a clear quality kitemark for potential tenants. I know that Manchester city council operates such a scheme, which gives tenants assurances about the standard of service that they can expect and gives landlords who belong to the scheme a market advantage.

In conclusion, we are confident that the package of measures I have described will be key to securing the improvements in quality and professionalism that we seek. They represent a sensible balance between providing support for good landlords and providing the tools that local authorities need to deal with poor landlords. Support for the sector is ever more important in the current financial climate, which has underlined the vital role that the sector plays in providing for the housing needs of a wide range of households. We are grateful to all those who have responded to the review, and to all hon. Members who have taken part in today's debate, for their constructive input to the ongoing process to drive up standards in the private sector. We will continue to develop our proposals and take them forward in the next few months.

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