Communities and Local Government Committee - Minutes of EvidenceHC 50

Back to Report

Oral Evidence

Taken before the Communities and Local Government Committee

on Monday 25 March 2013

Members present:

Mr Clive Betts (Chair)

Bob Blackman

Simon Danczuk

Mrs Mary Glindon

Mark Pawsey

John Pugh

Andy Sawford

John Stevenson

Heather Wheeler


Examination of Witnesses

Witnesses: Andrew Cunningham, Chief Executive, Grainger plc, Richard Lambert, Chief Executive Officer, National Landlords Association, and Sir Robin Wales, Mayor of Newham, gave evidence.

Q316 Chair: I welcome you all to this, our fifth evidence session of the inquiry into the private rented sector. Just before we start with the evidence, could I ask all members of the Committee to declare interests? I have one flat that I rent out in London.

Bob Blackman: I own six buytolet flats jointly with my wife.

John Stevenson: I declare an interest in three residential properties.

Simon Danczuk: My wife has an interest in a small rented property.

Andy Sawford: I have a small interest in a rented property.

John Pugh: I am a tenant.

Q317 Chair: We have put that on the record. Welcome to all three of you. Thank you for coming. Could you just go along the row and say who you are and the organisation that you represent, for our records? Thank you very much.

Andrew Cunningham: I am Andrew Cunningham. I am the Chief Executive of Grainger plc.

Sir Robin Wales: Robin Wales; I am the elected Mayor of Newham.

Richard Lambert: Richard Lambert, Chief Executive Officer, National Landlords Association.

Q318 Chair: Thank you all for coming. If there are things that other witnesses say that you absolutely agree with, you do not have to repeat them; you can say you agree, though that may not be necessarily true in all cases. Anyway, we will begin with a general question about the private rented sector. Why do you think it has grown so rapidly in recent years? Is it down to the change in the tenancy arrangements with assured shorthold tenancy, or is it simply down to the failings of other forms of tenure–the fact that some people end up in the private rented sector because there is no real choice for them?

Andrew Cunningham: I think it is probably a mix of a whole series of things, whether they are cultural, social or economic. There has been a trend over the last 50 years for all Western democracies to encourage home ownership and owner occupation, and there is a realisation that that may not be the appropriate form of tenure for a large section of our population. That may be for financial reasons-they cannot get hold of mortgages or they cannot afford a mortgage-but it also relates to social mobility and job flexibility. People are realising that, at certain stages of their housing career, it may be more appropriate for them to be a tenant rather than an owner-occupier. I think all of those factors have been exacerbated by the imbalance between supply and demand. There simply are not enough houses, and if people cannot afford to buy or do not choose to buy, then they are going to rent.

Richard Lambert: What you have seen, particularly over the past five years since the collapse of the financial markets, is that it is harder and harder for people to access mortgages. As a result, they have had to stay for longer in the private rented sector. You have also seen the gradual decline of social housing over the past 10 to 20 years, and the private rented sector has effectively picked up the slack between the two and kept those houses in circulation.

Sir Robin Wales: If a house is built, the house is built. Whether owned or rented, it is still there. I listen sometimes to arguments about houses going out of use. Why would they go out of use? People will find a way and they will take the best financial opportunities. I judge it by the fact that if they can afford to, people will buy property where they can. Even looking around the Committee, people will buy property in order to make money. It is financially worthwhile to rent your property; it is not worth selling. If you are living in London, for example, it is not worth selling your property if you are moving out. It is far better to rent it. Take the asset increase and take the revenue. My answer would be: people are making judgments and now young people cannot get mortgages. It is impossible to get a mortgage unless your parents are helping you with deposits or whatever. I would just go and look at where the finances are and look at what judgments people make.

The other thing is, the last time there was a downturn, people could not easily move and rent their property, and it has got much easier. Therefore, people choose to do that, so lots of people have left their property, moved and then rented it out, because they cannot necessarily sell it. I think people make financial judgments.

Q319 Chair: Clearly Grainger is one of the major players in terms of letting properties in the private rented sector. Just looking at your model, it seems that you are making a return from your rental incomes often over quite a long period of time but, at the same time, churning property around-buying it and selling it. The two do not seem quite to marry together. You are a longterm landlord keeping property, even looking in the future to build it and let it on, but then you are also relying for your income on buying and selling. Why are there two elements?

Andrew Cunningham: It goes to the historic heart of the Grainger business, which is dealing in regulated tenancies. As you know, or I hope you are aware, a regulated tenant has right of tenure and can stay in the property for as long as they live, and Grainger’s historic business has been to own those and then, when the tenant vacates the property, we have traded the property as a vacant property. Our returns have been a mixture of rental, while the tenant is in occupation, and then capital appreciation, and crystallising the capital gain when the property falls vacant and is sold. However, no regulated tenancies have been created since 1989, and so Grainger’s emphasis has changed, over the last few years, to have a greater proportion of market rented properties in the private rented sector, whether they are in the UK or Germany, so now we regard ourselves as having two portfolios: one that is a trading portfolio, when the properties fall vacant and we sell out of those, and the other is very much a market rented private rented sector portfolio.

Q320 Chair: I suppose I am asking why you do not then rent the properties on a nonregulated basis when they become vacant, or is it that you feel that they are not good longterm prospects?

Andrew Cunningham: When a regulated tenancy property falls vacant, it is probably not suitable for a market rented tenancy, because of its condition, style and how it has been occupied over the previous 50 years or so.

Q321 Chair: To come to Richard Lambert, on your website you claim to represent the interests of 1.4 million landlords, but you only have 20,000 members. How do you know you represent all the interests of all the landlords, because presumably the ones who join you are the enthusiastic, committed, good landlords, aren’t they? You do not claim to represent the rest of them.

Richard Lambert: I think that is why we claim to represent the interests, rather than actually represent the constituency. I think one of the things you find with any trade association is that the people who tend to join the association tend to be a good crosssection and by and large reflect the opinions of the wider market.

Q322 Chair: Right, so you think you are a crosssection of landlords, do you?

Richard Lambert: We have a pretty good crosssection, in terms of size, and in terms of the kinds of properties and the kinds of markets our members work in. If you are probing gently to see whether we represent the people who do not come up to standard, almost certainly not, because people who do not come up to the kinds of standards that would be expected do not tend to join trade bodies like ours.

Chair: We might probe that point a bit further in a bit.

Q323 Mark Pawsey: I would like to ask questions about the powers that local authorities currently have to deal with both substandard properties and landlords who fail to make sure their properties are available to tenants at the required standard. I first want to ask you if we are talking about rogue landlords here or criminal landlords, and is there a difference?

Sir Robin Wales: We called them "rogue landlords" until we were asked, by the National Landlords Association, to call them "criminal landlords". I do not much care; they are people who are looking to exploit other people. Before we went to do boroughwide licensing, we did a pilot in Little Ilford, which is an area in Newham. Very roughly, one-third of landlords were very good. This was not newbuild landlords either, so you did not have the really topoftherange landlords. One-third were very good; one-third were okay and dragged a wee bit doing it; and about 25% were cashinhand criminal landlords. We are finding some very interesting evidence. Sadly we have not got it sorted out yet, but we are discovering quite a lot of what we think is fraud. All sorts of things are going on. I can give you lots of cases. I have some fantastic examples of people we have found living in squalid, unacceptable conditions. The scale of what we are finding is very surprising. It is much bigger than we thought. We thought we had 5,000 landlords; we now know we have 15,000, and those are just the ones who have registered early. It is amazing. What is going on out there is something I do not think we are as aware of, and we think we know more about it than other people, because we have been doing this for a while.

Q324 Mark Pawsey: Sir Robin, would you prefer that, as a Committee, we did not use the term "rogue landlords", but called them either "legitimate landlords" or "criminal landlords"?

Richard Lambert: For the kind of people that Sir Robin is talking about, I would actually prefer you used "outandout criminals", because they are criminals. They are people who are exploiting the vulnerable, because they see the main chance and there is an opportunity to do it. Our members are as incensed as anybody, because it is their reputation that is being dragged down by people who are operating completely outside the law.

Q325 Mark Pawsey: At the very bottom end, the worst of those examples, Sir Robin, are the "beds in sheds". I understand that, in Newham, you believe there are 1,500 properties. First of all, how did you come about the figure and, secondly, what powers have you currently got in order to deal with that problem?

Sir Robin Wales: There were issues about the numbers. We originally thought 1,800. It has been going down as we have gone looking. It is also very patchy; there are some parts of our borough that we know are likely to have them. We have not done them all yet. We have gone round looking at them. We have used heat sensors to identify where people are, but we have a long process to go through to identify them all. We guess at 1,500, but do not hold me to it. If it is 1,000, it is 1,000. It will be what it will be. We will find it.

We certainly have some planning powers to be able to do things in there, but one thing we would say is that the fouryear rule is fine if you are building a conservatory and your neighbours do not complain, but if you then use that to house people and make money out of it, we would argue that the fouryear rule should be abolished. If you are using it to make money and exploit people, there should be no rule.

Q326 Mark Pawsey: Sorry; can you just remind us about the fouryear rule?

Sir Robin Wales: The fouryear rule of planning is that something is deemed to have planning consent after four years; we would argue that is perfectly all right. If you build a conservatory and people do not mind, we are not bothered. If you then use it to house people-if you attach power and water when you have not told people-and you use it to exploit people, we think at that point you should lose the right to have deemed planning permission, and we should be able to rip it down. We have put money into knocking things down directly.

Q327 Mark Pawsey: Are there buildings that are more than four years old that have effectively become legitimised through permitted development?

Sir Robin Wales: That is right. If you were smart, you would build and, after four years, you would then say, "Right, I can now rent it," and there is nothing we can do on the planning side. If it is a genuine conservatory, I do not want to get involved in people doing things and improving their property, but it is when you start to exploit people. Because we are doing the licensing, we can do something about that, but it could be much easier.

The beds in sheds are certainly not the worst ones. Do you want me to tell you about a joint operation we had? You might find this interesting. This is just the latest joint operation. The landlord was known to us. We found two illegally converted flats being used as HMOs for security guards. We took seven dogs away. That was after five were removed on a previous visit. We had occupiers sleeping in the cellar, two to three to a room. We had dog faeces and a cockroach infestation. The unlicensed HMO was next door to one held by the same owner. We got three arrests, and one of them was running down the road in handcuffs. I only give that as an example. It is just the latest one we got. I can give you hundreds of them.

Q328 Mark Pawsey: Why isn’t the housing health and safety rating system sufficiently powerful to deal with that problem? Where does it fall down? Why doesn’t it work?

Sir Robin Wales: It is just not right. The great thing about licensing is you can identify all the landlords.

Q329 Mark Pawsey: I know you are keen on licensing, but tell me why the existing powers are not suitable

Sir Robin Wales: We have tried to use them. We have used them sometimes to try to enforce. It is not properly understood. It is not clear. The real difficulty is we will use some of the powers, but we do not know who the landlords are. The great thing about licensing is they are forced to tell you or the fines are very substantial. Once we know they are there, we can then begin to enforce in lots of different ways.

The most important thing I would say we have done-we have talked about the licensing-is joining the enforcement up. We will use whatever powers of enforcement work best-trading standards, planning-in a specific place. I can get you details, if you want to get into greater detail; I can get papers sent to you. Basically, we can now identify them, because the ones who do not want to be found are the ones who stay away from all these things as best they can. We had 10% of all enforcements last year on housing, so we are using our powers, but with licensing we can identify where they are and use a variety of powers. If you ask me, honestly, it would be really good if we could have a review of powers and make them simpler to use. They are quite difficult to use.

Mark Pawsey: Richard, you have some views about these powers as well.

Richard Lambert: If we look at what Newham has done in Little Ilford, it is a classic example of the problem that the legislation on discretionary licensing was intended for, and the really impressive thing about the way the powers were used was that they were concentrated and co-ordinated in a really effective way. Now, whether that can be done on a boroughwide basis is another question, and I know that Sir Robin is very confident that he can do that. I have asked both him and his officials on previous occasions, and he has always said he could. Where we become concerned about licensing is that, in effect, because it seems to-

Mark Pawsey: We have some questions on licensing a bit later on. I do want to press you on how suitable the existing powers of local authorities are.

Richard Lambert: If they are used and they are used in an effective and co-ordinated way, then they are very effective.

Q330 Heather Wheeler: I would like to really tease out issues about licensing and so, Richard Lambert, if I could start with you first, you are very keen on voluntary accreditation. Newham, we have heard before in evidence, has tried voluntary accreditation and only 10% of landlords actually signed up, so how could that be the basis of an effective system? What was missing there?

Richard Lambert: What was missing was the approach. Accreditation, when it is introduced by local authorities, is often seen as an attempt to make bad landlords better. Accreditation is not a way of making bad landlords better, because the bad landlords, the kinds of criminals we have just been talking about, will always avoid that kind of engagement. What it is effective at is finding a way of giving the responsible landlords, the good landlords and the people who may not be as good as they could be-one of our greatest issues is around the people who do not understand the rights and responsibilities that they have taken on until they actually fall foul of the problem-a way to gain competence, gain knowledge and identify themselves. If you can get the people who are not causing problems to identify themselves and use accreditation as a filter, then the local authority will be able to direct their scarce resources down towards the people who are causing the problem and not need to worry about that other group, unless of course a problem actually emerges.

Q331 Heather Wheeler: Unbelievably, Sir Robin, that was actually going to be my next question to you, word for word. Have you been looking at my scripts? What I am fascinated by is that it just seems so logical to me that you are going to get the good and the middling who sign up for accreditation. Why do you think you only got 10%?

Sir Robin Wales: We did not. We did not even get 10%; we got 600. We thought it was 10%, but it is 600 out of a known 15,000 now, and we are fairly confident that will go up to 20,000 to 25,000, although these things are difficult to predict. We got that because there are good landlords who come in and say, "I want to get accredited. I want to do the right thing." I said earlier that two-thirds, by and large, we have found no problems with. They want to do the right thing in getting our advice and support. We are very happy to provide that. The difficulty is you do not know where they are. Quite often, they are single people or singleton properties, and they will get a letting agent. If you want to talk about letting agents, we would love to talk about that, because they should be licensed and we would be looking for the same system for letting agents, which are often very bad but sometimes very good.

My problem in coming to you now is we have had an accreditation scheme; we have done what we can. I am coming to you and saying I have 15,000 that I know of, and the stuff they are starting to open up is astonishing. We have not really got to all the bad ones, though we are targeting a few. We know it does not work. We know that, with all the powers and all the stuff that we had, it does not work, because we tried it.

Q332 Heather Wheeler: Okay, that is great. Thank you for that. Perhaps, Mr Cunningham, you would be kind enough to expand on why you think having a kitemark, which only in effect is going to be another name for an accreditation scheme, would work when we have heard the evidence now from Sir Robin that actually it does not. It will work for the great guys, but for everybody else-

Andrew Cunningham: When we talk about accreditation and licensing, if the background to that is to try to improve standards, particularly for the vulnerable, because the better off can vote with their feet and can move to other properties, then we are wholly supportive of it. My concern is that the best sort of regulation or legislation is a mixture of carrot and stick, and the introduction of licensing that Newham has done is for an organisation like ourselves a very heavy stick. There is no incentive for an organisation like Grainger to invest its relatively scarce resources into a borough like Newham. There is no incentive for a landlord like us to stay there. Therefore, I worry that there are perverse consequences, in that large landlords like us-I would not say we will be "driven out", because we would not leave Newham because of that-would not put any more money in there.

Richard Lambert: What is lacking from Sir Robin’s approach is engagement with the local landlord community. Although he uses statistics that sound very successful, the expense at which that has been bought is the alienation of the vast majority of the responsible landlord community, who could have been his biggest allies and his biggest supporters. If you talk to local landlords and EHOs on the ground in almost any borough I can think of, they will say, "We know where the problems are. By and large, we know which are the properties causing the problems. Let’s focus on how we attack those, rather than undergoing a boxticking exercise with the people who are not causing the problems."

Q333 Heather Wheeler: Sir Robin is desperate to come back, but actually I am going to move you on slightly, because I am sure other friends want to ask some other questions. There is this other dilemma: whose responsibility is it to understand the rights and responsibilities between the landlord and the tenant? Does the council end up doing it, or do you guys do it, or is it the letting agents that do it?

Richard Lambert: It is the landlord’s responsibility. This is a business. You get into this to offer a service and the landlord should make sure they understand the responsibilities and what they are aiming to do. If you ask me what our biggest concern about the private rented sector is, it is not the criminals that we are talking about, because actually I think they are, overall, a relatively small proportion; it is the people who do not know what they do not know. That is why the NLA has put so much investment into landlord development and education, because if you are going to do this, you need to know what you are doing and you need to do it competently and creditably.

Q334 Heather Wheeler: That is where the housing officer from the council comes along. He talks to the landlords.

Sir Robin Wales: We are talking two different things here. We are talking chalk and cheese. I am completely supportive of the idea that with an accreditation scheme you try to help and you give advice. I think it is a great idea. Landlords who are trying to invest, particularly ones with just one or two properties, need support, and I am completely a fan of that; I suspect Grainger does not need that support. The truth is that the landlords do not know where the problems are, because many of the landlords do not live in my borough. If I go from 600 accredited to 15,000–and those are the good ones, we think, because they have registered early–I am sorry, but I will tell you who knows where they are, and that is our residents.

ASB is twice as likely to happen in a private rented property in Newham as in a council place or an owneroccupied place. There is a real problem. We are talking about two different groups of people and that is one of my problems. We would love to have Grainger there. If Grainger does not want to invest in Newham, that is okay; we will do it ourselves, because we think it is a great place to make money. We are very keen on the landlords and supporting what they are trying to do, but that is not addressing the criminal element in my borough who are ripping people off and having people live two to a walkin freezer. It is not uncommon to get 15 people in a property in Newham.

Now, I am sorry; that we have to do something about. In fact, when we asked the residents, they said, "Yes, please; do something about it, because we are sick to death of these bad landlords," who by the way bring other landlords into disrepute, which is why I am surprised I am not getting much more support from landlords. If we can clean them up and clean this mess up, we will have good landlords who, by the way, will pay fees to you and you will make more money out of them.

Andrew Cunningham: The question was about education and about whose responsibility it is, whether it is the landlord or the tenant. One of the potential pluses of a kitemark system is making tenants aware of what they should get from a landlord. If there are published standards-"this is what you as a tenant should be asking for" but also setting a moral standard and a physical standard for landlords-then both sides are absolutely clear what they should be getting from the service function. That does not exist at the moment, and a kitemark service would help that.

In terms of public awareness and how you do that, I am not a communications expert, but the Government manages to publicise smoke alarms, breathalysers and changing to digital TV, so I am sure it can publicise landlord and tenant relationships.

Q335 Simon Danczuk: Sir Robin, can you very briefly summarise the evidence that you have to justify introducing the licensing scheme right across the entire borough?

Sir Robin Wales: Sure. I mentioned the ASB information we have; we know it is twice as likely to happen in a private rented property compared with other tenures. When we asked our residents, 74% of residents and 76% of private tenants said, "Yes, please; we would very much like you to do something about that." We went to Little Ilford, and after we had done the licensing, 99% of properties had no waste in their front gardens; there was a 75% drop in reported ASB; and the supply of PRS properties went up. It did not go down; it went up. There is plenty of evidence that this will work.

We will then have many cases. As I said, about 25% of those we found were cashinhand-people doing things that they should not do. We are now beginning to see with this licensing scheme some really interesting results. It is too early, but when we get them, we will share them with you. It is looking quite interesting.

Having looked at that and looked around the borough, we felt that we could go across the borough and look to license all private rented property. So far, the results look about right, but there is the fact of the sheer number that we are getting in and the need to tackle those problems. At the moment we think there are many more HMOs that people are not reporting than we would expect, but when we go and visit some of them, we will be able to identify them. We think those things will come up and fall out as we go along, but we based it on the evidence from Little Ilford, and Little Ilford was quite overwhelming.

Q336 Simon Danczuk: Let me just ask a couple more quick questions, Sir Robin. Grainger, "a respectable landlord", it says here, raised concerns that they are having to do too much formfilling, which is quite understandable for a respectable landlord. What do you say about that? You have created a convoluted bureaucratic process.

Sir Robin Wales: I will throw that back at you and say, if when legislation was passed it was not so convoluted and bureaucratic, we would be a lot better off. One of the things I would beg and plead is: make it simpler.

Q337 Simon Danczuk: That is a good point, Sir Robin. In what way?

Sir Robin Wales: Any formfilling was minimised. We only took what the Government said we had to take. We were not looking to add to that; we really were not. I would say a review of the legislation that says, "How do you make it simpler for us to enforce, and do not make us go through this?" We can do that and have a discussion in concrete terms.

Q338 Chair: Sorry; is this to simplify the enforcement aspect or the actual creation of the registration?

Sir Robin Wales: All of it. Instead of civil servants spending years dotting every ‘i’ and crossing every ‘t’, trust us to do it in a way that will give us some broad guidelines. A bit of localism would be really good.

Q339 Heather Wheeler: This is your scheme and you are making them fill it in 600 times.

Sir Robin Wales: We have to. Sorry; that is your legislation. We have to go with what we have.

Q340 Bob Blackman: May I just clarify this, Sir Robin, because I think this is very important? You are saying to us that the legislation requires the landlord of every single property to complete all the forms for each property.

Sir Robin Wales: Yes, because you have to have the details, but we would be delighted to have a conversation with you in detail to try to make it simpler and say these are the things we want. Having said that, without the legislation we could not do the things we are doing and we are very grateful for the legislation. I do not want to be critical of it. The other thing is it is filled in once. It is £150 for five years, so it is not the most expensive thing in the world. We have tried to make it simple. If you have registered early, it is £150 for five years. For those who are coming late, it is £500. We think those are the ones who will tend to be the worst landlords.

Q341 Simon Danczuk: Sir Robin, two more quick questions to you specifically. Those who do not register for the scheme, what happens to them? Secondly, could you just tell the Committee how many people have been fined under your scheme?

Sir Robin Wales: At the moment, none in the new scheme, because we have just started it. We registered them all by January, so you will have to be reasonable. We got in levels-I do not have the full details-of about £23,000 in housing benefit paid with 20 cases still to come, but that was from four cases. I can get you the details of Little Ilford, which was not a big area.

Q342 Simon Danczuk: What happens to those who do not register?

Sir Robin Wales: That is the great thing about the scheme and that is the thing that is most positive. If you fail to register and we find you, you are subject to some very substantial fines, and the reason why this is so powerful is we can identify where the landlords are. Of course the Graingers of this world will register; of course they will. If we can make it simpler for them, we would love to do that. It is the other ones who do not register. My understanding is that you can be subject to a fine of a year’s rent.

Q343 Simon Danczuk: You are going to do this.

Sir Robin Wales: Yes. To give you an idea, we have taken 15 additional licensing officers; we have paid for 46 police officers from the Met and we have gone from 18 to 52 enforcement officers, because we recognise this is serious stuff. Actually, our residents tell us the biggest issue is crime and antisocial behaviour, which is why we are doing this. When they tell us that is the biggest issue, we think we should respond to that. They say to us that the biggest problems are rubbish in gardens, people not behaving and people drinking until late at night, all in places that are private rented, though not the good ones. I keep coming back to that. It is the fact that they are forced to register. We will visit every home. We will go to every one and we will identify them. Remember, residents are likely to tell us. Tenants are likely to tell us. When we get an ASB complaint, we will look at that property first.

Q344 Simon Danczuk: Andrew, you suggested when the scheme was devised that investors would be walking away from Newham. That is what you said in the submission. Do you have any evidence for that at all?

Andrew Cunningham: No, but I think that if you are looking to invest in various places, if there are exactly equivalent properties in two boroughs, one where you have to spend an hour filling in a form and spend some money on fees and one where you do not, then investors will go to that one. I do not think people will flood out of the borough. In terms of the minutiae of Newham and the way that it works, we have about 60 properties in the borough. Most of those are regulated tenancies, where the rental is very low and also the rights of the tenant are significantly different from a market rented property. Therefore, some of the things we are having to do are not necessarily appropriate, so it is a little bit of a blunt instrument for us, but we also have to fill in 60 forms. All we would ask is that, if we have 60 properties, we fill in one form and list 60 addresses.

Sir Robin Wales: Yes.

Chair: So there is agreement.

Richard Lambert: We are certainly starting to get anecdotal evidence from our members in Newham, and indeed from some of the other boroughs that have discretionary licensing schemes, that lenders are reluctant or actively telling them that they will not lend on properties in a borough area that has selective licensing.

Sir Robin Wales: Hang on; there are two different questions. One is that some of the banks are taking a view that they will not lend on private rented in a place that is licensed. We are asking for the power to do that. We are perfectly happy to invest in Newham and perfectly happy to take that risk. You are mad if you do not invest in Newham at the moment; we are in a special position, because we had the Olympics, which is making a difference. There will be an interesting issue to take up with the banks. In the end, they will realise it is a better place to invest, because actually you are going to have a much better standard of accommodation. It takes a wee while for them to get used to new things, our banks, unless it makes a lot of money and wrecks the economy.

Q345 John Stevenson: Richard, HMO licensing: you seem to accept there is a need for a certain amount of regulation. You have called for a review. What changes would you like to see?

Richard Lambert: It is very difficult to answer, because we do not actually know what effect mandatory HMO licensing has had. There has not been an evaluation of the system that is in place. Until we actually have some kind of objective analysis of what has been done, it is very difficult to recommend changes as it stands.

Q346 John Stevenson: What system would you like, if you are accepting there has to be a degree of regulation? What would you like? What regime would you like to see in place?

Richard Lambert: There is actually a huge amount of regulation in the private rented sector already. There are over 50 Acts of Parliament, and over 70 other pieces of delegated legislation. What we would like to see is the existing legislation in force effectively and more intelligenceled enforcement, rather than simply waiting for something to emerge. The kind of system that I was postulating as an alternative to the licensing scheme that has been adopted in Newham is actually trying to encourage the responsible landlords to filter themselves out and identify themselves, so that the local authority can then focus their resources down on the people who might be causing the problem. That involves the kind of intelligenceled enforcement that we are talking about.

Q347 John Stevenson: Andrew, Grainger supports greater regulation of letting agents. What about landlords? Do you think they should be regulated?

Andrew Cunningham: For letting agents, there is a strong argument there, because somebody is entering into what could be a relatively longterm financial contract, and virtually every longterm financial contract is regulated one way or another, whether it is an HP agreement or a mortgage, so we see the justification for that. In terms of landlords, I do think that there are sufficient existing regulations and enforcement procedures available. The key is applying them, and so it comes back to enforcement.

It is enforcement, as I said right at the beginning; it is the vulnerable who need protecting. At the higher level of the private rented sector, people can exercise their will through choice. In other words, they leave the property and they go and rent somewhere else. It is at that lower level, at the vulnerable level, and we are as conscious as anybody else that there has to be some measure of protection there.

Q348 John Stevenson: Do you not think regulation would achieve that then?

Andrew Cunningham: It would, but is it too big a sledgehammer to crack a nut and is there a different way of doing it? In fact, is the sledgehammer missing the nut altogether? As we see from Newham’s instance, we get the sense that it is possibly the larger, more professional landlords that, in the short term at least, are paying for the rogue or criminal landlords, in terms of registration and licensing, because we will always register and we will always pay. I am not in favour of increased regulation for regulation’s sake, and I am not convinced that regulating every landlord in the country is either practical or desirable.

Q349 John Stevenson: Could the same arguments be applied to letting agents then?

Andrew Cunningham: I think for letting agents, at least from what we see, there is a lack of transparency about the fees, particularly when people are entering into longterm financial contracts. That is the area that needs to be caught. From Grainger’s point of view, we advertise on our website what our fees would be when we let. We only use accredited letting agents. We get feedback from both tenants and from our managers, and so we police letting agents ourselves. If that could be done for us through a registration scheme, fine.

Q350 John Stevenson: Richard, what is your view on regulation of landlords? You have talked quite a bit about criminal landlords. You clearly want to see them pushed out of the market. Why not regulate landlords?

Richard Lambert: As I said, there is a lot of regulation already, so if there is a gap in that regulation, then let us have that specific debate. The thing is, if you add another piece of regulation or legislation on top of all that, the responsible landlords will comply; the lawabiding always do. The problem you have is that the people who are already ignoring the law will not take notice of another thing that is laid on top of that.

Q351 John Stevenson: The same applies to letting agents. Why regulate them then?

Richard Lambert: The regulation around letting agents is not necessarily as clear. If you look at all the letting agent associations, they have set standards for their members that actually are not set down in law: the requirement for client money protection; the requirement for professional indemnity insurance; the need to be upfront and transparent about fees; and the need for independent redress. If we were looking at that kind of registration, although as a small business organisation instinctively we do not favour increased regulation, we could see a rational argument for extending the kinds of expectations that the associations have for their members to cover the entire letting agent industry.

Q352 Bob Blackman: Andrew, in your submission, you are concerned about regulation, particularly in terms of institutional investment, saying that more regulation may deter institutional investment. What is your evidence to support that view?

Andrew Cunningham: If it drifts into rent control in particular or anything that smacks of rent control, I think that would make institutions nervous. A lot of the issues we have been talking about this afternoon would actually be solved by supply: if there was sufficient good-quality residential property available to let.

Q353 Bob Blackman: We should not have any more regulation. We just build more properties and that will drive out the rogue landlords-the criminal landlords.

Andrew Cunningham: If you move to a more mature, sophisticated rental system as they have in some other countries, where the element of choice goes down the scale and therefore is available to everybody, you can help eliminate some of the problems we are talking about. One of the ways of funding that is through institutional landlords; in other words, people investing largescale institutional money into the sector. Anything that smacks to them of overregulation or of change of legislation or tax-

Q354 Bob Blackman: Can we just clarify what we mean by "overregulation"? You have talked about rent controls. That is clear, but the sort of thing that is going on in Newham, where the rogue landlords are being identified and stomped on quite hard, surely must be good news for the good landlords.

Andrew Cunningham: If you have got to an equilibrium, what institutional investors are nervous of is change, because they underwrite an investment for a number of years. If they are nervous about constantly changing regulation surrounding their investment policy, then that will make them nervous.

Q355 Bob Blackman: Richard, the Government has announced an extra £1 billion for the buildtorent or buildtolet scheme. How much effect is that going to have on the availability of supply and your members?

Richard Lambert: On the availability of supply, if it can actually be brought into building more properties, and that is the $64 billion question at the moment, it could have quite a significant effect on supply.

Q356 Bob Blackman: You obviously have a fear that it will not increase the supply.

Richard Lambert: I have been working in and around housing and the private rented sector for the last 15 years and, for as long as I can remember, increased institutional investment has been the Holy Grail; it has never quite come through. In the circumstances we have at the moment, it is closer than it has possibly ever been before, but that is because we are looking at buildtorent rather than the previous aspect that we looked at, which was more buying up enough stock to create an institutionalstyle portfolio. There is a real prospect of it coming through. If we can persuade the institutions, which are probably the one part of the economy sitting on piles of money, to put that money into building more housing, then that starts to address the fundamental issue, which actually everything comes back to. All problems stem from the fact that there is simply not enough housing for the number of people looking for it.

In terms of the NLA members, we are predominantly small landlords, rather than institutional investors. There is a slight concern that, if the institutions come in, the best tenants will be creamed off. Personally, I am not entirely convinced by that argument, but what it will do is raise the overall awareness and standards of the private rented sector.

Q357 Bob Blackman: Sir Robin, you have a plan for the borough to effectively become not only a public sector landlord, but a private sector landlord as well. Could you explain to us what you are doing?

Sir Robin Wales: Sure. I will just say we are not calling for more regulation; we are applying the regulation that is there. We would actually like to simplify it. We do not want more and we want it simplified. We are just applying the powers we have to make sure we can do things.

We are having no trouble getting people investing in Newham. Our New Homes Bonus is substantial. The Olympic Village was bought. Canning Town, which is a major regeneration scheme, is run by the council. It is on council land with some very good partners, and everything is being sold as it comes up. We are having no trouble. What we have asked for and what we would like is the power to build and rent ourselves, at market rent. Our plan currently is that we are building on all the land we have, and we are seeking to purchase any land we can find in Newham. We intend to build affordable housing because we know that all the numbers look very good, in terms of us making a return, so we would be much more proactive.

The other thing we want to do is be proactive in purchasing some of the properties that will come free from this scheme, this regulation, so that we can turn them into better properties; then we sell them. I am not bothered that we run them. Good landlords are great; it means we do not have to worry about it. If it comes to it, we are looking to do the same, because financially it makes lots of sense in Newham. That just happens to be a thing in Newham. It just happens to be the nature of where we are in London.

Q358 Bob Blackman: That is your plan in terms of new build. Clearly, one of the things that you have talked about is the fact that you have a lot of criminal landlords, who have got rundown properties. The issue for many people, not only in your borough but elsewhere, is that it is great having new properties and a lovely place to move into, but what about these awful properties? What about taking those over, expropriating them and doing something about them?

Sir Robin Wales: That is precisely what we intend to do if they cannot be sold and brought up to a decent standard. We will do it, and then sell them for people to live in, which would be great. Interestingly, the deposit scheme the Government has brought in is exactly the same as the one we were talking to the Government about us doing, in terms of giving people 20%. It is very interesting that they have followed that; even the 1.75% is what we were talking to CLG about. We are looking to sell them, rent them or get people to buy them to rent, but we will look to do that proactively if other people will not do it. If an individual landlord wants to come in and raise the standard of that property, then that is, by far, the best solution, but we will proactively do that. We think that, financially, we are in a perfectly good position to do it.

London’s problem is there is not enough supply. That is absolutely right. At the moment, in terms of investing in London, you are mad not to, because it is such a good opportunity, but you have to have the confidence to do that. The great thing about the local authority is we can think 25 years ahead. If we did that in housing, we would be in a better position.

Q359 Bob Blackman: Richard, do you see this as a potential threat to your members: a local authority, not just Newham-it could be others-deciding to municipalise all the private rented sector effectively?

Sir Robin Wales: Not all of it.

Richard Lambert: We are an organisation that believes in the free market and open competition, so if the local authority comes in on the basis of the open market and open competition, then I do not see that there is a problem with that. Where the concern would come is if a local authority was to use its power to, effectively, manipulate the market and force sales, which could happen. It is possible. We would also want to be sure that the properties were being bought at market price, let at market rents and it was being done on fair competition.

The other question I would have is: who would be overseeing that as a regulator, in terms of ensuring competition is free and fair? Also, if I remember rightly, there was an issue at one stage about whether a local authority could actually enforce against itself. If there were problems in the management of those properties, who would do that?

Bob Blackman: Just arrest Sir Robin.

Sir Robin Wales: We would love the power to pay ourselves a fee for all the properties we have.

Q360 Bob Blackman: Andrew, finally, do you see this as a threat to your institution?

Andrew Cunningham: One of the problems with the private rented sector is actually the lack of goodquality competition. I said before that a lot of these issues can be solved by supply, but also by competition. We do not see it as a threat; we see it as a benefit of goodquality ones. We do not want to compete against rogue or criminal landlords.

Just one final point on the Build to Rent Fund-I know you have moved off it a little bit-if you look at institutional investment in that, what they want is a stabilised block that gives regular rental income. What they do not want is development risk. The Build to Rent Fund is designed to help a developer get over that initial phase of development risk. Therefore, increasing it from £200 million to £1 billion is a positive, in terms of the ability of developers to have the confidence to develop for institutions, because institutions generally do not want to take a development risk.

Sir Robin Wales: I should just add: we have done something like this already. We set up a housing association, Local Space, where we invested some assets and they bought 1,000 properties, which we rent at full market value. We use that as temporary accommodation. It was one of our ways of protecting people who are homeless and of being more active, so there are 1,000 properties, mostly in Newham but a few around the other boroughs nearby, that are actually in that position. The difference there is the plan is to use the profit, in about 2025, to turn them into social homes, so that they pay social rent. That was the original thinking. We have done something like this. The housing association borrows the money, but we have to make the payments and we took all the risk, so it is not something we have not done.

Chair: I just want to pass over to Mary. I just apologise, on behalf of our Conservative colleagues, for their having to leave. It is nothing that you have said, and there has not been a split in the Committee. It is simply that they are going to see the Prime Minister, and when the Prime Minister calls, I am afraid you have to go.

Simon Danczuk: This side has not been invited.

Q361 Mrs Glindon: Mr Lambert, the NLA has said and we have heard that the current tenancy structure is actually a lot more flexible than people think. If this is the case, why are there so few tenancies longer than 12 months on offer?

Richard Lambert: You have to draw a distinction between the term of a tenancy and the duration of a tenancy. We have done some work surveying tenants over the course of the last year, and we have found, from asking them, that of the people who responded to our survey, over 60% had been in the tenancy for longer than two years, and over 40% had been in there for longer than four years. We equally found that some 39% had been offered a 12month tenancy first off, and 36% had been offered a sixmonth tenancy, but that is because, if you are dealing with somebody for the first time, you want to get to know them; you want to understand them; you want to see if it works for you and it works for them. In the same way that you do not get married on a first date, you are not going to offer somebody a longer tenancy straight off.

Q362 Mrs Glindon: Do you think perhaps the name of the first tenancy should be changed somehow, perhaps to "introductory tenancy", to give people the idea that they can have a more permanent home, or do you think it is fine as it is?

Richard Lambert: I would be reluctant to change it, because people are used to it. What I do think is important is making sure that landlords, tenants and indeed agents are aware of the flexibility in the options within there. That puts an onus on us, as a landlord organisation, to make sure that our members understand the flexibility. In the end, what a landlord wants is a good customer. They want somebody who is going to pay their rent in full, on time, look after the property and get on with the neighbours. The longer they stay, the better. One of our regional reps still has a tenant on one of the very first ASTs issued in 1989, so that shows how long a tenancy can last, if the relationship between the landlord and the tenant works.

Q363 Mrs Glindon: Mr Cunningham, Grainger operates in Germany, where there is a regulated system of indefinite tenancies, with freely set initial rent and indexlinked rent increases. Do you think that could work here?

Andrew Cunningham: Potentially, if you have a more mature market. One of the issues, as I keep on coming back to, is the scale and maturity of the residential lettings market in the UK. If you are talking about length of tenure and length of tenancy, our average for the market rented people is about two years. That is how long people stay. We would have no particular problems about extending tenures, but there is no great demand for our particular tenancy type at the moment, because it tends to be focused on young professional people who have a desire for a degree of flexibility and mobility. As the sector expands, and perhaps it becomes easier to accommodate married families who are more likely to want longer tenancies, then I see that becoming more prevalent.

One thing I would say is that, when it is drawn to tenants’ attention that a longterm tenancy is a twoway street-in other words not only is the landlord committing for five years, but the tenant is committing to a fiveyear contract to pay the rent-that is when most of them say, "Actually, I’ll just take it for six months or 12 months," because remember they are on the hook. If they sign for a fiveyear tenancy, they are on the hook for the rent for five years.

Q364 Mrs Glindon: That is a good point. Again to you, Mr Cunningham; you suggested that, in return for reduced affordable housing requirements, as per the 106 agreements, local authorities could demand that a property remain in the private rented sector for 10 to 20 years. First of all, how do you think that could be enforced and could properties be left empty if demand for private renting falls off over a 20year period?

Andrew Cunningham: I do not think so. We are a little bit like a borough. We do take a 25year view, which is slightly unusual in a commercial enterprise. We would be perfectly happy to set aside a block of flats and say every flat in that has got to be rented for X number of years. After that period, it can be split up and sold as individual flats. If the landlord wanted realisation of the asset in advance of that, then he would have to sell the entire block. That is no different from a commercial landlord owning a shopping centre. If a commercial landlord owns a shopping centre, he does not sell off individual shops; he would sell the entire block as a rental business. That is what we are saying at Grainger: we would be perfectly willing to build and let out, for an extended period of time, entire blocks of flats, but there has to be a financial incentive for us to do so. One of the ways of doing that is to reduce the in-cost, by reducing the Section 106 costs-i.e. build less affordable housing or to be able to use public land for it.

Q365 Mrs Glindon: Finally, do you think that would give a big enough mix of types of houses available?

Andrew Cunningham: Yes. We are doing a development down in Hampshire, where we have, not officially but pretty much, reached agreement with the local authority that we will let properties for a period of 15 years.1 We are calling them, very imaginatively, "Grainger Lets", and we have committed to a local authority that this becomes part of the affordable housing component. Alongside affordable housing and the shared equity, there are Grainger Lets.2 The local authority recognises that a mixedtenure community of private renters, of shared equity people, affordable housing and owner-occupiers is the best form of mixed tenure. Having been in the business for a long time, Grainger realises that sort of mixedtenure base actually helps drive lands values, so we are not being entirely altruistic. This is commercial as well.

Q366 Chair: Just explain that mix again. Is it that that mix of development has all those various tenures in the same development? Because of a lower proportion of affordable houses, you then put some private rented in as well.

Andrew Cunningham: Absolutely, but we are committing to say that that private rented is going to be there for X number of years.

Q367 Chair: Before I pass on, on the issue of the longer term tenancies, you were talking about the problem of tenants locking themselves in. I think Shelter has come up with a model where there would be more flexibility for a tenant to get out of a fiveyear rent. Equally, the landlord, if they got into financial difficulties, could get out as well.

Andrew Cunningham: That is what you would have to do. You would have to start building in exit mechanisms. How big do you make those exit mechanisms before it does not become a fiveyear tenancy? It actually just becomes a 12month tenancy, and then somebody finds an excuse to go. That is the point. Where do you draw those distinctions or exit routes?

Richard Lambert: What Shelter has described is one possible option, but what we need to do is develop a wider range of options, rather than assuming that the only form of tenancy you can have is a sixmonth or 12month assured shorthold. We need to develop different tenancies for different needs.

Sir Robin Wales: Different things for different places. We know, in the west of our borough around Stratford, people are probably looking for six to 12 months. They are young people; they are moving and all the rest of it. One of the reasons we want to get into private rented is to give long-term tenancies to people with kids at school. We also know that jobs sometimes change and that people have to move, so what we are looking for, as a council, is to provide what we can in terms of housing options so that kids can be stable at school. If you, as a family, choose to move, we will take that and accept that, because we can be much more flexible, because there is a public good here.

Our view is we should be giving long tenures to people with kids while the kids are at school and while the kids are local, which is also good for us in terms of building communities, so we have different things that we are looking for. We, for example, would not want more private rented; we would actually like some more owner-occupation. That would be really good for us, because we are losing that at a fantastic rate. That is not because we are against private rented; it is because we want that mix. It is different in different places, and that is about letting people make a judgment locally and letting councils say, "We will move into this to try to provide some of the things some of our residents need," which for us is a bit of stability while kids are at school. After that, if they move about a bit, it is not so serious.

Q368 Simon Danczuk: Richard, in 2011 your colleagues at the Residential Landlords Association told us that yields for landlords were being eroded and that rents had fallen in real terms. Is it time for us to start feeling sorry for landlords, do you think?

Richard Lambert: I think landlords are in a competitive business and I would not go as far as to say you should feel sorry for them. What has happened is very much that there has been a shift in the way that landlords look at judging their business. It was formerly that, with the increase in capital values, you could look at a combination of both the rent and the capital. With a much more stagnant housing market, with prices not going up the way they were, people are looking much more now to rental return. From the surveys we do of landlords, we know that rental returns run between about 6% and 6.5% at the moment, which is not bad compared with other asset classes. However, going over to the point about institutional investment, it is much lower than other forms of property. Landlords can make a reasonable return. Thinking back on our most recent survey, 10% said that they were just breaking even; 4% said that they were making a slight loss; 1% said they were making quite a serious loss. It is not necessarily a licence to print money.

Q369 Simon Danczuk: Robin, you were calling for a higher benefit cap for London. Given that you estimate that £100 million a year is spent on housing benefit in Newham, are you not concerned that that is really not sustainable? You could be accused of being financially irresponsible in terms of suggesting an increase in benefits, do you not think?

Sir Robin Wales: What we know is that, if you have three kids, you cannot afford Newham if you are not working. That is what is going to happen: three kids, get out. That is not right.

Q370 Simon Danczuk: More to be spent on housing benefit.

Sir Robin Wales: I believe what we should have been doing is investing in assets. What I think is awful is that we are selling our housing assets. We have housing assets; we have them in social housing. We are rapidly removing our social housing assets and removing our housing assets, which is why we did Local Space; it was to build some housing assets. I believe we have to get in the business of reversing the trend, because if we had owned more assets, we would be spending less on housing benefits now and having more in terms of investing in the bricks and mortar. I am entirely a fan of that, but it is going to take 10 or 20 years to do that.

In the meantime, I do not want to see people driven out of Newham because there are higher rents in London. That is our worry. We have very few people living out of London at the moment. When it comes to temporary accommodation, there are only about 14, I think, out of London, which is not many of the total we deal with, but there are going to be more. Early on we tried to identify where people would have options. We are now going to have people coming to us to whom we will say, "These are your options in terms of where you can live with a cap," and I think it drives people who are not working out of London into other places where there are people who are not working. It will create ghettos across the country. That is just wrong.

While I think we need to reverse the whole issue about benefit, you are not going to do that in the space of six months to a year without massive social upheaval and serious personal cost to families. Yes, it is right to have a higher cap, but we should also be investing in those assets, so that we have options in the future. I can stand here and say that is what Newham did. We did get £250 million invested without Government help or support, and we are trying to do more to do that investment, so I think we have a good record on that. Yes, it is bad news, but it is the only thing. The shortterm costs are too high. We need a longterm strategy, which I do not think we have.

Q371 Simon Danczuk: Richard, whilst we are on housing benefit, it seems like a good idea to link housing benefit to the condition of the property, do you not think?

Richard Lambert: We do not think anybody should be letting substandard property.

Q372 Simon Danczuk: If the Committee recommended linking the payment of housing benefit to landlords keeping their properties in a decent condition, you would be happy with that.

Richard Lambert: We would have to understand exactly how that worked. I can see it becoming a complex and bureaucratic process, which could ultimately delay the granting of a tenancy. If local authorities can now exercise their duty to house the homeless by discharging people into the private rented sector, I would certainly say that the local authorities should be making sure that any property they put somebody into should be of a decent standard.

Q373 Simon Danczuk: Are there any other views on that housing benefit link?

Andrew Cunningham: I would just be slightly careful that it is not too broadbrush, because for certain types of tenancies, regulated tenancies for example, the rights and obligations of a landlord are very different than for the landlord of a market rented property. Sometimes, we do not even get access to the property, for example, on a regulated tenancy. Therefore, although our properties are a reasonable standard, to impose quality standards that we then cannot improve and penalise us by not giving the tenant sufficient housing benefit to pay the rent would be slightly perverse.

Simon Danczuk: We need to be aware of that.

Andrew Cunningham: You just have to wary of that.

Sir Robin Wales: All properties should be of the standard that Parliament has legislated that they should be at, and that would make them acceptable, which is what we are doing, which is why I would expect more support from the private landlords, in terms of us trying to enforce the standards, so that everybody is doing that. Otherwise, spending public money on places that are not fit is not acceptable. It is a waste of public money; we should do something about it.

Q374 Chair: Before we move on to Andy’s questions on housing homeless families, Andrew, I understand you have a plane to catch.

Andrew Cunningham: I do. As long as I am away by half past-

Chair: Are you sure? The last set of questions is just about housing homeless families so, if you needed to go-

Andrew Cunningham: Can I follow the example of your colleagues? If I walk out, I am not being terribly rude.

Q375 Andy Sawford: It follows on, Sir Robin, very much from the discussion that has just taken place. You talk about massive social upheaval coming. What are your estimates of homelessness numbers in Newham and what do you see as the critical timing of that? For example, do you envisage a rise in homelessness in April or this autumn– at what point?

Sir Robin Wales: It is an interesting question. To give you an idea at the moment, 97.7% of people that we discharge to private rented are living in Newham or what we describe as our local boroughs around about, and 1.6% are out of London. Some of them are in Thurrock. My goodness, we have somebody in Falkirk, which is an interesting choice.

Andy Sawford: I want to ask you about that, but my first question was just about-

Sir Robin Wales: I was going to explain that. What will then happen, we do not know. Some people are going to lose £500 a week. With three children, it becomes very difficult. I think there has been evidence of people lying about being in work. It is anecdotal at the moment. There is a question of when the Government will actually apply the caps, to whom and in what way. How many come in a particular week? We are getting some but not all, so we do not know. What will people do in terms of choosing to live together or to move out? We simply do not know. When I see estimates, my comment is, "I do not know what is going to happen."

What I do know is this: if you have three children, you will hit the cap in Newham and, at that point, you are going to have to do something, whatever that is. Our fear is that of course people will run up rent arrears, be evicted, and then they are on their own, but honestly people come and they go and sort themselves out.

My other comment would be something that has long been a Newham view. We encourage people to present with need and present as homeless, and many do. This is the route we choose to force people down-to have them present need. Many other people in the same position choose to do things differently. They are more resilient, which is something we are very keen to push. We took the Ahmad case to court, and argued that it should not be about need; it should be about length of time and stay, and there should be a different view of it. We have quite a different view of this but, three kids and above, you have to do something. I do not know all the numbers.

Q376 Andy Sawford: Doing something might involve sending somebody to Falkirk or StokeonTrent, as was widely publicised. How can it be acceptable? How can it be acceptable?

Sir Robin Wales: Never. We never send people anywhere. People choose.

Andy Sawford: You earlier said 14 people have gone out of London.

Sir Robin Wales: People are out of London. They choose to be out of London. I really think you have to look more closely at what you mean by "homeless". If I have two families exactly the same and one presents and says, "I’m homeless. Do things," and another says, "I’m homeless. I’ll go and find something for myself," why don’t they both do that? We present people with options. They make the choices.

Andy Sawford: So each of those 14 families-

Sir Robin Wales: You have options. Ensure you have got enough properties across the country.

Q377 Andy Sawford: They have been shown properties within the borough.

Sir Robin Wales: There may not be properties in the borough. We tell them the truth. Listen, there are so many properties in the borough.

Q378 Andy Sawford: They have not necessarily had the option to be housed within the borough.

Sir Robin Wales: Again, people choose what they want to do. Many people from Westminster are dumped in Newham.

Q379 Andy Sawford: With respect, it is pretty straightforward.

Sir Robin Wales: No, it is not.

Q380 Andy Sawford: We are quite happy, because we want this to be as informative as possible, for you to explain how that choice works. But we ought to just be clear that when you talk about choice, this may not be a choice to be housed within the borough and, therefore, it is accurate, as reported in the press, that people are being offered housing elsewhere and not local housing.

Sir Robin Wales: There you said people are being offered housing. What do we mean by choice? We would argue very strongly that people make choices for themselves. They come to us and we say, "What do you want?" If you are renting and then you are told you cannot rent anymore, you go and find a place. You make a choice. We believe that when people come in, we should say, "Look, here are your choices. You might not get a place in Newham for six months, because they are not easy to come by; they are really not." They might want a place in Barking and Dagenham, or they might want a place in Thurrock or they might want a place somewhere else. I cannot magic homes out of nothing. Westminster has dumped lots of people out in Newham, in the sense that they are dumped. There are only so many properties and homes. All I can do is say to them is: "Look, the truth is that the rental market in Newham is very busy. If you have got four kids, you are not going to be able to afford the rent. What do you want to do? What choice do you want to make?" I do not believe we tell people what to do or send them places. People need to make rational choices.

Q381 Andy Sawford: Would you accept that these are people, actually, for whom the choices are very limited?

Sir Robin Wales: Yes, I would, which is why we have called for a higher cap, so they have a bit more choice in terms of London. We have argued for a long time that the homelessness legislation is badly flawed. It does not deal with homeless families. The idea of people being on the streets and homeless is horrible and we should do something about it. What it deals with, what it says is, "Come and present as needy, and we will spend a lot of public money for no benefit," as opposed to saying, "Why don’t we have a positive conversation with you about the real options you have and what you might choose to do?" The cap will force a lot more people down a different line. If people are going to move to a place where they cannot afford the rent, let us tell them before they do it.

Q382 Andy Sawford: What about housing homeless people in the private rented sector?

Sir Robin Wales: We have argued that for an awfully long time. To give you an idea, 1.6% of the people we have housed in private rented are outside London. A third of them are in Thurrock. A lot of people would choose to go there. The vast majority are still in London and making choices in London. I come back again to saying that people can choose what they want to do. I do not make anybody do anything. All I can do is say to people, "Here are your options. If it is a leased property, that is where I can send you for a leased property. If it is private rented sector, we will discharge. But do you know what? You are still completely at liberty to go and find your own place in Newham or close by."

Q383 Andy Sawford: You know that they are not available.

Sir Robin Wales: They are available to a certain number.

Q384 Andy Sawford: You know that they are not available, so let us think about this choice and how real this choice is for the individual. They are offered a private rented property in Thurrock. They may feel that, for transport reasons or family reasons or for all sorts of reasons, that is not a choice that they can make. You would then say to them, "Just go and find somewhere," even though you know that there are not any places available.

Sir Robin Wales: I think you are conflating several things. If I take the benefit cap, you are not going to have a choice. You will only be able to afford certain places and they may not be in London. That is not something I think is right, which is why I think the benefit cap should be different for London, so people do have more choices. That is the Government imposing no choice on people. I accept that is not a choice. I accept it is a very limited choice, but then, insofar as I have anything, there are a certain number of properties in Newham; there are a certain number of properties in London, by and large. The choice is for all families. We do not have enough supply in London. It comes back to this. In the end, there should be more supply. If you limit the cap, you limit choice. Within that, all I can do is say, "These are your options. What would you want to do? Be realistic about it." It may be that, in Newham, we simply do not have the properties because other people are living there.

Q385 Andy Sawford: The Government is talking about statutory guidance, and you commented to the Committee that you think it is unhelpful for the Government to impose on Newham in this way, and you have made an argument for localism at stages of this hearing. What is your view about statutory guidance and the placement of homeless households? Will Newham comply with it?

Sir Robin Wales: We will comply with anything we are told to do, but our view has long been that people who present as homeless are going through a system that forces them to do that or they choose to go through that. Our argument is very much that, instead of starting with what your options are in terms of housing that is available, if there is a property available in Newham, one family can get it, by and large. One family gets it. If there are two families, I am sorry; that is the number of properties we have. What you are trying to do is come up with a system that does not marry those two things together, and that is what is ludicrous about the system. It does not say, "I only have so many properties." Most people get housed; they make choices; they make decisions. We are very keen to support that. We are very keen to help people with information and help people to make those decisions. That, as far as any choice they have got, is limited by benefit or other things.

The other thing I would say is we have the best jobs brokers in the country, because helping people into work-we got 5,000 last year-does give them more choice. If they are in a job, they then have more options and more choice. You have to look at the whole thing. Look at the family and what you can do as a totality. The homelessness system is mad. It is just a daft system. It does not work.

Q386 Andy Sawford: Richard, is there capacity in the private rented sector to house homeless people?

Richard Lambert: The private rented sector is expanding all the time so, yes, there is capacity to house people. If landlords see that there is a business opportunity in a particular sector, then they will look to see if they can invest to provide that particular kind of housing. I would say that housing benefit claimants is becoming more and more the province of the experienced professional landlord, because it is that much harder to find the properties where you can get a return on the rent. Also, you may be dealing with people who live disorganised, chaotic lives and are very vulnerable, who actually need more management from the landlord’s side of things. That again requires more experience.

Q387 Andy Sawford: Should homeless families be offered tenancies of longer than a year to provide them with stability?

Richard Lambert: Again, you have to find the point at which both the landlord and the tenant are comfortable working with each other. Interestingly, we have done a lot of work with Crisis on private rented sector access schemes.

Q388 Andy Sawford: Richard, your answer seems to relate to the question, perhaps in part, of where people go. The farther away you are from the borough where you wanted to be housed–we have been through the Newham example–the greater the problem of instability is, if the tenancy is short. For example, if you have uprooted and moved to StokeonTrent, a sixmonth tenancy is obviously of itself going to create great instability. Can you see that and how might we, as a Committee, make recommendations that mitigate that?

Richard Lambert: The first thing I would say is that actually uprooting anybody out of their environment and their support networks, and putting them down somewhere else that is completely unfamiliar to them is going to be incredibly destabilising. That is something that adds to the difficulties of creating that effective tenancy relationship. I come back to this point: in the first instance, you need that kind of introductory process; you need that initial relationship, just so that everyone knows they can get on with each other.

To come back to the point I was about to make about the work we have done with Crisis on private rented sector access schemes, they have analysed what makes a placement work, what makes a scheme work and what makes a scheme fail. One of the things that makes a scheme work, and one of the things that is most likely to ensure that a placement lasts more than six months, is if you give the tenant some kind of initial training and initial understanding of what it is that they are getting into and what their rights and responsibilities are, and you try to encourage them to work more effectively with the landlord. If you can then add into that a tenancy relations officer who is going to take a proactive role in sustaining that tenancy, then you can get something that works.

Q389 Andy Sawford: Who pays for it?

Richard Lambert: The local authorities are already employing tenancy relations officers.

Andy Sawford: Sir Robin is going to pay for it.

Richard Lambert: The local authorities already have private sector housing departments, and we have seen several of the local authorities in the north-west almost retask their private sector housing team to work on this basis. If you can sustain a tenancy, actually, it works out better for the local authority overall.

Sir Robin Wales: That is such a better way to look at it. We believe in resilience. We believe in building the concept of resilience in people. We have cut the legs off people for years. We have actually put in place a dependency. That is why we spend £5 million a year getting 5,000 people into work with no Government support, because we think that is important. It is why we have the biggest free music tuition scheme in the country, because we think it builds resilience and capacity. That is a positive thing for us to do. I believe that is what we should be doing. We should be saying, when people come in homeless, "What is it you as a family are trying to do? Here are your options. Judge your options, but we cannot do it for you. What we can do is help you do it yourself, because that will make you more resilient and more capable and more able to survive."

We are launching a scheme where we are saying to people, "If you have something that will change your life, we will give you money to do it," because we want to invest in people doing something for themselves. We have got to. I believe, if you want to try to do something, we should be your best buddies. That is what we are trying to be, as a local council. If you come to me and say, "I’m homeless," my answer is, "These are your options. What do you want to do?" Enough of telling people what to do, of saying, "You have to go to that leased property or that leased property, because that is all we can do." It is far better for us to say, "Here are the real options you have. How can we help you take the decisions you want as a family? How can we help you?" That is where I think we should be.

Q390 Andy Sawford: It seems like there is a choice of not very much sometimes though, which you may be equally as dissatisfied with as I am.

Sir Robin Wales: Yes, I am, absolutely.

Chair: Thank you all very much indeed for coming this afternoon and giving evidence to us. Thank you.

[1] Correction by witness: 25 years.

[2] Note by witness: They will be let at 80% of market rent during the period and once the period is over they can be let or sold at full market value.

Prepared 16th July 2013