§ 3.13 p.m.
§ The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Lord Bellwin)My Lords, I beg to move that this Bill be now read a second time. I do so with great pleasure, and, I may add, with somewhat less trepidation than when I moved the Second Reading of the Transport Bill. That was my first Bill, and a subject with which I started by being somewhat less acquainted than I am with housing. My personal experience in local government, with one of the local authorities most active in the sale of council houses, makes me particularly proud to present this measure to the House, in that one of the benefits will be to extend to public sector tenants generally the opportunities we were able to offer in Leeds.
18 The right for public sector tenants to buy their own homes is indeed one of the principal measures, but it is only one of the many important provisions in the Bill, which is a wide-ranging piece of legislation, covering the whole field of housing, including the private rented sector and housing associations, as well as local authorities and new towns. Chapter I of the Bill gives the right to buy their homes to tenants of local authorities, new towns, and housing associations. In providing this right to buy, we are giving many public sector tenants what they have wanted for years—the opportunity to have a stake in their own homes. They will be able to put their resources into an appreciating capital asset, thereby giving them the chance to accumulate wealth and to pass it on to their children. This desire is shared by tenants, whatever their political complexion, as the opinion poll taken by the Observer before the election demonstrated; it found that the proportion of Labour votes supporting the right to buy was not less than 75 per cent. The popularity of the policy has had many other such endorsements.
My Lords, let me say at once that in the past the provision of rented housing in the public sector has helped to improve the quality of life for very many people. It will continue to play a vital role for those in the greatest need, and the Bill contains important provisions to enhance the rights and status of public sector tenants. I will describe these in detail later, but public sector tenants should also be able to go on and become homeowners; and the right to buy will enable them to do so, wherever they live.
Clause 1 of the Bill gives the secure tenant of a public sector dwelling an unequivocal right to acquire the freehold of his house or the leasehold of his flat, provided that he has been a secure tenant for at least three years. The limited exceptions to the right to buy, notably groups of dwellings which are specially adapted for the use of elderly and disabled people, are set out in Clause 2 and Schedule 1. Clauses 6, 7 and 8 are concerned with the purchase price. The market value of a dwelling will be determined by the local authority valuer, or the district valuer if the tenant so chooses. The purchase price will be 19 based on market value, less a discount of between 33 and 50 per cent., depending on the purchaser's length of tenancy. If a dwelling is resold within five years, the original purchaser must repay a part or the whole of the discount.
My Lords, these are fair proposals. They recognise that the dwelling, although valued as if with vacant possession, is in fact occupied by a sitting tenant. They also recognise the length of time tenants have been paying out rent, and have been unable to accumulate wealth, as have homeowners. These discounts will bring home ownership within the reach of many for whom it would otherwise be impossible.
Tenants exercising the right to buy their house, will be looking for mortgages and Clause 1 of the Bill gives those exercising the right to buy the right also to a mortgage. Many of those who buy already finance their purchases other than through their local authority. The Government wish to encourage the private financing of sales, and the building societies and other lending institutions will, of course, play their part, commensurate with their other lending priorities. Clause 15 provides for tenants to receive a two-year option to purchase their homes, at the original valuation, if, for financial reasons, they are unable to do so immediately. For this they will make a returnable deposit of £100. It will enable them to save for the purchase of their homes, in the firm knowledge of an established price. This fulfils one of the promises in our election manifesto.
Tenants wishing to become owners will expect the Government to ensure that they have a right to buy, which cannot be circumvented or ignored. We believe that all local authorities whose properties are subject to the right to buy, will carry out their duties responsibly and speedily. If it appears, however, that a local authority is not taking adequate steps to facilitate a sale under the Bill, my right honourable friend will he able to take over the transaction. Clause 22 gives the powers and discretion necessary to do this effectively, although we regard this as a reserve power. We trust that it will be necessary to use it rarely, if at all.
One aspect of our proposals will be of particular interest to your Lordships; it is the safeguards for rural areas in 20 Clause 18. As our manifesto recognised, special factors apply to these areas. However, we believe it would be wrong to deprive those in the countryside of the opportunity to buy their homes. As noble Lords may have noticed, the safeguards originally included have been considerably strengthened by amendments made in another place. The clause enables a landlord selling a dwelling in a national park, or in an area of outstanding natural beauty, or in other rural areas to be designated by my right honourable friend, to require that any resale could only be to a person who has lived or worked for the previous three years in a surrounding area, to be prescribed by my right honourable friend. Alternatively, they may, with the Secretary of State's consent, reserve a right of pre-emption, enabling them to buy the dwelling back at market value, if it is to be re-sold within 10 years. These safeguards do not take away the tenants' right to buy, but they protect the interests of the local communities in these areas: we believe that we have struck a sensible balance.
My Lords, I turn next to Chapter II of Part I, and Part III of the Bill, which contain the charter of rights for public sector tenants, to which I have already referred briefly. The tenants' charter is the second major plank in the Bill. I see it as a vital complement to the right to buy, and as no less of a social advance. There will always be some tenants who do not wish to, or cannot buy their homes, and for them Chapter II of Part I, and Part III of the Bill, will bring important new freedoms and responsibilities. They will he able to exercise their own personal preferences as never before—by making their own improvements, by (if you like) choosing the colour of their own front door, by taking in lodgers, or by subletting part of the dwelling. They will have a new, statutory, framework of rights, and will be informed about them, and about their rights and duties under the particular conditions of their tenancy. This new relationship is the basis for the freedom to which the Government are committed.
Yet we are not removing the local authority's freedom to manage the stock as they think best. For example, we are not imposing a rigid pattern of consulta- 21 tion, with a uniform system of tenants' committees, as the previous Government intended. We are allowing them to adopt the method which they feel appropriate for their local area, within the context of a clear duty to consult tenants on matters of housing management. Indeed, much of what is in this section of the Bill is based on what is the practice of many good landlords at the moment. I think we have a tenants' charter which gives tenants a great deal of freedom, but which neither undermines local government's proper responsibility, nor is excessively bureaucratic. I acknowledge that there is a good deal of common ground here between the major political parties.
Clause 27 conveys security of tenure to tenants and licensees of local authorities, housing associations and new towns, who are occupying the dwellings as their only or principal homes. The only exceptions are clearly listed in Clause 48 and Schedule 3. Clauses 29 to 33 give a right to one succession to a secure tenancy, and lay down the procedure for possession. A court may not make an order for possession unless one or more of the grounds for possession in Schedule 4 is satisfied.
Clauses 34 to 36 convey the new rights of secure tenants to take in lodgers, or to sublet part of the dwelling, with the landlord's consent, not to be unreasonably withheld. This can help make better use of the housing stock and will be an aid to mobility. Clauses 76 to 82 give tenants the right to carry out improvements: Clause 37 gives a discretionary power for public sector landlords to reimburse tenants for improvements, and Clause 38 prohibits rent increases on account of a tenant's own or his spouse's improvements.
Clauses 39 to 43 specify how the terms of a tenancy may be varied, and lay new duties on landlord authorities to make essential information available to tenants in as simple language as possible, including the local terms of secure tenancies, statutory rights under the tenants' charter and the rules for allocations, transfers and exchanges. At the same time, landlords will be obliged to consult their secure tenants on a wide range of management issues before taking a decision on them.
22 Clause 45 provides that the Secretary of State may contribute to the costs of housing transfers and exchanges. The local authority associations, with the encouragement of my honourable friend the Minister for Housing and Construction, have made substantial progress towards a voluntary national mobility scheme, which will make it easier for public sector tenants to move, whether for employment or urgent social reasons. The provisions of Clause 45 would allow the Government to make a contribution to the central costs of the scheme.
I referred earlier to the contribution which progressive local authorities have already made to the formulation of the tenants' charter. I think there is now a tremendous challenge for them, in implementing this charter. When one is legislating on a matter like housing, which is essentially concerned with the well-being and the problems of individuals, legislation alone is not enough; it is the spirit in which its intentions are put into practice which makes the difference. I am confident that local government and housing management can meet this challenge, and I hope that elected members of all complexions will concern themselves with how the charter is implemented. It is a landmark for both landlords and tenants in the public sector.
The Bill next goes on to propose important changes in the private rented sector. Part H of the Bill deals with the private rented sector, which has now been in decline for 60 years. There has, however, been no shortage of legislation or governmental inquiries—I myself was one of those privileged to serve on the Francis Committee on the Rent Acts, which reported in 1971, and, I believe, made many valuable recommendations.
As noble Lords will be aware, the last Government announced their intention to review the Rent Acts in 1975; but by the time of the general election, four years later, they had still announced no final conclusions. Any solutions they may have had must remain shrouded in mystery.
This Government have acted more quickly. We are determined to try to stem the unabated decline of the private rented sector. We believe landlords must be encouraged to go on letting and to 23 make more accommodation available. The unsatisfied demand for rented property is there for all to see, in every large town and city. The young, mobile workers and single people look particularly to private renting to meet their needs, and we must do more to satisfy them.
This Bill proposes constructive measures to help meet that need. We are not proposing a radical upheaval. It would not be right to upset existing arrangements, on which tenants have come to rely. There is therefore nothing in the Bill that will remove security from existing protected or statutory tenants, nor will the Bill remove the protection of fair rents.
There are three new initiatives in the Bill designed to encourage new letting. The first of these is shorthold, which is introduced in Clauses 50 to 54. Under the shorthold provisions of the Bill, landlords will be able to grant new tenancies of between one and five years with the certainty of being able to regain possession at the end of the final period. By enabling landlords to let without the risk of taking on a sitting tenant for life, the Government are removing a major disincentive to letting and re-letting. Shorthold was promised in our election manifesto, and I believe that it has an important role to play in helping to meet housing need, particularly for those—the young and the mobile—who do not really need long-term security, and have been having such difficulty in finding decent rented accommodation—especially, as I have said, in our cities.
However, our shorthold proposals in-corporate important safeguards for tenants. In view of the unfortunate and destructive attitude to shorthold that has been taken toy the Opposition in another place, I should like to spell out what these safeguards are. First, the Bill makes it impossible for an existing protected or statutory tenant to lose his existing security of tenure by taking a shorthold of the same dwelling. Second, the Bill provides that shortholds will be subject to compulsory rent registration—unlike any previous rent legislation. Third, by a Government amendment added at Report stage in another place, any tenant who is still in occupation at the 24 end of the first shorthold term will be guaranteed a further year's security under shorthold provided his landlord has not exercised his right to recover possession at the end of the original shorthold term. Fourth, all shorthold tenants will have the same benefits of Rent Act protection as other protected and statutory tenants. Altogether, we have demonstrated our readiness to take every possible reasonable step to provide satisfactory and practical safeguards for shorthold tenants.
The second initiative to encourage new lettings concerns lettings by resident landlords. The Government believe that owner-occupiers and tenants with room to spare should be encouraged to let out spare accommodation in their homes. At the moment, it can take a resident landlord up to a year—or even more—to recover possession of a part of his own home that he may have let. It is hardly surprising that people are not letting tenants in. That is why, for new lettings, Clause 67 ends the role of rent tribunals in suspending notices to quit, though they will retain their rent-fixing functions. Resident landlords will still have to apply to the county court for a possession order, but the court will only be able to give tenants a maximum of three months' extra security.
The third new initiative involves what are to be known as "assured tenancies"; these are introduced in Clauses 55 to 57. Landlords approved by the Secretary of State will be able to build for rent outside the Rent Act. Rents will be agreed at market levels, but tenants will have the right to renewal of their leases under an adapted version of the business tenancy regime in Part II of the Landlord and Tenant Act 1954. This is a controlled experiment which, in the first place, would be applied to bodies such as building societies, pension funds and insurance companies.
The Bill does not change the basis on which fair rents are fixed independently by rent officers, according to the criteria set out in Section 70 of the Rent Act. But Clauses 58 to 62 do seek to make the fair rent system, introduced in 1965, more responsive to present circumstances. Most importantly, we are changing the minimum period between registration, from three to two years. The three-year period was fixed in 1965, when inflation was running at 4 per cent. and thus, at the 25 point of review, a fair rent would have been worth some 12 per cent. less than when it was fixed. Today, after three years, a so-called fair rent may be worth 50 per cent. less than when it was fixed. An adjustment to two years is, in our view, entirely reasonable, with the number of phasing instalments reduced accordingly from three to two. This will produce greater equity between tenant and landlord and help reduce the present disincentive to relet.
Inflation has made an even greater nonsense of controlled tenancies, whose rents, astonishingly, are still fixed on the basis of 1956 rateable values, with average weekly rents of £1 to £1.50. Two hundred thousand of such still remain, and we are providing, in Clause 63, for the immediate conversion of these to regulated tenancies on fair rents.
The Bill also makes a number of other changes to the Acts, designed to tidy up and clarify. All in all, these changes add up to a coherent and comprehensive package, aimed at reviving private renting. They should help preserve our housing stock and increase the choice of those looking for accommodation.
Part VI of the Bill proposes a new housing subsidy system from 1st April 1981, for local authorities, new towns and the Development Board for Rural Wales. At present, housing subsidy depends almost entirely on housing costs. As a result, subsidy is not paid according to whether it is needed locally. This will be corrected under the new system, where subsidy will depend not only on housing costs but also on the local resources available to meet them. Instead of the somewhat indiscriminate present arrangement, subsidy will in future be directed to the areas which require it.
The operation of the new system will be as follows. Subsidy in any year will comprise the previous year's subsidy entitlement, adjusted for two factors. The first is the change in expenditure which is reckonable for subsidy, in accordance with the Secretary of State's determination. The second is the annual change in local contributions towards that expenditure, which is to be determined by the Secretary of State after consultation with local authorities.
26 I might also mention in this connection that we are proposing, in Part IX of the Bill, the repeal of Section 1(3) of the Housing Rents and Subsidies Act 1975 —the so-called "No Profit Rule". This will enable local authorities to provide for such credit balance as they see fit on their housing revenue account. It will also enable a credit balance to be transferred, in whole or in part, to the general rate fund if an authority wishes. Equally, they may apply credit balances to housing purposes, if they so choose.
Part VII of the Bill contains provisions relating to repairs and improvements, mortgages and home ownership, and rent allowances and rebates. I shall refer now to the repairs and improvements provisions but leave any comment on the others until the end of the debate. The improvement and repair of the existing housing stock is an important element in the Government's overall housing strategy. Although we have made a good deal of progress over the last 30 years, there are still far too many families who are living in houses which simply do not measure up to today's conditions. We also have to recognise that our housing stock, which is a great national asset, is inevitably ageing, and much of it needs attention if it is not to fall into decay and eventual dereliction.
Most of the housing which is at risk is privately owned; much of it by people of relatively limited means. We are, therefore, proposing significant changes to the system of grants for the improvement and repair of privately-owned dwellings, in order to increase the effectiveness and flexibility of the system and to direct resources where the need is greatest. The main provisions, contained in Clauses 101 and 102 and in Schedule 11 to the Bill, will extend the availability of grants for repairs, allow secure tenants to apply for grants, relax over-rigid conditions, and enable the Secretary of State to set grant rates and grant limits which reflect priority needs.
In addition to these changes, Clauses 103 and 123 provide for a new system of Exchequer contribution towards schemes of improvement and sale of older housing by both local authorities and housing associations. Taken together, these provisions form a package of measures which we hope will revitalise the improvement programme, help preserve the national 27 housing stock and make a real contribution to the overall objective of a decent home for every family.
Part VIII of the Bill opens a new chapter for the housing associations movement by enabling them to meet the demand for homes for sale, as well as for rent, as many associations want to do. They will be able to sell their stock and to improve property for sale, in each case either outright or into shared ownership. The Bill also introduces a number of changes to improve the accountability of associations, recognising the very large sums of public money flowing to them, and to extend the Housing Corporation's powers of supervision and control over associations. It increases the Housing Corporation's borrowing limit to reflect a change in the method of funding housing association schemes and to allow for continued investment. Finally, it introduces a new system of grant-in-aid to meet the corporation's administrative expenses, and, on a contingency basis, provides a new system of control for housing association projects.
Part IX of the Bill includes provisions relating to service charges, a matter of increasing concern in recent years, and various changes to the Leasehold Reform Act 1967 designed to improve the operation of that Act and to assist long leaseholders of houses to purchase the freehold of their homes more quickly and more easily.
My Lords, I have already spoken long enough. The Bill includes such a wide variety of important provisions that I have not been able in the time available to mention them all, but at the conclusion I will try to deal with any points which may come up in the course of the debate. At this stage, all that remains is for me to commend the Bill to your Lordships as a significant contribution to the Government's policy of reducing public sector involvement and reducing the role of the bureaucracy. Through the tenants' charter, we shall give public sector tenants greater protection in the enjoyment of their homes and greater influence over their living conditions. In the private rented sector we are firmly grasping the nettle and doing something to help, instead of passively accepting its decline. Most importantly, through the right to buy, 28 we are making home ownership a reality for a great section of our people to whom it has hitherto been denied. My Lords, I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read 2a—(Lord Bellwin.)