§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jon Owen Jones.]
§ 10.4 pm
§ Ms Karen Buck (Regent's Park and Kensington, North)I begin with a brief disclaimer: if I live to be 100, and think of nothing else for the rest of my life, I shall never acquire the knowledge on the subject of my Adjournment debate that my hon. Friend the Minister has, so I introduce it with some humility. I hope that I do not make him cringe too much with any errors of fact, as I tread through a complex field of housing and law.
I appreciate the Government's awareness of the issue, both as a national concern and as it affects my constituency. I am grateful to my hon. Friend for the fact that he has met some of the people about whom I intend to talk, and has heard their concerns at first hand. I thank him for his interest in, and knowledge of, the subject. I congratulate the Association of Regulated Tenants Associations, and various other private tenants' groups and workers in this sector, who have helped many vulnerable individuals and documented their story.
I want to place on the record some of my constituents' experiences in Kensington and Chelsea and in Westminster, and to plead for sympathetic consideration of their plight. My constituency has one of the highest proportions of private sector tenants in the United Kingdom—they are heavily concentrated in places such as Maida Vale, St. John's Wood and Regent's Park—but there are 300,000 protected tenants throughout the country. I believe that there are about 85,000 pensioner households in London in unfurnished accommodation, many of which will fall into the category of protected tenants.
The sector undoubtedly has a major contribution to make to housing supply, but it has some severe weaknesses that need redress. As usual, what is true for the country as a whole is magnified here in central London. The value of privately rented accommodation is that it offers flexibility for people who need housing, perhaps because of changes in employment or personal circumstances, and for whom the permanence of a house purchase, for example, would not be appropriate. It also offers housing opportunities for those who may be unable to obtain a mortgage or who cannot access the social rented sector.
There is no doubt that renting a home in the private market is for many people an important, often an ideal, option. The problems on which I intend to concentrate tonight concern the substantial minority of tenants who have sought not flexibility but security in the private rented sector. Some sought security of tenure, as implied by their original leases or tenancy agreements, while others had a reasonable expectation of financial security when agreements were entered into, sometimes 40 or 50 years ago.
I want to draw attention to an injustice done to householders who entered into agreements in good faith. They believed that those agreements enabled them to invest and plan for the future and that they could build a family home; but those agreements have turned out to be effectively worthless, as rents have soared, sometimes by 122 hundreds of percentage points. Investment in homes, sometimes running to tens of thousands of pounds, has counted for nothing.
Assurances given at the time of the Housing Act 1988 have been rendered null and void by practices adopted in recent years. That legislation had among its aims the transformation of the rented housing market. There was a clear expectation that rents would rise for new tenants, but that was balanced by the stated exemption for tenants who entered into agreements before the commencement of that Act, such as regulated tenants under the Rent Act 1977. In fact, the shift towards market rents for pre-1988 protected tenants has in recent years had a dramatic and devastating effect.
Not only have landlords forced the pace towards market rents for protected tenants, but rent officers—and especially rent assessment committees—have exacerbated the process. That has especially been the case since the Spath Holme judgment in 1995, which changed the basis of rent officers' determinations. As a result, landlords are requesting substantial two-yearly increases, which are often raised by rent officers. Ironically, sometimes rent officers raise rents to forestall excessive rises at the appeal stage. When cases go to appeal, further huge increases are often imposed by rent assessment committees.
§ Maria Eagle (Liverpool, Garston)Is my hon. Friend aware that such problems exist not only in London but in Liverpool and many other places? In one instance in my constituency, a rent officer accompanying a landlady, who was given the full 100 per cent. increase for which she asked, told her that she should be able to obtain more. As a result, the landlady appealed against the assessment, despite getting 100 per cent. of what she asked for, and got a further increase. The 85-year-old tenant, who had lived in the property all her life, has been in hospital ever since. The problem seriously affects vulnerable and elderly tenants.
§ Ms BuckThat is exactly the sort of the case that I shall discuss. My hon. Friend confirms my argument. She mentioned appeals. Of 703 cases heard in London in the first quarter of 1996, the rent assessment committee found in favour of the tenant in only 14 per cent. of cases. In more than 60 per cent., it increased the rent recommended by rent officers. It is hardly surprising that the rent determination process is viewed with the deepest cynicism by my constituents or that the secretive and unaccountable rent assessment committees are regarded as heavily loaded in favour of landlords.
I want to tell the stories of some my constituents, stories that are shot through with a sense of betrayal and anger, both at the role of landlords and at the rent assessment procedure, and with a great deal of human misery. A lady tenant of the Eyre estate in St. John's Wood wrote:
My husband, who is 77 and has Parkinson's Disease, myself and my two children have lived in this house for 29 years … from the beginning, we treated this house as our home; installed heating; rewired; put a new roof on the house … yet since 1980, the rent has increased by 900 per cent … It is definitely time for the market to come to a halt so people like us do not have to worry ourselves to the grave about rents".Another gentleman wrote: 123In 1990, my rent was £4350 per annum. By 1994 it had increased to £8200. At the next registration the landlord asked for £11,600 and was granted this figure by the Rent Officer. Notwithstanding this the landlord still objected to the rent and I had to face the Rent Assessment Committee … At the hearing, the landlord asked for £35,000 per annum and the Rent Assessment Committee assessed the rent at £17,000.My constituent says that he managed to cope, but many other tenants have not. They have been forced out, sometimes into old people's homes as many are pensioners.To add appalling insult to injury, when tenants go, they are often landed with dilapidation charges, compounding their fears. One gentleman wrote to advise me of a 79-year-old neighbour who left his home because he could not afford the rent increases. He had two disabled children as well as a dependent elderly wife. The landlords demanded £35,000 from him on leaving the property.
The person involved in the final example out of many that I could have quoted wrote:
When I first moved in in 1976, my rent was £1,600 per annum. It is now £13,650—a rise of 753 per cent … the high capital investment I have made, and the tough lease terms were acceptable at the time because we had the security of a protected tenancy, low rents, phasing in of rent increases and the right of my children to live in this house when I die. Without these advantages, I would never have taken the lease and invested all that time and money … No-one would have done so. It is, therefore, no surprise that we now feel cheated.Again and again comes the message, "We have been betrayed."The vulnerability of my constituents is heightened by the booming London property market, which adds both to market pressures on rents and to pressure to turn rental properties into corporate or holiday lets or sales. Last week, one private tenants' rights worker told me that she was about to represent a tenant in a block where the quoted market rents ranged from £515 a week to £1,350 a week. Another told me of a case where the rent was increased from £10,000 per annum in March to £17,000 in December following the decision in the Court of Appeal in the Curtis case.
The effects of such increases can be summarised simply—communities of rented homes are breaking up. The number of Eyre estate tenants in St. John's Wood has plunged below 100. Many of those communities are made up of people who moved in years ago, sometimes before the second world war. They are established communities which are part of London life, but they are being destroyed.
Properties are sold, often into the international property market because of the demands of that sector in central London, and they are being turned into corporate and holiday lets. That is helping to turn parts of the inner city into a desert. That is in direct contrast to the aims of our social exclusion unit, which seeks a mixed residential pattern in our inner cities.
Pensioners and others on fixed incomes are living in terror. They are unable to pay rent increases, but virtually unable to leave homes that they may have occupied for decades. Many of them are just above the housing benefit level and therefore have to absorb the full cost of the charges placed on them. However, many others are on housing benefit, so the excessive demands of landlords, supported by a rent assessment committee decision, is transferring much of that cost on to the public purse through housing benefit.
124 My hon. Friend the Minister has been asked to consider several options, including the use of section 31 of the Landlord and Tenant Act 1987 to restrict increases in rent. He has also been asked to consider a rent cap linking rent increases to the retail prices index plus a given percentage; a thorough review of rent assessment committees to ensure impartiality between landlords and tenants' interests; and the restoration of succession rights where they form part of the original lease.
I should greatly welcome any sign that my hon. Friend is able to give tonight as to the Government's thinking on the problems I have outlined and their possible solutions. Above all, I should welcome his recognition of the urgency of the matter. Every passing week results in more of my constituents being forced out of their homes. It is adding to the toll of families forced to leave their homes and of pensioners made homeless or living in constant fear of debt and homelessness. Those people are an integral part of the inner-London community and I hope that we shall soon be able to lift at least a portion of the burden that they bear.
§ The Minister for London and Construction (Mr. Nick Raynsford)I congratulate my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) on securing the Adjournment debate and using it to raise such an important matter. She has highlighted a number of cases of steep rent increases, which have caused anxiety and hardship to people who have long been residents in her area. My hon. Friend the Member for Liverpool, Garston (Maria Eagle) intervened to highlight the extent to which it is not just a problem encountered in London, but in other parts of the country.
Both my hon. Friends will know that the Government are very concerned about the disproportionate increases that some regulated tenants have faced in recent years. My hon. Friend the Member for Regent's Park and Kensington, North has been in correspondence with my Department about the plight of some of her constituents and will be aware that we have been looking to see what can be done to help tenants who face such problems.
Before I outline the possible measures that we are exploring, it might be helpful if I summarise the background to the setting of fair rents and why they have increased significantly in recent years.
When the Housing Act 1988 introduced assured tenancies at market rents for all new lettings from January 1989, existing tenants' rights to security of tenure and rent control were not changed. Those regulated tenants and their landlords have the right to have a fair rent registered for the tenancy by an independent rent officer. Both also have a right to appeal to a rent assessment committee if they are dissatisfied with the rent officer's decision. The registered rent is the maximum rent the landlord can charge and it cannot normally be re-registered for two years.
When assessing fair rents, rent officers and rent assessment committees must follow the rules laid down in section 70 of the Rent Act 1977. That requires them to take into account the age, character, locality and state of repair of the dwelling but to disregard any premium resulting from a scarcity of similar accommodation in the area. A fair rent is therefore what a landlord could achieve in a market in which the supply of and demand for 125 accommodation are in balance. Rent officers cannot take a tenant's or a landlord's personal circumstances into account.
Until the introduction of assured tenancies, there was little evidence of open-market rents because of rent control, so rent officers and rent assessment committees tended in the past to determine fair rents using the evidence of their own previous decisions. Before 1989, when there was no evidence of decontrolled market rents, that was the only practicable approach. More recently, it has been possible to determine fair rents by starting from the market rent and subtracting any element due to scarcity.
The way in which rent officers and rent assessment committees determine fair rents was the subject of a Court of Appeal case in 1995—Greater Manchester and Lancashire Rent Assessment Panel v. Spath Holme. The effect of the judgment was to give more weight to the market rent less the scarcity method of rent determination. That approach has been reaffirmed in a series of subsequent judgments, most recently the Curtis case, which came before the Court of Appeal in October 1997. Changing to that method has caused fair rents to rise steeply. Increases in recent years have been well above increases in the retail prices index over the same period. In some areas, particularly but not exclusively in London, increases on re-registration have been more than 20 per cent. higher than the retail prices index for the same two-year period.
Most of the tenants affected could never have expected increases of that magnitude under a fair rent system. As my hon. Friend said, many regulated tenants are elderly and on fixed incomes. They have planned their affairs on the assumption that they would be able to remain in their present home and I know that these increases are causing some of them not only great hardship, but great anxiety as they face the alternatives of giving up their home of many years, or seeing their savings rapidly disappear.
I do not believe that landlords of regulated tenants expected such increases. Regulated tenancies have generally been acquired in anticipation of substantial capital gains when the tenancies come to an end. These tenancies have always traded at a discount to vacant possession value. The discount may have reduced in recent years, but even now those properties trade at some 30 to 45 per cent. below vacant possession value. Moreover, the landlords bought those properties in the knowledge that the rents were subject to fair rent controls and that potential rental yields would be lower than those obtainable from assured shorthold tenancies. Therefore, we feel that there is a strong case for considering Government intervention to moderate rent increases for the small group of existing tenants in that position.
What options are we considering? First, I must make it clear that we do not have it in mind to change either the existing system of fair rent determinations by rent officers and rent assessment committees, or the rent criteria in section 70 of the Rent Act 1977. That would require primary legislation and, in view of the many other pressures on parliamentary time, any opportunity for that would be likely to lie some way ahead.
A more attractive option, which may be possible through secondary legislation, is the application of a maximum limit to the size of the rent increase which could be imposed by rent officers and rent assessment 126 committees under the existing system. We have in mind linking rent increases to the retail prices index, as a well-established measure of affordability, by way of an "RPI plus X" formula. However, there are some tricky issues to be resolved. We would need to ensure that we got the right balance between the interests of tenants and the interests of landlords. Another issue is that we do not want to discourage landlords from carrying out necessary improvements to their property; but, equally, we must be sure that any mechanism that allows rent increases to reflect those improvements does not simply provide the landlord with a loophole for circumventing the new limit.
There are difficult and detailed technical and legal issues which still need further study, but assuming that we can overcome these to our satisfaction, we shall issue a public consultation document setting out our proposals and seeking comments on the details. I cannot say precisely when that might be, but I can assure my hon. Friend that we are moving as rapidly as we can.
The principles and procedures for registering rents which apply to regulated tenancies under the Rent Act 1977 apply equally to tenants of registered social landlords whose tenancies started before January 1989. Rent officers register the maximum rent that may be charged. The rent officer cannot take into account the fact that RSLs are expected to charge rents affordable to people on low incomes, or that rents are expected to be below equivalent local private market levels. In recent years, in line with trends affecting other secure tenants, rent officers have recommended steep increases in RSL fair rents. Although, RSLs are not obliged to charge the full fair rent if they consider it too high, many do so.
The Housing Corporation has become increasingly concerned about rent levels within the sector generally and is taking steps to bear down on all RSL rents. Since April 1997, RSLs receiving capital grants for new development have been required to limit the increase in rents and service charges to RPI plus 1 per cent.
The corporation has recently consulted on further measures to limit increases for existing secure and assured tenants. Under the new performance standards for RSLs, to be introduced on 1 April 1998, RSLs will be expected to limit their overall rent increases to RPI plus 1 per cent. That figure will, however, apply to the total rent envelope of an association's stock rather than to individual rents. It will not prevent an individual tenant's rent from rising by significantly more than that figure.
The corporation has also been encouraging RSLs to develop rent policies aimed at setting rents that reflect the size, nature and location of the property rather than the nature of the tenancy or the funding regime under which it was developed. That would suggest a gradual process of convergence between secure and assured rents. However, it could seem rather inequitable to allow individual fair rents in the social rented sector to rise unchecked, if those in the private sector were subject to a cap.
We are therefore considering whether any proposal to limit fair rent increases for regulated tenants might also apply to secure tenants of RSLs, but within the rent control framework being developed by the Housing Corporation for all existing stock. RSLs would still be expected to develop rent policies that worked towards rent convergence, although that convergence might be slower if fair rent increases were limited. Clearly, we are trying 127 to balance a number of issues here and we would not take any decisions about the way ahead without consulting all the interested parties first.
Concerns have also been expressed that fair rent levels are not consistent between rent office areas or between rent officers and rent assessment committees. The Government share those concerns and we are looking at ways to improve performance. We have already announced that we have decided to create a unified national structure for the rent officer service in England by establishing it as a next steps agency of the Department of the Environment, Transport and the Regions. That should ensure that a more consistent and accountable service is provided to the public. We are currently planning on the assumption that the agency will be established in October 1999.
We are also reviewing, in the light of the Nolan report and the code of practice for public appointments, the composition of rent assessment panels and the procedures for appointing members. In doing so, we are responding to the anxiety expressed by my hon. Friend about possible imbalances in the membership of rent assessment panels.
I have been concerned that members of the panel should be drawn from a broader constituency. The panels are now making greater use of lay members on their committees and tribunals. The Department has already started advertising annually for panel members to widen the catchment from which they are drawn. More information is now required from candidates for appointment and declarations of interest are required from members on both appointment and re-appointment. I know that panel presidents are very aware of the need to ensure that members do not consider cases in which they may have either a personal or professional interest. However, we are looking to strengthen the safeguards still further. We want to see greater openness in the appointment process, with tenants and landlords having 128 ready access to information about the members considering their case. That is why I have asked the panels to look at how a register of members' interests can be made available for public inspection.
Another development that I can report is that a working group comprising members of the Institute of Rent Officers and rent assessment panels has been set up to consider, in the light of the recent fair rent court cases, how to achieve general consistency of approach to the registration of fair rents. I welcome that initiative and look forward to seeing the good practice guide that it proposes to issue in due course.
I know that the very fact that we are looking at the problem of unjustifiably high rent increases in the regulated sector has set alarm bells ringing in some quarters. Landlords' associations are suggesting that moderating fair rent increases could be the thin end of the wedge—the prelude to wider rent control. They are also predicting that it would scare away the financial institutions, which are at last beginning to show renewed interest in investing in private residential housing. I have to say, and keep on saying, that there is no rational basis for such fears. They are groundless. The factors that have led us to consider moderating fair rent increases simply do not apply in the deregulated sector of the market. We have no plans to change the legal framework for deregulated private tenancies, where rents and rent increases follow market trends.
I hope that my hon. Friend the Member for Regent's Park and Kensington, North is reassured from what I have said that the Government share her concerns about the plight of fair rent tenants. We are developing proposals to impose a maximum limit on the size of fair rent increases and we hope to be in a position to issue a public consultation paper shortly, setting out our proposals and seeking comments on the details.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-nine minutes past Ten o'clock.