Communities and Local Government Committee - Minutes of EvidenceHC 50

Back to Report

Oral Evidence

Taken before the Communities and Local Government Committee

on Monday 20 May 2013

Members present:

Mr Clive Betts (Chair)

Simon Danczuk

Mary Glindon

James Morris

Mark Pawsey

Andy Sawford

John Stevenson

Heather Wheeler

________________

Examination of Witness

Witness: Mr Mark Prisk MP, Minister for Housing, Department for Communities and Local Government, gave evidence.

Chair: Minister, you are most welcome. Thank you for joining us for our ninth and final evidence session of the inquiry into the private rented sector. Before we commence with the session, just for the record, those of us with an interest ought to put them on the record in this session. I have one flat that I rent out.

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

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

Q679 Chair: That is all for us. I apologise for keeping you, Minister. We were having a bit of tuition at the beginning on how to use iPads. You have probably noticed we are all using paper briefs-

Mr Prisk: So that worked then?

Q680 Chair: -apart from Mary. Mary, you win the prize today-and James as well; that is two prizes. We thought we might keep you longer if we all reverted to our iPads.

Mr Prisk: I am still on paper.

Q681 Chair: Thank you very much for coming to give evidence to us, and welcome once again. The private rented sector has been the tenure of growth over the last few years. However, when people are asked what they aspire to, many people who do not own a home will say, "We want to be owner occupiers." Government policy over the years has tended towards seeing owner occupation as a preferred form of tenure, and it is Government’s job to help people towards that. Is it Government policy that private renting is a temporary form of tenure for many people, or that the growth in the private rented sector will be of limited duration and then things will all revert back and owner occupation will start growing again? What is the Government approach to this, and how are you shaping the landscape?

Mr Prisk: I think it is a very pertinent question, Chairman, and thank you for this opportunity to contribute to your inquiry. I think, and I have felt this for some time, that an overpreoccupation of Governments on either owner occupation or, for that matter, on social housing has been part of a failure to deal with housing markets in the round. I strongly believe that for each of the different markets, with the private rented sector perhaps sitting in the middle, as it were, we need to understand how each operates and how they interrelate with the others, in order to try to reduce the frankly dysfunctional nature of the way in which housing has developed in this country.

I am-and this is as a Government-strongly in favour of encouraging people who can afford it to be able to own their own home, absolutely. However, we need to set a sensible balance, and that is why we have tried to make sure that we have looked at both supply and demand issues in owner occupation, in social housing as is, and also of course in private rented. We have to make sure that we work in all those sectors, and look at those sectors together and how they relate to each other, if we are to start to turn back what is probably 20 or maybe 25 years of dysfunctional markets, whether rented or freehold.

Q682 Chair: What would your expectation be? Is the private renting growth that has happened over the last 10 years largely to reverse at some point? Is it a product of the recession to some degree and will there be a reversal of that trend when the economy improves? What is your take on the situation?

Mr Prisk: If we look back, I think 1988 was an important point because at that point, once we moved to a more flexible market, we had started to see a rise in the numbers. Inevitably it is not just the regulatory framework; I think a shift to more flexible labour markets, a demand for people to be able to be more mobile contributes to the process of needing to have greater flexibility in how the markets work.

Looking forward, I would suggest that all the indicators are that with a growing population, with the fact that not only is the population growing but the gap remains at the moment between supply and demand, the prospects for this sector are therefore strong in terms of its growth. That is something we are happy to encourage, indeed it is something we are actively encouraging, particularly through the build to rent and the housing guarantee. The prospects are strong for this marketplace and for this sector, but we have to make sure it is both a better and bigger sector.

Q683 James Morris: Can I just ask about the two Government schemes that you just referred to, with build to let. What are your expectations in terms of the number of new private rented houses that will come out of that scheme?

Mr Prisk: We have gone for the level of investment rather than trying to count the dwellings, as it were, because it has to be demandled, so therefore the moment we try-as has happened in Government schemes-to pluck a figure out of the air, the market will cheerfully manage to disprove it.

Q684 James Morris: Just broad ballpark expectations?

Mr Prisk: We are putting £1 billion forward. We believe that will unlock several billion other. That is in the build to rent scheme. Clearly that will deliver tens of thousands, but how many and over what duration we have not set a target.

Q685 James Morris: Do you think it will have the effect of just unlocking pipeline, rather than delivering new private rental homes?

Mr Prisk: I think it will add to the situation, because what is encouraging when I look at the first 45 applications that we are now moving forward through due diligence to complete, as it were, it is very interesting that firstly there is a whole range of new providers, many of whom are institutional investors who are not in the marketplace now, or who have a very small presence in the market. Secondly there is quite a good geographical spread. It was quite understandable that some people might have looked of this and thought, "Is this just going to be another Londoncentric thing?" We think around half of the applications we have had so far include sites in the north; about one quarter of those schemes are in the midlands, so there is quite a good spread in terms of new providers and geographies. That suggests to me that it is an additional-

Q686 James Morris: What sort of order of magnitude of money has been taken up by institutional investors?

Mr Prisk: What we have done is to put forward £1 billion in total. This round that we have invited applications for we think is to the value of £700 million to £800 million, which leaves us with some residue. When you do that you also slightly overprogramme, because inevitably when you go through due diligence you will find there are some gaps or problems with that. That is the public sector investment, and we would expect to lever in three or four times on top of that.

Q687 James Morris: One of the criticisms or thoughts might be that one of the effects of the scheme might be to build lots more dwellings for the middle class, but not necessarily improve the situation in areas of deprivation or where we have overcrowded accommodation. Do you see that as a danger?

Mr Prisk: No, what we have to do first of all is to recognise that this is a sector that needs an injection of investment, further to what it has already had. If you do that, not only do you get the additional dwellings themselves, but that then starts to open up the market more and give tenants genuinely better choice, both overall but also, most importantly, in the locality they are seeking. If you like, by growing the market it will give all tenants greater choice. In terms of at what point in the marketplace they will reside, it depends. I have certainly been to see a number of schemes, one or two of them in the east end, where they have quite a range of steps, as it were, in terms of the tenancy and the rental package, for those who are young people not looking to spend a fortune through to a more serviced facility, as it were. There is quite a range there, but the key is to get that investment into the market, grow the market, give tenants choice.

Q688 James Morris: On the £10 billion guarantee, we had some institutional investors who came, who were saying, "It is all very well having a guarantee; we probably do not need it because we can borrow anyway." We have had similar evidence from housing associations. What impact do you think that guarantee will have-or is already having?

Mr Prisk: This is one of those funny areas where it is a little bit like wrestling with jelly. It is entirely unclear sometimes as to whether, simply by announcing your intention to do something, you affect the market without having done it yet.

Q689 James Morris: So it has not been done yet.

Mr Prisk: We are in the middle of the procurement for that whole process, and we are on the verge of being able to announce where we have got to on that. To go back to your question, the representations I have had from housing associations and major investors is that they very much welcome this because this is about helping to derisk some of those upfront costs and will allow them to go for larger schemes and be a little more ambitious than perhaps they would have been in the past. I take your point, however; the point about the guarantees is that we help lever in additional private finance. Some major investors may be confident that the market they are targeting within this overall sector does not need that. That is fine; we do not need to spend the taxpayer’s dollar.

Q690 James Morris: Just a final question: when you say you are going through a procurement process, what stage have you got to? What is that procurement process?

Mr Prisk: That is really in terms of the way in which we deliver the guarantees, because obviously we have an affordable market, affordable rented sector, to which the guarantees apply, and we have the private rented sector, to which the guarantees apply, and inevitably, and very encouragingly, there are some people who are coming forward with schemes that will mix the two. What we have been looking at is how we deliver that process. We are in the middle of procurement for that, and we will have something to announce on that shortly.

Q691 Mark Pawsey: Minister, in this inquiry we have spent an awful lot of time talking to both landlords and tenants about the length of tenancies and the issue of security of tenure. Landlords are telling us that they have an interest in longer tenancies, because many of them are investors who are there for the long term. There are some who are shortterm landlords, but we have heard an awful lot from longterm landlords who want the security of a longterm income. In many instances tenants also would benefit from knowing that they are able to securely remain in occupation for a fairly lengthy period, and there are lots of barriers to enabling landlords and tenants to do what, in many cases, both of them would want to do.

One key issue is that of gaining occupation if either the landlord or the tenant fails to honour the commitment within the tenancy agreement: if on the part of the tenant he does not pay his rent, it is very difficult for the landlord to secure occupation. Judges are often very reluctant to evict people from their home, and we are wondering what the Government might do in order to encourage longer tenancies. We also have the issue of lenders, who are also very worried that if a tenant refuses to pay, they might want to gain occupation and sell the property with vacant possession. How can we change the system to encourage longer tenancies?

Mr Prisk: This is a sector that is hugely diverse, so the key thing is to ensure there is genuine flexibility and choice for tenants here. I have been looking at the issue around duration of tenure, because this is an issue I see in constituency correspondence, from colleagues here, but also from the rest of the House, and obviously it is part of the general debate. The median length of leases, as I understand it at the moment, is around two years. Half of tenants are over two years in tenancy, and in fact about 19% are over five years, so there is some interesting information in terms of the number of tenants that are in longer leases.

Q692 Mark Pawsey: That may be the amount of time that people remain in a property, but the evidence we are getting is that what people are often doing is taking renewable sixmonthly or annual leases. A tenant will only have the security of six months, and a landlord will only have security of income for a period of six months, and even though there is provision in the legislation for them to between them agree for a longer period, in practice they are not doing so.

Mr Prisk: I accept and I think most people recognise that shorthold tenancy does have a minimum of six months, but there is nothing to stop either party from doing more than that, so your question effectively is why it is not happening.

Q693 Mark Pawsey: In many cases, what stops a landlord from offering a longer period is the terms imposed by their lender.

Mr Prisk: When we have been talking to the lenders-and we are very happy to seek further information on this one-they say to us, "We have yet to see the evidence that there is demand coming from landlords in this regard, particularly in the buy to let market." Again, we said to them that we want to make sure there are not unreasonable barriers in the marketplace. We have also made that clear to landlords in our regular dialogue, and I think that is an important aspect that we want to reflect on. There is no reason, as I said, why assured shorthold tenancies cannot be for longer periods; it may be that it is something as basic as information to both landlords and tenants about what their rights are. This is one other further aspect that I think is important.

Q694 Mark Pawsey: But overwhelmingly what we are getting from landlords is that they cannot get occupation, because when they go to a court to seek occupation the courts will not give them occupation. They will not evict people from their home. Is there anything we can do to strengthen the hand of landlords in such a position where a tenant has not done their part of the bargain-namely, paid the rent?

Mr Prisk: I am wary of statutory legislation, because obviously if we start moving that out further there will be some people who will want to have the ability to know that if something goes wrong, especially with the buytolet market, and they need to recoup that investment-or indeed in some cases recoup the family home in order to be able to live somewhere as a landlord-the worry is that if it is a two, three or fouryear minimum we may see a number of properties come off the market altogether. However, I am certainly open to suggestions as to whether there are nonstatutory barriers that would help us encourage people to have greater choice.

Q695 Mark Pawsey: From the tenant’s point of view, Minister, we have heard serious concerns about retaliatory eviction from both tenants and local authorities. That is where a tenant makes a complaint about the nature of their property, and then their sixmonth lease is not renewed because they are seen to be a problem tenant. How can we give tenants more confidence to ask landlords, or require landlords in many cases, to do what is necessary but without the fear of eviction if they do so?

Mr Prisk: It is difficult, because of course harassment and illegal eviction are already a criminal offence, with custodial sentences of up to two years. That is already in place.

Q696 Mark Pawsey: These are not legal issues, Minister. These are where people have a genuine fear that if they make a complaint about their landlord that the landlord may not harass them or anything of that nature; he may simply refuse to renew when the sixmonth or oneyear period comes to an end.

Mr Prisk: The difficulty we have had is trying, in law, to distinguish between a reasonable eviction, where someone has a perfectly legitimate reason, and someone who may have a reason but may be acting for other purposes behind that and being malicious perhaps in intent. I know that certainly my officials, as I understand it not only under this Administration but the previous Administration, have had lengthy conversations with people like Shelter and others about this. If we can find a good place to draw that line that is effective, then that is something we ought to do. I would certainly be happy to see if the Committee felt they could, but it has challenged some of the brightest minds in the Department, and indeed in the housing sector, as to how you draw that line without unintended consequences. I am happy to look at it.

Q697 Andy Sawford: Thank you, Minister. We have had discussions with a range of organisations through the evidence sessions about the extent to which tenants and landlords know their rights and they are well publicised. We have heard suggestions that the Government should instigate a publicity campaign to make tenants and landlords more aware of their respective rights and responsibilities. One witness to us said that the Government publicise information about digital switchover and breathalysers; would you support a campaign so that tenants and landlords are more aware of their rights and responsibilities?

Mr Prisk: I am a strong believer that an effective market works when, in the broadest sense, the consumer understands exactly what their rights are. In this case this is both tenants and landlords, if we are talking particularly about the agency market; they are both players in that role. We have published guidance already in this field, and it is something where we have said to the industry that we would be happy to support an industryled scheme to get this across. Once people know exactly where they stand and they know what their rights are it gives them such empowerment. That is a positive area to consider, absolutely.

Q698 Andy Sawford: In that spirit, we have had various suggestions from the industry, ranging from a kitemark-which I thought interesting-to a key facts sheet, which seemed to me a much simpler, less onerous thing to ask people to provide. Perhaps the most straightforward would be an obligation on landlords in arranging tenancy agreements to provide a clear statement of rights and responsibilities. Would you support that?

Mr Prisk: What I would want to see, and what I have been trying to say to the industry, and I am happy to put firmly on the record now, is there are lots of different codes of practice and different marks and elements, and we need some clarity and some harmonisation of what is there now. That is why I am being cautious in saying yes to another one simply because I would like to see a clearer set of single elements saying, "This is a lease that is legit."

We obviously have the SAFE agent scheme in place for client money protection. That is good to use. We want to think about how, for example, when we get on to the issue of redress and letting agents, what support that might be in terms of the code of practice that underpins that so we have something that is clearer and simpler. I think the area you are in is absolutely right, which is that we need clarity about this. Frankly, we are very happy to support and engage with that, but I really want to say to the industry as well, "I think this is an area where you guys can lead, and should lead."

Q699 Andy Sawford: Just a question, Minister, given your emphasis on clarity, which this Committee would agree with, I expect, having heard the evidence we have heard. Why are you content to leave it to the industry? What confidence do you have that they will bring something forward? Is there, for example, any way in which the Government is creating a framework or some kind of pressure for that clarity?

Mr Prisk: I have no problem in wanting to do that as a partner, but if it is all Government there is a not unknown habit of some industries to sit back and wait for Government to do everything. This is where it should be a partnership. I am more than happy, and I have had those initial conversations with some of them, to say, "This is where you in the industry, the different players that you are, and we in Government, need to work together in partnership." We want to make sure that people have a clearer idea, and that then may well mean-whether it is a kitemark or whatever, I think that is the detail. The key is making sure there is clarity around it and people know where to go, know what the key issues are, know the questions to ask.

Q700 Andy Sawford: By what date, or by what mechanism, will we arrive at that clarity?

Mr Prisk: I am working on responding to the Office of Fair Trading’s report. We have obviously been able to make an initial response to that. I am keen to see what you as a Select Committee do before I rush into that, but I am also about to look at the consultation on the redress scheme. Those discussions are about to kick off with the industry, but you are right: as we move towards the redress scheme, over the next six months or so, the logic will be to sit the industry down and look to have some commonsense rules, clarity, transparency and active promotion around what people’s rights and responsibilities are in this field, over that period. That would be good timing from my point of view.

Q701 Andy Sawford: Just one very specific point. We have heard different views about the extent of the problem of accidental landlords. Is that something you have come across yourself in the sector, and how much of a problem would you see it as?

Mr Prisk: I have heard about four people define it in different ways, so I have never got a straight answer as to what it is that people think they mean by that. I have heard three or four different definitions of an accidental landlord. Sometimes it can literally be somebody who maybe is doing a friend a favour and then it becomes something a little more formalised and suddenly they find they are a "landlord".

Q702 Andy Sawford: I think we would interpret that-and perhaps we will put some clarity in our final report-as, for example, somebody might inherit a property and let it out, who had not set out to become a landlord, and therefore there is perhaps a greater need for the exchange of information about rights and responsibilities.

Mr Prisk: I think that is right, and that is where we need to look at all the parties involved, for people to be clear that if you are engaged in this process, these are your rights and these are your responsibilities. The two together are very important.

Q703 Chair: You used the term "industry" a couple of times there. Could you just define for us what you mean by industry?

Mr Prisk: I suppose I am thinking about the providers, in the sense that they may be the landlords, the professions that work with them and for them, potentially obviously the investors who are part of that process, and then obviously the intermediaries in terms of letting agents, managing agents and others.

Q704 Heather Wheeler: Minister, apologies for coming in late, but I bagsied this question early this morning, so the Chairman very kindly allowed me to have this one. We have heard a lot about the regulation relating to the private rented sector being too complex, with 50 Acts of Parliament, 70 separate pieces of regulation. Is it time, and how bold would it be, for the Government to have a wholesale review and simplification, along the lines of the Planning Guidance Review?

Mr Prisk: Of course there is a plan in this parliamentary Session to have a wholesale review of consumer legislation, but clearly this is much broader. I am always happy to talk to industry where we can look at sensible simplification and consolidation of law, not least because it then comes back to the point Mr Sawford was making, which is that if people are to know what their rights and responsibilities are, if the legislation is clearer and more consolidated, the chances of them understanding what it is is there. Like a lot of legislation, naturally it tends to have been in response to a particular event that has driven us as a Parliament to take an action, and then it steadily builds, like a set of barnacles on the bottom of a ship. Occasionally you need to clear that off and have a clear set of rules.

Q705 Heather Wheeler: That is very encouraging, thank you very much. One of the areas where we have heard mixed messages, red tape or misunderstandings is on the housing, health and safety rating system. Frankly, very few people understand how it works: again, should there be a simpler system with clear standards that landlords and tenants understand?

Mr Prisk: I have heard diverse views on this. I have heard some people say that it has the right robustness, that it is effective; others say that they are not quite sure where the extent of it lies and at what point the rating system kicks in. I have to say it has not been at the top of the list of the representations I have received, but again, if that is something that you have heard differently, I am more than happy to look at that more carefully. It belies the occasional suggestion that the rented sector has no regulations involved. I was going back through what is there in the last 12 months, and it is a pretty extensive list of different regulatory forms, but as we are learning, sometimes people are not aware of what those are, and using them most effectively. This is one of the other areas where enforcement is a very important question.

Heather Wheeler: You bring me on nicely to-

Mr Prisk: Oh, sorry.

Q706 Heather Wheeler: No, no, beautifully done, Minister. I honestly did not share this with you before. My final question is: do you think local government have enough powers? I suppose what I am getting at is that it is so diverse; some use them an awful lot and some do not. I do not know where you think levers need to be pulled.

Mr Prisk: There is a parallel in my mind here. We have been looking at some really excellent work some local authorities do around homelessness, and we have established this gold standard principle, which is about using those who are really firstclass to draw up best practice and promote and encourage that in the sector. I am generally in favour of that as a principle, rather than beating people over the head as to what they are not doing. You occasionally need the stick, but I think on the whole demonstrating why good practice works is very often more likely to achieve the change in culture you need.

What is interesting is when you see comparable authorities, with similar problems and similar resources, doing things wholly differently, one very well, the other poorly, you realise it is about culture and process. I would say that there is a wide variability in enforcement, whether it is trading standards, environmental health, planning or whatever, and one of the things I want to encourage is how we can strengthen that, so that good and best practice becomes more of the norm. However, that is a cultural change and quite a deepset issue, which we need to think about.

Q707 Chair: One suggestion we had about enforcement came from a local authority officer who said that very often it was very complicated when you had a landlord who just was not being compliant. The process could be quite complicated, expensive and timeconsuming to get them to respond. It was suggested that we might develop a form of fixed penalty system, where you issued a notice to a landlord and they may have seven days to do the work, and if they did not, they got the penalty. I wondered whether you thought that might be an appropriate way of a "light touch" regulation that might be more effective.

Mr Prisk: A form of yellow or red card system can be helpful, whether it is actually a fixed penalty notice or whatever. That can be helpful in clarifying what the rules are. I think it is more the fact that because a property has a number of areas where there are potential hazards or failures by the owner, it might be genuinely hazardous or unsafe in what they are doing in terms of the condition of the building, or it might be the way in which they have changed the planning laws.

However, one of the problems is that it is different elements of a council needing to understand the interplay and to deal with those in the round. That is more to do with training, in a sense, rather than necessarily the nature of the notice. If there is stronger evidence-I obviously want to look at the details of what the Committee suggests-that some form of simpler system of a yellow and red card, if you like, or a fixed penalty notice would clarify that, then I would be happy to look at the evidence.

Q708 Chair: Just coming on to registration schemes, Julie Rugg did a report in 2008 that recommended what she called a "light touch registration scheme". It seems the Government have dismissed the idea, though we have had a lot of evidence to the Committee so far that some scheme that simply obliged landlords to register, so the local authority knew who they were, for a start, would be a good step forward. Indeed, when we went to Leeds the other day it was the landlords who said to us, very clearly, "We are here, all of us who are present in the room at the time, all members of the Leeds local authority accreditation scheme," which they were very complimentary about, "but we think all landlords ought to have to join it." They think it is unfair because the bad ones do not, basically. Have you any thoughts?

Mr Prisk: My worry here is that a national scheme can be very rigid and not reflect local circumstances. I am encouraged to watch some local authorities deal with specific issues that are very particular to them. We have at the moment a mandatory licensing system for HMOs, we have an additional licensing system for smaller HMOs, and we have a selective licensing system. Those do allow local authorities to home in on a particular problem.

I have a classic example of this at the moment; it is a conversation with another Member of this House, so I will not say where, but in a rural area where there is a particular problem, principally around HMOs but potentially the rest of the rented sector in one town. They want to use the selective licensing system to address that issue, and I think that is the right route for it, whereas clearly other areas-Newham has particularly difficult other kinds of challenges, and I believe you had Sir Robin Wales come and talk to you. My inclination would be that the current set of licensing has the flexibility that is about right, rather than adding to that with a new national register or whatever.

Q709 Chair: What more than one local authority has said to us is that so far there is the ability to bring in a selective scheme, but it is a very specific set of requirements that local authorities have to have. They have to have either low demand, or a high level of antisocial behaviour: for no other reasons can they bring it in. The process for doing that, they are all saying, is very expensive and timeconsuming, and the regulatory arrangements-I understand Newham’s form is 11 pages long and 20 pages of guidance, so landlords like Grainger are saying, "This is really timeconsuming and expensive to us. Something more light touch would be appropriate in the circumstances, but this is not really fit for purpose."

Mr Prisk: It has not stopped Newham doing what they are doing, and that is up to them. My own view is that once we go down the road of national registration, my fear genuinely is that it would become quite rigid, and I am not wholly convinced it will stop those criminal fraternities on the edge from doing the informal stuff that they do. I am not sure we would be dealing with the root of the problem. My preference would remain for the current set of licensing, though I take the point on the conditions. I am certainly always open to seeing whether there is another problem that the selective licensing system might apply to, which could be used locally in that way.

Q710 Chair: Or, in the light of the spirit of localism, Minister, if you are not in favour of a national registration scheme, would it be possible to give local authorities a wider range of possibilities about bringing local schemes in? We went to Leeds, for example, and they equally raised concerns about the cost of selective licensing-which they have currently in one particular area; we went to look at it-and saying that they are looking to experiment in other areas and were testing their powers out where they might want to bring a light-touch scheme. One example: the selective scheme apparently requires every property to be registered on a separate set of forms; why do you not have a landlord registered and then put all the properties they own down on the same form? It is that sort of thing, and Leeds were certainly saying they were looking to target areas where they were in a poor state of disrepair but had not got the antisocial problems, but they still had to go through the complications of selective licensing. Is there a different approach that authorities could be enabled to take in terms of registration?

Mr Prisk: We have simplified the selective licensing system in terms of the consultation arrangements; I think that is important. If there is a good argument demonstrated that a significant proportion of local authorities would welcome something going beyond low demand and antisocial behaviour-in other words, other circumstances they are finding they would like to approach-I would certainly be happy to look at the evidence, absolutely.

Q711 Chair: And maybe look at any other complications around the number of forms and the-

Mr Prisk: Always happy to look at that.

Q712 Chair: That is very helpful. One of the things that also came up was that all private rental properties have to have a gas safety certificate, but there is nothing about electrical safety. This Committee has done quite a bit of work about electrical safety on various items in the past. I wondered whether you thought that was appropriate, or whether there ought to be something on electrical safety in the regulations as well.

Mr Prisk: Of course there is the 1985 Landlord and Tenant Act, which specifically requires that all installations, whether it is gas, water or electricity, are maintained in good repair and working order. That is a very good underpinning of the legislative environment. That is probably the right place to stay in, in that instance; it is already on the books, and we should apply it.

Q713 Chair: Except that on gas, I understand, someone has to come and check the-

Mr Prisk: There has always been a slight difference with gas in the sense that because, of course, it is something where-and this is again where the legislation has developed because of several tragic incidents, as I understand it, from previous Governments and Parliaments, and tragically we have seen it in the last 48 hours or so-gas leaks are more prevalent in that sense, and the feeling that making sure there is particular legislation there, whereas obviously electricity has proven to have far fewer incidents. I think therefore the 1985 Act probably covers that risk as it stands.

Q714 Andy Sawford: This leads on very much, Minister, from your answers. What has the Government done to assess the effectiveness of mandatory licensing of HMOs?

Mr Prisk: We talk with local authorities regularly on this. Obviously it leads on into other issues. Most obvious, I would say, is the way in which we have been able to use that legislation, and local authorities like Ealing have used it, in tackling rogue landlords and beds in sheds, where although we are looking at the outer buildings, what we often find then is that the way in which the HMO is run is frankly at the heart of many of the problems we have. We keep quite a close eye on exactly how they work, and the 40,000 or so large HMOs that we currently have.

Q715 Andy Sawford: Is there a case for extending licensing to other types of HMOs, then?

Mr Prisk: There is, of course, additional licensing for the smaller HMO. The mandatory one, obviously, is only for the three-storey and above in that sense, or where there are five people in residence. You then have the additional licensing arrangements for the smaller HMOs in place at the moment.

Q716 Andy Sawford: We are also interested in the use of Article 4 by local authorities-York has used it, for example-but we had evidence from the Residential Landlords Association who argue that Article 4 directions and the power to impose these should be repealed. They argue that they are a restriction on supply and people should be allowed to choose where they want to live. They are arguing that these are an unnecessary and inappropriate intervention in the market, effectively. What is your view of Article 4 and its use?

Mr Prisk: I have to say that when I look at some of the issues around this sector, it is HMOs and the larger ones where there seem to be more and more of the problems, and so I want to see a reasonably robust regulatory framework.

Q717 Andy Sawford: I can interpret that.

Mr Prisk: By all means.

Q718 Andy Sawford: We did have a specific issue, which is about landlords being concerned if they let their property to a family, because of Article 4 directions they will not be able to convert it back to an HMO at a later date. Do you recognise that concern?

Mr Prisk: Yes, I have heard it, but I have to say it tends to be at the minority end of the equation. The argument on the other side tends to be the one that I hear more often, that you need that rule in place.

Q719 Simon Danczuk: I think we are all agreed that the proposals the Government are setting out around letting and managing agents being required to belong to an approved redress scheme are welcome. There are currently two redress schemes: the Property Ombudsman and the Ombudsman Services for Property. Is this a good opportunity to create one single scheme that makes it simpler for the consumer?

Mr Prisk: This redress issue is important, because in many ways it strengthens the hand of the tenant particularly-though occasionally the landlord as well-where, as Members of this House and indeed I as a constituency Member find individual problems. Getting that redress in place as a mandatory approach is absolutely right. In terms of how we do this, just to share with the Committee our thinking on this, the first step is, by talking to the industry and talking to tenants and others, making sure that we agree on how we will bring the redress schemes forward, and whether there is one or more.

There are arguments for having more than one, and that is because this applies not just to the letting agents, but we have also sought to apply the issue in the parallel market of leasehold. Therefore whether we have one or more, or whether one would encompass both, or whether we need one for each is something we are consulting on at the moment. I agree with you that what we do need to make sure is that there is, if you like, a genuine harmony in terms of what is expected of any ombudsman scheme, so that they are all working to the same set of principles and potentially code of practice.

Q720 Simon Danczuk: Will you make adherence to a code of practice and a client money protection scheme mandatory?

Mr Prisk: With client money protection schemes, I feel there the critical issue is that the consumer be aware of what the risks and the challenges are. That is where the SAFE agents scheme that we have in place, which is increasingly used and adhered to now, is a good approach. In terms of the code of practice more generally, this is an opportunity, now that we have the opportunity to have a redress scheme in place, to look at that code of practice that underpins it, and use it to weed out the cowboys and raise standards.

Q721 Simon Danczuk: Will the money protection scheme be mandatory?

Mr Prisk: I am not at this stage wanting to tie my hands there, not because I want to be shifty on it in any sense, to you as a Committee or to the public as a whole, but I need to talk to the sector and understand exactly what the pros and cons are of that, given what we already have in place.

Q722 Simon Danczuk: Can you confirm the timescales for the consultation and implementation of the secondary legislation?

Mr Prisk: Yes. My game plan, which is causing some challenge amongst Whitehall lawyers, as you might imagine, is to try to make sure that we have a defined scheme, so that people know exactly what it is, brought before this House in the autumn. We then need to have a second set of orders, which then makes it law. In other words we need to set out in law what they will have to do and what the scheme will be, but you cannot then instantly have it, because they all need to adjust to what that is. You then need what I hope will be a relatively short-but I am relatively flexible about that, as long as I know the scheme is right and it is going to work. The moment people can see what the scheme is, the vast majority will start moving towards applying to join the appropriate redress scheme, and so on and so forth. When it becomes law-I am not saying it is a secondary matter, but in a sense that is the tailend of that process-that is when, going back to Mr Sawford’s question, there is that period where we need to start thinking about banging the drum about, "What are your rights? What are your responsibilities?" That would be the perfect moment to do it.

Q723 Simon Danczuk: It will all be sorted by early next year, though, that is what you are saying?

Mr Prisk: It is intended to make sure that we have the scheme in place by, I would hope, Christmas of this year, with a view to its full implementation in the first half of next year.

Q724 Simon Danczuk: Excellent. Scotland has made it illegal for letting agents to charge tenants. Are you going to do the same, Minister?

Mr Prisk: I am generally not in favour of banning things. What I have seen there is that some agents have gone out of business as a result, so it would not be my first choice, no.

Q725 Simon Danczuk: What is your reasoning behind that?

Mr Prisk: Because moving towards a redress scheme for all agents, having an appropriate code of practice, and working with the industry to make sure that there is clarity over what you charge and when, is the best route forward.

Q726 Simon Danczuk: Finally, will forcing landlords to check the immigration status of tenants encourage the private rented sector to increase supply, or will it discourage supply, do you think?

Mr Prisk: At the moment quite a lot of landlords do this anyway. You get your bank account details, and they will want to just check that you are who you say you are, which is perfectly sensible. What we are asking for is that all landlords undertake that kind of basic check, just to make sure that people are who they say they are and they are entitled to be here.

Q727 Simon Danczuk: It is quite a rigmarole, though. I have been an employer and having to check it as an employer is quite a rigmarole. Do you think it will encourage supply, or discourage it?

Mr Prisk: The intention is to make it light touch, as the Prime Minister has said. We are working on the proposals at the moment and will want to make sure that it does not become unduly onerous.

Q728 Chair: Just to follow that up, Minister: two points. You said that landlords will have to check that the person who is setting themselves before them to rent a property is who they say they are, and they are entitled to be here. The two are not the same checks, are they? It is very easy to get someone’s passport, look at them, and say, "That looks like the person in front of me," but that does not necessarily show to the landlord that the person has a right to be here. That may be a completely different document, which the landlord has no understanding of; it is sometimes difficult to get from the Border Agency a clear statement about whether someone is entitled to be here, let alone from a piece of paper someone made.

Mr Prisk: Yes. The idea is to make sure that someone takes a reasonable step to check someone’s identity, and that naturally would be a passport. That is the purpose.

Q729 Chair: But not beyond that?

Mr Prisk: No.

Q730 Chair: How does that prove whether they are entitled to be here?

Mr Prisk: The purpose is to make sure that landlords take reasonable steps to check that that person is. Clearly they are not able to be a full enforcer of that, so that would remain where it stands.

Q731 Chair: Finally, just on licensing, given the redress scheme is about putting things right that have gone wrong-and we would hope that maybe some of the letting agents who do things wrong should not be around and in business-are you open to an argument about extending that to a licensing scheme for letting agents? That is what most of the evidence we have had so far has said to us, that there should be a licensing scheme for letting agents.

Mr Prisk: At this stage, having looked at this carefully, we want to get the redress scheme right. That is where I am at this stage.

Q732 Chair: Are you open to looking at something beyond that in due course?

Mr Prisk: In due course, but let us not get ahead of ourselves. We have quite a complex process to go through, and if we can get the code of practice right that underpins the redress scheme we probably will drive out the vast majority of the kinds of problems that our constituents face.

Q733 John Stevenson: Apologies for being late. Can I take you back to the question about the letting agent charging the tenant? Would you not agree that there is potentially an inherent conflict of interest if a letting agent acts for and charges both the landlord and the tenant, and therefore it should be quite clear that the letting agent only acts for the landlord and should therefore only be entitled to charge the landlord, and not make any charge to the tenant?

Mr Prisk: It is worrying that you do get instances where agents try to charge both sides for the same activity; I think that is wrong. 60% of existing agents are either part of a professional scheme where clearly trying to charge both sides for the same thing is verboten, and rightly so. That is why I want to use the redress scheme to make sure that we raise those standards. That is where we need to address some of the questions. It is also where we need to recognise that on the fringe of this market we have people who are in lettings, informally, but they are also in an awful lot of other things informally. We just need to make sure that it is difficult for them to trade in that kind of way.

Q734 John Stevenson: Do you think there should be an absolute bar, that a letting agent can only act for one client and therefore only charge one?

Mr Prisk: I am not sure about an absolute bar. I do want to make sure that the key thing is that fees and charges are crystal clear to people upfront, before they enter into any contract. That is the critical bit.

Q735 Mark Pawsey: Minister, I wonder if I could ask you about the future financial viability of the private rented sector, because we have heard from landlords that their ability to make a reasonable yield on their investment depended on capital growth in the value of residential properties. Of course, over the last five years or so, we have been living in an era of no capital growth, and they are suggesting that on the basis of the rent income alone, in the absence of capital growth, the yields are not satisfactory for them to continue to invest in the way that we might like them to do in terms of improving quality.

On the other hand, we hear from the English Housing Survey that housing costs for private renters take up 43% of their gross weekly income, compared to 19% with owneroccupiers, and social renters at 29%. The feeling is that tenants are paying too large a proportion of their income out in rent in the private rented sector. The landlords would like to see rents go up; tenants want to see rents come down, and the longterm effect of that is that people will not bring the properties to the market. What is the future for the sector?

Mr Prisk: The future is relatively brighter than perhaps you wanted to paint that dilemma-and I understand that-in the sense that I have watched it grow and nearly double in size since 1988. That is during a period when there was a very strong owneroccupier market, and then, as we saw in 200708, a crash, so there has been a sustained growth of that. That reflects some of the longer demographic issues we were talking about earlier, in terms of labour mobility and so on.

We also need to remember that this is a very diverse market, with everything from a grandmother letting out a little bit of lodging on one side, right the way through to major international investors holding large blocks of properties for longterm yields, and everything in between. My view with this is that we have to make sure the market works effectively, that we say to those who might invest more for yield than capital gain-in other words the longerterm investor-that there is a clarity and a constant regulatory framework, because if you are looking to invest for the longer term, and you are more concerned with the yield than an early capital gain, and therefore come into the market for the long term, they want to be certain about the regulatory framework. That is one of those areas where we have to move quite carefully to make sure we get that.

It can be a market that is very sensitive to regulatory changes. We saw that period when it dropped from half of the housing market, at one stage, in this country to 9%, and it is now back. It can be a market that, if the wrong signals are sent out, can actually shrink, and then we would find that our overall housing stock has been reduced even further.

Q736 Mark Pawsey: Do you think the yields that investors are looking for are unrealistic?

Mr Prisk: No. What I am encouraged by is that it is relative, and what many of them say to me is that they watched their returns in commercial property fall away, and they like the potential that UK residential has. They see a growing population, and they would like to see whether they can bring some of their expertise, and that longerterm investment. I think there is a real prize here, if I may say. I have nothing against people who wish to buy to let, and that is fine, but I think the mature end of the market, where we have a greater spread of investors, particularly those who are more concerned with a longerterm yield than a shorterterm capital gain, offers some real opportunities.

Q737 Mark Pawsey: One of the issues we came across again in evidence is the uncertainty around data in the sector. The leader of Newham told us that there had turned out to be rather more landlords in his area than he thought there were. How can we make certain that we know enough about the number of landlords and the number of tenancies and the kind of rents they are paying to get a true picture of the sector?

Mr Prisk: It is a hugely diverse and dynamic market, I agree with you. On rent, this is one of those areas that I found quite vexing, coming into this role seven or eight months ago: every week a new statistic comes out, which, depending on which point you wanted to make, the statistic neatly either supports you or condemns your argument. We have the ONS, the VOA, LSL, RightMove, Halifax: there is a whole raft of people giving out statistics, and because you are dealing with a variety of different properties in a variety of locations, they all give slightly different signals.

That is why we have encouraged the Office for National Statistics to use the biggest database we are aware of, which is the VOA’s, to develop a new index to try to gain some greater clarity about where rent levels are and where they are in particular locations, because clearly London distorts the whole of the statistics.

Q738 Mark Pawsey: Is that a case for registration?

Mr Prisk: No, I think it is a case of making sure the index is right. I do not think it is a case for needing necessarily to try to count every landlord; that sounds like a very expensive process. I am not sure how it would actually help policy.

Q739 Chair: Someone said to us in evidence that if they had a registration scheme and they had a unique number, which also went to HMRC, it might help in the tax collection that perhaps goes under-noticed amongst some landlords.

Mr Prisk: I am always wary of the words "Whitehall" and "computer", I think, Mr Chairman.

Q740 Chair: But more effective tax collection might help?

Mr Prisk: It could do, yes. I am cautious about the argument of a master computer system run by Whitehall that would miraculously deliver something. There is a long history of it miraculously delivering not a lot.

Q741 Simon Danczuk: Blackpool Council has called for a refined approach to the calculation of local housing allowance, to enable it to address issues around higher numbers of benefit claimants. I think it applies to other towns as well, but because the outskirts of Blackpool, where there are rented properties, are used in calculating they have set a higher local housing allowance, which then makes it very profitable for landlords to have benefit claimants in the area. Are you prepared to explore this with your colleagues in the Department for Work and Pensions?

Mr Prisk: The LHA boundaries tend to relate to local authority boundaries, which makes sense, in many senses, in that context, but there can be anomalies and I think the Blackpool one is an interesting one. What we have tried to do is to make sure, by applying the CPI rise this year, but then putting a 1% cap thereafter, is to try to keep a downward pressure on those rents. There are some local anomalies. That is something which, as this is something that both DWP and ourselves have an interest in, we need to keep an eye on. I know my colleagues in DWP do that.

Q742 Simon Danczuk: Something that has been in the press today, as well, is the use, particularly in London, of bed and breakfasts, and also the point around moving homeless people out of London, often to coastal towns. Are you comfortable with that situation, Minister?

Mr Prisk: We are very clear about out-of-London placements, or indeed out-of- borough placements. The law is quite clear: there must be no, as there was in the 1970s, mass dumping of people tens or hundreds of miles from their home. In fact, last year we strengthened the law with the new suitability test, to try to make sure that is not happening. We talk regularly to local authorities about this. Some have particular problems because of their own locality, but the law is clear on out-of-borough placement, and I expect them to abide by it.

Q743 Simon Danczuk: Yes, but the figures are there. There were some that were published today that showed that this is clearly happening. We had representations from Hastings that talked about having to deal with an influx of vulnerable households. Since I have been in Parliament it is a recurring theme. What are the Government doing to stop it happening?

Mr Prisk: What we have been trying to do is to make sure that first of all we apply the law, and secondly we strengthen it, which is what the suitability test is. Thirdly, I think you do need to talk to individual local authorities, because what I have been struck by, particularly in the context of London boroughs, is the huge difference between boroughs that sit next door to each other who nevertheless have radically different issues around B and B or temporary accommodation, and yet their demographics are the same. It is trying to work out why it is that borough A is significantly in greater difficulties than borough B, and very often it is not the demographics or the market, it is about the way they are approaching the situation.

What we are doing is engaging positively with those: if they can demonstrate where they have a unique problem beyond their own means I am more than happy to engage, and indeed we are engaging with them, but I do not want to send the signal that dumping 200 miles away is acceptable. It is not, and we need to be quite robust about that.

Q744 Simon Danczuk: Are you going to bring an end to it?

Mr Prisk: I am not guaranteeing that at all. I am guaranteeing that I will do my best to keep it to a minimum and that the law is upheld.

Q745 Simon Danczuk: Sticking with London, then, do you share the Deputy Mayor of London’s view that housing benefits should be linked to landlords meeting certain standards in their properties?

Mr Prisk: The tricky thing with that is how you enforce it. For example, if you were a housing benefit tenant and I was not, and we were both going for the same property, does it mean that you would have to get the local authority in the area to clear that that property was acceptable before you could sign up to the tenancy? Because if it does, the chances are the landlord would have signed up with me before you got there. There is a practical problem, as well as a significant administrative problem. The general principle that underpins his argument is that we need to make sure that we are challenging local landlords about the quality of property they are offering, and that we as local authorities, if we are to use these private properties, need to have clear regard to the standards. That is a perfectly acceptable way. I just do not think you can link HB directly with the standard of an individual property without having adverse consequences.

Q746 Simon Danczuk: So you do not think the standards in a property should be linked to housing benefit, then?

Mr Prisk: I do not see how it is practical. What would be more beneficial is to use other means, by making sure that when we do let, the standard of those properties is where it should be.

Q747 Simon Danczuk: Is there anyone else besides yourself and rogue landlords who do not share this view? I cannot help thinking that it would not be difficult for a local authority to determine a simple accreditation scheme for landlords that they have to sign up to, to certain standards in terms of the property-decent home standards, call it what you will-and if they do that they will receive housing benefit, and if they do not do that they will not receive housing benefit. It does not seem that complex or difficult to me.

Mr Prisk: What you have to say is that at the beginning of every tenancy you would have to be convinced that the property in question was acceptable to the housing benefit authorities, and that would mean having to check that before they signed up each time. In some instances if they are a repeat landlord that might be easier to deal with, but there will be many instances where there is a new landlord coming in, or a new property. My worry would be that as an HB tenant you might find yourself at a significant disadvantage when trying to get the property, because someone who is not an HB tenant will be able to sign without having to go to the local authority. There is a genuine practical problem you would have to sort out.

Q748 Simon Danczuk: Because the tenant could report it, could they not?

Mr Prisk: They could, but they would have signed up to it by then. The question is then how they unpick themselves, and whether you stop the housing benefit. That is when you get into difficulties. The point that is underlying it is a good one, which is that we should have good regard, where public money is effectively paying the rent, to making sure that care is taken as to which properties are used. That is a sensible point. I just think that trying to link HB with a standard of property will prove to be quite impractical.

Q749 Chair: Minister, thank you very much indeed for coming in this afternoon and meeting with us.

Mr Prisk: Not at all. Thank you very much.