§ 6.18 p.m.
§ Lord Vaizey
My Lords, I beg to move that this Bill be now read a second time. This is a short and, indeed, a pithy Bill, and your Lordships may be tempted to think it is a sweeping Bill. In an almost literal sense it is, because in one way it is a product of the all-partyrepeal group chaired by the noble Lord, Lord Spens, which is going through the statute book bit by bit, not merely to look at obsolete statutes—after all, that is the function of the Law Commission and a job that it does efficiently and very well—but to look for areas of statute law where, in our opinion, there is either regulation for regulation's sake or the whole initial purpose of the legislation has become self-defeating.
Two examples will spring to mind of the group's initiatives where the group has already pressed its case in this House. One is the Bill presented by my noble friend Lady Trumpington, before she was promoted to the Front Bench, to repeal the Shop Acts, which has resulted in a committee of inquiry into the Shop Acts. The other is the Bill of the noble Lord, Lord Rugby, to repeal the statute enforcing the monopoly of opticians.
§ Baroness Birk
My Lords, may I interrupt the noble Lord to ask him a point of fact at this stage? He refers to the all-party repeal group. It is something unknown to me, and I think it is important to the debate. Is this a committee established by the House of Lords or is it just an informal group of like-minded peers?
§ Lord Vaizey
My Lords, the noble Baroness is correct. It is like the defence study group, in that it brings together people who are interested in a particular question. In this case it is the study of legislation where we think it has become self-defeating. The group has been going for some time, and includes noble Lords across the House.
This Bill on rents arises directly from a debate on housing in your Lordships' House which was of considerable interest and importance and which I had the privilege of initiating in the last Parliament on a Wednesday afternoon. In that debate we discussed the great changes that have occurred in housing since the last war, with the building of over eight million houses and flats in the past 30 years and the ever-growing shift to home ownership. If we leave various special categories out, about three out of five of what one might call ordinary households now own their own homes. The desirability of widespread home ownership is not a matter of party dispute. What is at issue is whether council tenants should be enabled to buy their houses, at what discount and in what circumstances. It is a matter of perfectly legitimate discussion. But the 1004 central principle of being in favour of home ownership is no longer a matter of dispute.
On this issue, and during over 30 years of council housing, I have been consistently radical. It seems to me that home ownership gives great power to the ndividual family—power to deal as it wishes with its own home; to sell it, to build up capital and to pass the capital on to the children. Those are all matters greatly prized by the vast majority of our fellow citizens. I am glad that not only are the Government also radical in this matter: I am delighted to say that so is the new leadership of the Labour Party.
There was also agreement in the debate that we had in the last Parliament that there will always be a need for a large rented sector for young people, people frequently on the move, elderly people, people who have other uses for their capital and, above all, very poor people. I shall come back to the question of the very poor. These are all people who at one time or another, or perhaps all the time, want to rent accommodation. In the land of the home owner, in New York City, few well-to-do people own their own apartments. André Meyer was a horrible man but one of the richest men in the world. In a book that I have read it states that he rented the top of the Carlyle Hotel when he escaped from occupied Germany, and just lived there.
Many people want to rent rather than to own for short or for long periods. There is no law of nature or social law that I know of that says that people ought to own the bricks and mortar in which they live. Of course, it is a very emotional subject. People who want to rent vary from university students who want accommodation for three academic years, through holiday tenants, to people who might want to rent for many years.
If I leave out of account for a moment the shorthold tenancy, there are two major types of tenancy. One is the council tenancy, which is a form of tenancy that is being reduced in number by selling off existing houses and through the relatively low rate of building of new council houses. The other is the private sector. In 1914, about 19 out of 20 flats and houses were privately rented. That proportion is now fewer than one in 10. It is one of the most radical social changes that this century has seen in the form of house and flat tenure.
Can we cast our minds back to the 1914–18 war? Prices rose sharply, and the standard of living fell. Rowntree's studies had shown that a major element in working-class expenditure, and therefore in working-class poverty, was rent. Accordingly, rents were frozen by Parliament. The war ended and there was a great housing boom in the 1920s and 1930s. Over five million people became home owners, but it left the private rented sector on one side, although a number of blocks of flats were built for letting, such as those that we see all round what are now becoming the inner suburbs of our cities. One often comes across them around the tube stations.
Came the 1939 war and the process of 1914 was repeated. There was a bit of liberalisation in 1957, as I shall mention later. In 1974 Tony Crosland brought furnished properties into the net, with catastrophic consequences. At that time I was a professor at Brunel University. We ceased to be able to find furnished 1005 accommodation for our students almost overnight. People were frightened of letting accommodation to people if they had security of tenure.
The position now in this country is that the rich and prosperous can rent property from private persons on any terms they mutually agree. Below a certain rateable value you cannot rent, except in the case of shortholds or new property specifically built for letting since 1980. Only chance will give people privately rented property if they are looking for somewhere to live unless they pay the exorbitant rents demanded in the so-called "bed and breakfast" furnished tenancies.
Three categories of people suffer from this circumstance, and two categories benefit. Of the two categories which benefit, there are, first, the lawyers. There is a class of solicitor who has grown rich on the Rent Acts, which are a legal jungle. A few solicitors in each town—solicitors' clerks most specifically—are experts on the whole paraphernalia. If my Bill went through unamended they would suffer, but I hope that their sufferings would be disregarded. The new public prosecution system may well give them more work.
§ Lord Mishcon
My Lords, before the noble Lord continues, and in defence of my profession, which I love very dearly, may I say that it is not for reasons of economy or for their riches that many solicitors will hope that the noble Lord's Bill fails.
§ Lord Vaizey
My Lords, the last thing on earth I want to do is to upset the noble Lord, Lord Mishcon, but I think he would agree that the Rent Acts give a substantial volume of work to many solicitors.
The other category which benefits is that comprised of the people who are lucky enough to live in rent controlled property. They are rarely the original tenants, but they are their descendants. They enjoy a substantial benefit. If my Bill passes, in some circumstances their rents will probably rise. If they are brought to the poverty line—as many of them might be—they may be forced to turn to housing benefits. That is a matter with which I shall deal in the closing passages of my speech. We have to bear that category in mind as potential and important sufferers—as the noble Lord, Lord Mishcon, points out—from the change in the law which I am discussing.
I turn now to the beneficiaries. The first is the owner of the existing rent controlled house who would make a capital gain if he were able to raise the rent. This does happen. I suppose that we all know people who live in Islington, where the gentrification is going on. People buy a rent controlled house with an old lady in it, and they carefully and touchingly inquire after her health every time that they go to collect the rent. The moment the old lady dies, and if she has no daughter living with her, the house has a yellow door, the Guardian is delivered and the Trotskyists move into the newly-gentrified property, which rises enormously in value. Personally, I have some, but not very much, sympathy with the owners of these properties, because the properties have been bought over the past 30–odd years at knock-down prices, and in many respects the new owners are gambling on the ending of the tenancy of their properties.
My example shows, I think, that the supply of rented places dries up as houses fall vacant. That is 1006 undoubtedly the case from the fact that as a percentage of the total this type of property has dropped from over 90 per cent. to well under 10 per cent., and when such properties fall vacant they are sold to owner-occupiers. They are rarely let again.
So my second category of beneficiary from my legislation is the person who is looking for a place. He or she cannot find one, except by luck. He may find a grotty, furnished slum; but none of us I think would dare to let our own houses except to rich Arabs or diplomats whom we are absolutely certain will move out at the end of the tenancy. If we were to let our houses unfurnished with vacant possession, there would in effect be a capital loss of really very substantial proportions. Consequently, fewer and fewer people who want to get somewhere to rent can get anything except by turning to the council.
I shall quote an actual example. A tenant of a property, which he has rent free as it is a service tenancy, dies. His widow cannot afford to buy a house. There are no houses or flats for private tenancy, except furnished flats at £300 a month. Under the present law in order for the widow to get a council flat her husband's employer is forced to evict her, which causes untold distress and expense, so that she is homeless and the local authority is forced to house her. She jumps the queue before other people who also wish to have rented accommodation.
Why is this?—andhere I come to my third category of beneficiary of my Bill. I began by reminding the House that three-fifths of the nation are now house-owners. That is all very well and good. Subject only to the sanitary and planning laws, you can do what you like with your own house: beautify it, extend it, alter it, neglect it, sell it; but you cannot let it. Now, my Lords, let us suppose that you or I went to Australia for five years, and let us suppose that our employer offered to ship our furniture. We should have to sell our house here, because we could not let it, since if we did, we could never get it back. That is another actual example—of my own, as a matter of fact.
It is inescapable logic of house ownership that the right to let will in fact come about. But having come about, there will be very serious problems of transition, and I have no doubt that other speakers, and notably the noble Baroness, Lady Birk, will concentrate on them. I hope, however, that they will not seek to refute the logic of the argument, because the logic of home ownership means that the right to let, and, once having let, to regain possession, is inescapable.
Lastly, I turn to the Government's position. There are many thoughtful Conservatives who share my concern at the problem of renting, but of course it is politically very hard to be part of a Government who are not only allegedly leaving most of the population dying in the streets because they are cutting the National Health Service, but are also putting them out there to die as well by repealing the Rent Acts. Therefore, I can guess to a certain extent what my noble friend's departmental brief will say. But I would stress that the reform of the housing market is an inevitability in the longer run, and that it is an all-party matter.
Perhaps I may say this to noble Lords: the aim of a political party—any political party—is to gain office, 1007 but to gain office in order to serve the people. A political party in office, especially one with as large a majority as the present one, urgently needs to refresh itself by looking beyond office to measures. This is an area that has been crying out for measures. The House of Commons Select Committee that studies housing said explicitly, on an all-party basis, that rent control was a major element in creating housing shortage. Yet it was in 1957 that the last major reforming measure was created by the noble Lord, Lord Brooke of Cumnor (then Mr. Henry Brooke). That began the process of rent decontrol by going down the scale; first, deregulating tenancies with high rateable values above a certain value, and then going down slice by slice. But the political will of my noble friend was not sustained by his successors until the 1980 Act, which exempted newly-built places for letting and the short-holds which have scarcely taken off.
The Labour party has always frustrated Tory measures by the threat of repeal of any legislation affecting tenancies. This is why one obviously has to ask: please will the Labour Party turn its mind to this subject? We are moving to a home ownership society, because certainly by the end of this Parliament three-quarters of the total of houses and flats will be owner-occupied, and I think that the Labour Party has now accepted that that is likely to be the pattern of society. I believe that in such a society some kind of power to let your own place when you want to move away, rather than have to sell it and then find somewhere else, is important. I earnestly hope that the Labour Party will think very carefully about that.
I hope that the Alliance will, too. In his important hook, Dr. Owen has embraced the social market philosophy, and in many respects Dr. Owen's views are important and relevant here. Therefore I hope that the Alliance will turn its serious attention to this matter. Certainly from past conversations with the noble Lord, Lord Roberthall, I know that he has always thought that one of the major elements in any housing reform must be the paying of some attention to the Rent Acts.
Finally, I turn to what the level of rents might be in a free market. In the nature of things, it is absolutely impossible to say directly what will be the level. But, in his most perceptive speech on the Agricultural Holdings Bill on Monday, the noble Lord, Lord Northfield, said that one cannot have a threefold rise in the level of prices, including money incomes, and expect frozen rents for farms. Clearly, that also applies to the normal rented home sector.
Therefore I can predict that freeing rents and tenures would in some cases lead to a substantial increase in supply and the emergence of a demand—a demand which at the moment is quite frustrated because there is nowhere for it to rent. I would judge that many rents would settle at something like the level of the financing cost of mortgages plus depreciation, which may well be below the actual mortgage repayment cost, with its element of capital repayment. Rents for bad houses would almost certainly go down, and those for good houses would probably go up.
I now turn to the question of the poor, which is of course central to the issue, because I do not think that anybody would defend rent control per se if it 1008 benefited only the rich or the middle income groups. It is because of the poor that there is this concern, and that is why it is such a highly emotional issue. We have the housing allowances system, which in principle should meet this need. I would strongly argue that, if there is a problem of compensation for the householder being inadequate, it needs attention. So undoubtedly in some respects housing allowances would go up.
On the other hand, tax relief on mortgages would go down, because fewer people would be driven into buying a house as the only means of getting hold of one. Furthermore, if there were a greater supply of unfurnished accommodation, there is no doubt that housing allowances at present paid to tenants of furnished property would substantially fall. Therefore I think it absolutely impossible to tell what would be the cost to the public purse of this kind of measure if it were followed.
I should like to thank the House for listening to me with such patience, and I look forward to an interesting debate.
§ Moved, That the Bill be now read a second time.—(Lord Vaizey.)
§ 6.40 p.m.
§ Baroness Birk
My Lords, may I start by thanking the noble Lord, Lord Vaizey, for his courtesy in sending me a copy of his speech, or at least two-thirds of it. It was very helpful. The noble Lord has a nice quirky sense of humour. I enjoy exchanging remarks and comments with him outside the Chamber, but I do not think this should extend to legislative measures. I can only believe that he has his tongue firmly in his cheek when he brings this Bill to the House. The very title of the Bill is a classic example of what George Orwell called "Newspeak". The Title of the Bill states it is a Bill that repeals legislation "restricting the freedom of tenants". But this Bill repeals legislation that protects the tenants, not restricts their freedom.
It is a Bill that reduces the rights of tenants. But that would sound a far less attractive proposition to put to the House. The Bill demonstrates an over-simplistic approach. It is monumentally irrelevant to those who are inadequately housed, a vast and growing number, unfortunately, in our society. It is irrelevant to those who are homeless. It is of no consequence in tackling the growing level of housing repair so graphically illustrated in the English House Conditions Survey. It does nothing to assist local authorities to reduce their ever-increasing waiting lists, and in no way will it help to provide decent facilities for the hundreds of thousands who, even today, lack basic facilities. Incidentally, it would also remove all the grounds under which landlords can obtain possession through the county court.
The Bill brashly implies that the dramatic decline in private letting can be attributed solely to Rent Act control. The evidence is quite contrary to this view. The House of Commons Environment Committee report on the private rented housing sector, issued in July last year—on which there was a majority of Conservatives—set out the reasons clearly in paragraph 9. This stated:There was widespread agreement in the evidence presented to the Committee that there were three main ways in which this decline 1009 had happened: (a) slum clearance, which resulted in the removal of older, bad quality accommodation from the stock; (b) transfer of existing properties to other tenures principally to owner-occupation, often by sale at a discount to the sitting tenant; and (c) concentration of new housing investment almost exclusively in other tenures, so that increasingly the demand for rented accommodation was met by local authorities and housing associations rather than by private landlords".There was no mention by the Select Committee of the House of Commons that rent controls were a factor in the decline of the rented sector which has been going on through most of this century.
§ Lord Harris of High Cross
My Lords, if the noble Baroness will allow me, I think there is a misunderstanding. The last point that the noble Baroness read out refers to the concentration of new housing investment exclusively in other tenures. The noble Lord, Lord Vaizey, was pointing out that you would not get investment in rented property while you have the rent control Acts. I do not think that that is inconsistent with his view.
§ Baroness Birk
My Lords, it may not be inconsistent with his view, but if a committee of the House of Commons, on which, I repeat, the Government party was in the majority, had come to the conclusion, from the evidence it heard and its own deliberations, that the rent control Acts were an important factor in the decline of the rented sector, it would most certainly have said so. The noble Lord can read the account himself, as I am sure he has done, and he will see that point. In fact, it does not. I do not think, with the greatest respect, that the noble Lord's intervention was valid.
The Bill implies, as the noble Lord himself stated, that the landlord and tenant could freely agree terms of letting to their mutual advantage. Frankly, this is nonsense. There is a grossly unequal relationship. You cannot have a contract or an agreement that works between two quite unequally balanced parties. The terms would be unfair because of the shortage of housing. This would be the lawyers' paradise, not what the noble Lord said, in trying to work out agreements and the litigation that would result.
I have a great deal of sympathy with many private landlords in the dilemma in which they find themselves, although it must be said that this sector has had and still has, unfortunately, more than its fair share of sharks and those who exploit rather than alleviate human misery. Because house prices have escalated dramatically, individual houses now represent sizeable investments. To get a return on that scale of investment means charging rents that are way beyond the means of most of those who want to rent or who have no alternative. Selling is a far more attractive proposition because of the subsidy system. Mortgage relief is for owner-occupiers. There is no comparative subsidy for the landlord.
When the noble Lord talks about the rent control Acts, I would remind him of the 1957 Act which went a considerable way towards reducing controls. This resulted in such chaos and the whole structure of Rachmanism, that changes had to be made by a Conservative Government in 1961. A £40,000 house, again, according to the Select Committee report, would have to be rented at £80 a week to get an annual 1010 return of 10 per cent., and that does not allow for all the costs that would have to be met. The Environment Committee reported a graphic illustration of how, through subsidy, it can be much cheaper to buy a house than to rent it. I refer noble Lords to paragraph 57:SHAC gave the example of the comparative costs to a landlord and owner-occupier of one-bedroomed flats in a converted property in London. The landlord would have to charge at least £58a week simply to cover his costs, while the same flat would cost £31 a week (net) to buy on a mortgage".The problems of landlords, particularly those who rent their homes temporarily, have been met. Indeed, the 1974 Act, the 1977 Act and the 1980 Act made it easier for home owners to gain possession from tenants and there is specific provision for owners to rent during a period of absence. They are guaranteed possession on their return. I agree entirely that there are still problems of repossession since court proceedings can take a long time, but this is not a case for changing housing legislation—certainly not in this way. There is a case for speeding up procedures either in the county court or by setting up housing courts, which was also recommended by the Environment Committee in paragraph 95.
The noble Lord referred to shorthold. That was going to be part of the Government's answer to renting in the private sector. What happened? Shorthold has been a dismal failure. So that is not the answer. With the escalation in house prices, fewer and fewer investors will find it remotely attractive to invest in houses to rent. Again, this was recognised by the Environment Committee when it reported in paragraph 86:Because of their low incomes many tenants are unable to pay economic rents. Moreover, if rent levels were increased to the extent suggested by some witnesses, for example 20 to 30 per cent. of income, private tenants would he paying a proportion of income far greater than that normally paid by council tenants or owner occupiers over the long term".That is, of course, when they pay off their mortgages. The paragraph continues:Furthermore, such higher rents would result in increased sharing, overcrowding and homelessness. These are the very problems that housing policy aims to alleviate".Then:Given the low incomes of many tenants, rents, even at market levels, are not likely to provide the rates of return deemed necessary by landlords to halt the decline of the sector".This has been graphically illustrated by the Government's hold new initiative under the 1980 Act to increase private renting through assured tenancies which are, of course, free from control. But this resulted in only four new properties being built, I think, by Abbey National, for rent outside any rent control, not because investors fear that a future Government may change the rules but because such investments are just not economic. The Rent Acts introduced order into an area of decline to help those disadvantaged people who need the help badly.
Pulling the rug out from under the private rented sector is not going to halt that decline. That is exactly what the Bill does: it is trying to pull the rug out from under the private rented sector. In fact, as I have shown, it will exacerbate the problem to an absolutely alarming degree. The social effects would be disastrous. People could be literally put on the streets. This applies not only to the poor. For example, it 1011 applies to mansion flats which are at present controlled up to £3,000 or £4,000 a year. They would also be included in the wide sweep of the noble Lords' Bill. It would create a framework in which no tenant would have any feeling of security or in practice any real security, because the Rent (Agriculture) Act 1976 would also be wiped off the statute book by the Bill. It is listed in the repeals on the back page.
I should like to quote from a letter I received yesterday from the Agricultural Workers' Union. It says:Prior to the enactment of the Rent (Agriculture) Act 1976 evictions from tied cottages were commonplace, frequently unceremonious and invariably very distressing for the tenant and the tenant's family. The tied cottage system does, of course, exist in other industries but it was the farm worker who was constantly appearing in the county courts rather than workers from other industries prior to the 1976 Act.The recent cutbacks in council house building programmes and the disproportionately harsher effects of these cuts in rural areas means that there is considerable difficulty finding suitable alternative accommodation for even those rural workers legally dispossessed of their tied accommodation! Repeal of the 1976 Act would put impossible pressures on local authorities".At this point I should like to introduce a personal note. I was a Minister at the Department of the Environment when that Bill went through this House. At the beginning many noble Lords opposite, particularly those who were farmers, felt very hostile to the measure. But with the coming into force of the Act and the way in which it worked out, I received letters even up to a year or so later, and had conversations with noble Lords who said that they were relieved to find that in fact it had worked out very much better than they thought it would.
So let us not lose sight of a crucial fact: people still want and need to rent. The Government have single-minded (and, I sometimes feel, obsessive) commitment to owner occupation. The Labour Party also supports owner occupation. As the noble Lord quite fairly said, this is an all-party commitment, and the people have shown that this is the way in which they feel. Indeed, it was a Labour Government which originally brought in option mortgages and have maintained their financial support whenever in office. Yet we have not lost sight of an equally important right: the right to rent. Many cannot own their own homes, however many inducements there may be. They are often the most disadvantaged in the community. Local authorities and housing associations try to provide for them, but Government cuts have severely restricted their efforts.
As far as the forecast cuts in public expenditure in the coming year are concerned, it looks as though the situation will certainly not get better but will unfortunately get worse. We have to accept that the bulk of rented accommodation must come from the public sector, whether it comes from local authorities, housing associations, co-operatives or whatever. That is evident from what is happening at present, and it is why things have gone so badly in the past.
Rented housing is badly needed for key groups like the young single homeless, single parent families, those from mental institutions who are returning to the community, the elderly and the handicapped. They are just part of a list which unfortunately is very much greater. It is up to Parliament and, therefore, this 1012 House to look to their needs and their basic right to rent, and not to debate, as we are tonight, a cut in controls which is based on a rigid, uncaring and rather careless dogma which would have the reverse effect to that which is apparently intended. Maybe it is not what the noble Lord, Lord Vaizey, really intends. If it is not, then he should come clean and say that what he wishes to see is the end of the private rented sector, for that would be the consequence of his proposals.
I hope that the noble Lord, having had his "go", is using this as a rather garish housing balloon from which the gas can now be expelled so that he and everybody else can come down to earth. It is not the custom of this House to vote against a Second Reading, particularly of a Private Member's Bill. This is a monstrous little measure, contrary to the principles not only of my party but contrary to all decent instincts and contrary to any serious discussion of housing policy. Indeed, we await with interest the speech on behalf of the Government, but I should have thought that the Bill was absolutely contrary to Government policy. If the noble Lord decides to press his Bill—and I am sure he is far too sensible to want to do that—my noble friends and I will be voting against it.
§ 6.56 p.m.
§ Lord Harris of High Cross
My Lords, the noble Baroness, Lady Birk, has made a spirited reply on behalf of the Labour Party, but I think she relies chiefly on assertion and emotion, with very little attempt to analyse the operation of the Rent Acts, which will be my chief concern. I believe that her reference to the Commons Committee was highly selective and misleading, as will emerge from fuller study.
For my part, I congratulate the noble Lord, Lord Vaizey, on bringing forward this Private Member's Bill to repeal the Rent Acts. As he explained, this initiative has been encouraged by the correctly called "non-party" repeal group, following the debate in the House of Lords which the noble Lord opened in June of last year.
In that debate, all 11 speakers were in perfect agreement about the widespread human misery inflicted, especially on young people, by the difficulty or impossibility of finding a place to rent. Even more remarkable, four of the half a dozen professional economists in your Lordships' House, speaking variously from the Conservative, Social Democrat and Cross-Benches, were found in rare unison emphasising that the major cause of the housing tragedy was rent control. I am now looking forward to hearing the speech of the noble Lord, Lord Bauer, to see whether his formidable economic wisdom will reinforce our case.
In the earlier debate, a notable contribution was made by my noble friend Lord Robbins from these Cross-Benches. Since he is still tragically laid low by a most grievous stroke, I should like to quote three sentences from his speech at that time. On the 23rd June, 1982, he said, at col. 1046:Rent control is essentially the fixing of maximum rents below the level which would prevail in a free market. Thus it affords an incentive to an excess of demand and a disincentive to spontaneous response of supply. This has occurred whenever and wherever it has been introduced".1013 In a single sentence, it is a self-evident truism from elementary economic analysis that, in peace or war, in North or South, in houses or in ham sandwiches, if the price is held below the market clearing level, the resulting excess of demand over supply will create a shortage. This prediction from basic theory is amply borne out by all the evidence, as the noble Lord, Lord Robbins, declared on that occasion.
More than 10 years ago at the Institute of Economic Affairs, with which I must declare some connection, we published a study entitled Verdict on Rent Control. It assembled researches by leading international economists, including three Nobel Laureates, on countries as varied as Austria, France, Sweden, the United States and Britain. The introduction was written by a foremost British authority, the late Professor Fred Pennace, who entitled his essay Fifty Years, Five Countries, One Lesson. The lesson was that rent control had done more harm than good by:perpetuating shortages, encouraging immobility, swamping consumer preferences, fostering dilapidation of the housing stocks and eroding production incentives, distorting land-use patterns and the allocation of scarce resources".In every case that was studied, rent control was introduced as an emergency response to the disruption caused by war—after 1914 in Britain, Austria and France, and after 1940 in Sweden and the United States. Where control has been abolished, as in Sweden and most of the United States outside New York, the housing shortage has miraculously vanished. But wherever control has been perpetuated it has intensified the plight of people seeking even a temporary roof over their heads. For example, writing of rent control in Paris after 1945, the formidable, internationally famous philosopher Bertrand de Jouvenel concluded:It is self-perpetuating and culminates in both the physical ruin of housing and the legal dispossession of the owners. The havoc wrought here is not the work of the enemy but of our own measures.In the debate last year, the right reverend Prelate the Bishop of Southwark gave a rather depressing glimpse of what might politely be called the ineffable innocence of Church thinking on these worldly matters. He reported his shock at seeing the urban devastation in New York, which he implied was due to inadequate public spending. In truth, that devastation is directly due to the usual ravages of rent control. My authority is a Professor Salins of the New York Department of Urban Affairs. In 1980 he published a book called The Ecology of Housing Destruction, with a more revealing sub-title, The Economic Effects of Public Intervention in the Housing Market. There he showed that public spending of more than 10,000 million dollars has not prevented the appalling deterioration and continuing destruction of the New York housing stock at the rate of 200,000 apartments every decade. In addition to reducing maintenance and construction, he showed that artificially depressed rents have increased demand and encouraged small families to occupy large premises. Professor Salins calls for the abolition of rent control and all its associated complexity of regulations. His conclusion on New York is, I believe, equally applicable to London and is as follows:There have been so many unsuccesful twists and turns along the path of well-intentioned tinkering that perhaps it is time to test the 1014 possibility that the generally reasonable incentives and disincentives of an unconstrained market might do a better job of allocating and conserving the housing stock.I draw precisely the same moral from the First Report of the House of Commons Environment Committee, which was published last year. Paragraphs 100 and 101 confirm that a major cause of the decline of the rented sector, from seven million in 1945 to below two million today, was rent control and lifetime security of tenure. The impossibility of gaining repossession appears even more oppressive for small landlords than the derisory gross return of 2 per cent. or 3 per cent. on their capital. Evidence was given there that in the decade since 1970 what are, in my view, fraudulently called "fair rents" doubled, while prices trebled and earnings quadrupled.
§ Baroness Birk
My Lords, if the noble Lord will give way—and I realise that it is getting late and do not want to elongate the debate—I think he must agree that the whole situation in New York is entirely different from that in London. In New York you have apartments with very high rents. They have much more atradition of renting than home ownership because of the difference in space. Secondly, has the noble Lord seen some of the properties that people are renting at the lower end of the scale? I imagine that he is talking about property around Manhattan and that sort of area. Certainly nowhere in his quotations from the report of the Environment Committee does it state that a repeal of the rent control Acts would improve or increase the quantity of rented housing. In fact, when the Committee discuss it—and the noble Lord has read it all, so I shall not go over it again—they point out what has happened and also what would happen if this was reversed—that it would not make the situation better, but in fact would make it worse.
§ Lord Harris of High Cross
My Lords, we must set some limits to the chewing over of these events, because the whole of Professor Salin's report on New York concentrates on places like the Bronx. He is concerned with the poor end of the market of New York and not with Manhattan.
Paragraph 101, in the House of Commons Committee report, to which I have referred, says that:Most witnesses argued that a revival of supply in the [rented] sector would require the removal or reduction of rent and security controls, together with a growth of confidence that future changes in legislation and government policy would not reimpose tighter controls.
§ Baroness Birk
My Lords, would the noble Lord mind reading the following sentence?
Lord Harris of High Cross: My Lords, not at all. It reads:However, many felt that even this could not succeed and removal of controls would simply exacerbate housing stress without achieving acceptable housing conditions for those in the sector.
§ Lord Harris of High Cross
My Lords, they say that the majority of witnesses gave this view, and the witnesses included Shelter, the Small Landlords Association, Professor Donnison, Brighton Borough Council, the City of Manchester Council, Chestertons, 1015 and the Paddington Federation of Tenants and Residents Associations. I am establishing that no clear-cut view is handed down from the House of Commons report. It is all open for argument, and we propose to continue that argument.
From the evidence in that report I was surprised to discover that those who derive much satisfaction from baiting the landlords and working up prejudice in this matter argue that rents may be held low but the owners would gain from increased property values over a period of years. Yet in practice it is elsewhere acknowledged that a house with a sitting tenant might be lucky to fetch 20 per cent. of its market value with vacant possession. The whole point is that it is just such grotesquely falsified values that provide less scrupulous owners with a strong temptation to neglect repairs and get sitting tenants out.
Leaving aside the immorality of rent control, which I think should trouble its defenders rather more, the more down-to-earth economic question is whether repeal would bring more lettings onto the market at rents people can afford. I believe that clear evidence is provided by the orchestrated complaints about "loopholes", which take the form of holiday homes, company lettings, licences and shared occupancy in place of full tenancies. The success of these escape clauses in my view provides proof beyond any doubt whatever that, where the legalised theft of the Rent Acts can be avoided, new accommodation is forthcoming to relieve the distress of homelessness.
The best way to end the "loopholes" is simply to repeal these obstructive statutes by supporting the Bill of the noble Lord, Lord Vaizey, in the Lobby. The way to help the poor is not to control rents any more than it is to control the price of food or clothing. To distort the price system obstructs supply and demand, as we see to our cost in a quite different connection with the common agricultural policy.
In conclusion, I would emphasise (the noble Lord, Lord Vaizey, touched upon this) that poverty is the proper province of social policy and is best tackled by topping-up low incomes in some form. It should not be confused with general economic policy nor with policy on particular prices. Alas! it has to be said that for decades the Labour Party has won votes by confounding these wholly distinct issues to the detriment of both economic and social progress. It has further obstructed reform by reckless threats to restore or even to extend rent control, as we have been reminded that Mr. Crosland did—in my view, to his eternal shame—in 1974by destroying the market for rented premises. I take some encouragement that, now the Labour Party looks like being reduced to talking to itself and perhaps threatening one another, as special responsibility shifts to the Social Democrats as the alternative Government of the future. It only needs David Owen and the eagerly awaited Lord Grimond to teach the Liberals some economic sense for the repeal of rent control to open up the way for long-term reconstruction of the much needed market in rented accommodation.
§ 7.10 p.m.
§ Lord Bauer
My Lords, as a relative newcomer I am somewhat hesitant to address the House on the repeal of the Rent Acts. I know much less about housing than some of the other speakers; certainly far less than my noble friend Lord Vaizey, or the noble Lord, Lord Harris of High Cross. However, I feel impelled to support my noble friend in his courageous effort to advance this important and deserving, if forlorn, cause, recognising that my remarks are, at best, a modest contribution, an optional extra, to the eloquent arguments of others.
When rent control was first introduced in 1915 it was on cogent social, political, even military grounds. As a result of wartime inflation prices and rents were rising faster than service pay, and the families of fighting men were evicted because they could not pay higher rents. Sixty-eight years later, in totally different conditions, after Governments have built many millions of houses and spent many millions of pounds, rent control and security of tenure are still with us. Here is an outstanding example of a policy introduced for compelling reasons but maintained, and even extended, after it had outlived its usefulness and has indeed inflicted massive social and economic damage over many years.
§ Lord Strabolgi
My Lords, I am sorry to interrupt the noble Lord, but would he not also say something about Rachmanism? When rent controls and security of tenure were taken off for a few years, as the noble Lord will recollect, we had Rachmanism—that terrible word which has passed into the language—and they had to be put back.
§ Lord Bauer
My Lords, with respect to the noble Lord, Rachmanism could only flourish because of the existence of rent controls.
There is virtually no market in rented accommodation. For unfurnished accommodation it has disappeared, except for luxury flats for the very rich. The same applies largely to furnished accommodation because of the extension of control to furnished tenancies.
Why is there a housing shortage, but no shortage of food, clothes, or, for that matter, motor-cars and refrigerators? The chronic housing shortage is only another name for rent control. If a maximum price is fixed below market clearing levels, whether for eggs or for rented accommodation, an excess demand emerges by definition. If this excess demand is sustained by fixed rents you have a permanent shortage. I shall not insult your Lordships by labouring such an elementary truism. But there are certain pertinent specific characteristics of the rental market, some of which it may be instructive to note.
For instance, each house is unique in space and therefore differs, often radically, from every other house even if in other respects it appears closely similar. Again, people's circumstances and their requirements for accommodation differ greatly with the size of their families, their age, their place of work, their preferences and many other variants. So while it is relatively simple to ration staple foodstuffs on the basis of requirements from the viewpoint of both 1017 equity and efficiency, allocating dwellings is altogether different.
Many people, indeed most people, who want to move, or have to move, must either buy, even if they prefer to rent, or they have to seek council accommodation. The allocation of such accommodation inevitably involves much arbitrariness. Where is equity in the allocation of a council flat between a young woman with a child, an elderely person or couple, or a small family? Their widely different circumstances and requirements lead inevitably to allegations of bias in the allocation of dwellings, but notably of bias on ethnic grounds in Britain, and also on sectarian grounds in Ulster. Hence the Labour Party proposal reported in The Timesof 21st July 1981 that local authorities should:monitor their allocation policies by maintaining ethnic records".Local authority allocation of accommodation, therefore, inevitably exacerbates communal tension. Once again we see the baleful results of the needless politicisation of economic life.
Not surprisingly companies find it easier to rent accommodation than do families; and foreigners, who can be expected to leave, can rent much more easily than British people. In Marylebone, where I live, the few advertisements for letting are apt to specify companies, banks, or embassies as tenants. Some advertisements are in Arabic, which I cannot read, but they are unlikely to be addressed to British subjects.
The hardships are not confined to people who cannot find rented accommodation. They extend to luckless landlords whose savings have been eroded or lost through investment in dwellings to let. Such victims are often people of modest means, like the taxi-driver and the tailor I know who have lost their savings in this way. Before rent control, the purchase of a house or two for letting was a popular and prudent outlet for working-class savings in Scotland and the North of England. This outlet has disappeared. At the same time, people who would prefer to rent are forced to buy. Finally, the damage that rent control inflicts on families and on the economy by inhibiting the movement of people between jobs and places is too familiar to deserve more than mere mention.
Like controlled tenants, all Members of this House enjoy at least life tenancy of their seats. This imposes the obligation to be ready to support a politically unpopular cause, if we think this is in the best interests of our fellow men. The Bill of my noble friend is a conspicuous example of such a cause, and therefore of the corresponding obligation. I unhesitatingly support the Second Reading of this Bill.
§ 7.18 p.m.
§ Viscount Mountgarret
My Lords, I appreciate that the words "abolition of controls relating to properties" are rather like a red rag to a bull to the party opposite. However, I would ask the noble Baroness, Lady Birk, before she says categorically that there is no way in which she and her party could support the Second Reading of this Bill, to consider for one moment what we are trying to drive out, or what I believe my noble friend is trying to drive out, and what I believe the Government might well support.
1018 This Bill as it stands is a vehicle to enable us to debate the provisions of the various Rent Acts in generality, in the hope that it will give rise to a Committee stage where we can then start to amend the more iniquitous parts of the various Rent Acts which have a genuinely bad effect, and operate detrimentally to many perfectly bona fide landlords. I believe that that is the purpose of this Bill. If we can give it a Second Reading and proceed on those lines, then we shall be able to get some good amendments down in the Rent Act proposals in this Bill.
§ Baroness Birk
My Lords, I appreciate what the noble Viscount has said, but it is not good enough to say that one should support something which is quite wrong. He described it as a vehicle, and then suggests that all the parts that we find distasteful can be changed at Committee stage. This is completely impossible. He must know this if he has read the Bill—and obviously he has—and sees the repeals. If he is arguing in favour of having just a discussion on it and perhaps coming forward with other recommendations, that is different; but we are discussing the Bill before us. We cannot be discussing whether we should give a Second Reading to something which may be turned on its head at Committee stage. That is not what we are discussing.
§ Viscount Mountgarret
My Lords, l take the point of the noble Baroness, but, equally, I am quite sure that there are very few Members of your Lordships' House who could really go so far as to agree to abolish all the provisions of all the Acts referred to in this Bill. There are very many points in the various Rent Acts which are highly desirable and necessary. The establishment of rent officers, and that sort of thing, is entirely necessary. You have arbitrators to arbitrate on agricultural rents; and I think that it is perfectly correct to have rent officers to arbitrate between landlord and tenant if there is disagreement. I think that is perfectly fair.
The objectionable parts are the provisions whereby it makes it virtually impossible for a bona fide landlord, a private landlord, to get his property back, within reason, when he wants to do so. The noble Lord, Lord Strabolgi, reterred to "Rachmanism" as being-a dirty word in past history. I agree entirely with him. But the trouble is that in our enthusiasm to despatch Rachmanism to the depths of the deepest, darkest jungle we are tempted to throw out the baby with the bathwater; for not only did we throw out Mr. Rachman but we threw out also a great number of perfectly harmless landlords—if I may say that landlords can be harmless. We threw them out, too. This has been shown up to be highly inconvenient, to say the least, and, I think, wrong in principle.
With the necessary reduction—and, if I may say so, I refer to rural establishments, for I do not profess to know anything at all about metropolitan areas—of workforce on farms and estates in the country, and with smallholdings falling in, and so on, there has been a greater number of very attractive rural houses and farmhouses coming on to the market. These would have been available for renting by the owner as he found that he was not able to replace the agricultural or estate worker who had been in his employ because he had had to cut back.
1019 The position on that is that if he enters into an agreement with another person who wishes to be a tenant and they both agree between them that there is a property for letting and "you may have it for a period of (shall we say?) six years" at a fair rent of whatever it is—say, £10 or £15 a week—then it does not matter that the agreement has been drawn up legally by a solicitor and that the tenant has been represented legally, or advised. The fact of the matter is that the moment that person enters the house and pays his first rent in excess of two-thirds of the rateable value of the house, that man has absolute, totally-protected tenancy in that house for the rest of his life if he so wishes. This must be stupid.
I should have thought that it was highly desirable to get to the stage where owners can freely negotiate fair and reasonable agreements, duly witnessed, duly signed, and duly advised by legal people, and to let the tenants have as much advice and help as possible. When that agreement has been reached, then I believe that it is only right that it should be allowed to stand and not be superseded by some Act of Parliament which acts contrary to the interests of both landlord and tenant.
Therefore, what happens is that if the landlord finds himself in the position of being unable to let his property in a way that can be beneficial to him—and, after all, he has a right to have things beneficial to him, because it is his capital and his investment, and he is entitled to have a fair and reasonable return—then that property stands empty. Who benefits by that? Nobody!
Reference has been made to the local authorities and to the difficulties that they have of finding housing for people on their lists. Yes, indeed, they do; but it is not very helpful to the local authorities if they can see around them numerous empty houses which are not being occupied for the very reasons that I have shown. Furthermore, the authorities, or some of them, understandably set to work to impose rates on unoccupied properties so that the landlord is then faced with the expense of maintaining his house and having to pay rates on it, and getting no income there from. It seems to me to be a very unsatisfactory situation. Fortunately, we have recently passed an Act relating to shorthold tenancies, to which I believe reference has been made this afternoon. There, again, while going some way to alleviate this problem, it is still highly unsatisfactory.
I shall quote, if I may, from personal experience. I probably have at the moment four or five houses occupied by shorthold tenants. They are farming people, they are awfully nice, they are terribly happy, and they pay a fair rent, agreed between us. But if that tenancy is renewed more than once, then that property falls under the Rent Act 1977 (I believe) and it becomes a protected tenancy. This means, in effect, that there is a perfectly decent person living in one's house at a fair rent, he has his tenancy renewed once and, after that, he has to vacate the house; otherwise, I would lose control of the availability of repossession. I think that this is most unfair. I have had this happen to me on more than one occasion. I have had to ask the person to leave and I have had to have somebody else to come in. This seems to me to be most 1020 unsatisfactory, and nobody regrets it more than I do.
I think that there are areas of these Rent Acts which do need looking at and tidying up so as to try to help the tenants as well as helping the landlord. Therefore, I hope that the House will give my noble friend's Bill a Second Reading so that we can proceed in the way that I suggested in my opening remarks.
§ 7.27 p.m.
§ Lord Monson
My Lords, I must start by declaring an interest, albeit a technical one. I happen to let a number of houses and cottages, but I am happy to let them at less than the market rate for what might be termed conservationist reasons, if that does not sound priggish. In other words, I prefer to let them to village people at a so-called fair rent rather than let them to commuters who may be willing and able to pay the full market rent which, of course, is generally higher, and sometimes considerably higher. So this Bill, if it becomes law, would scarcely affect my position one way or the other.
Most landlords, whether private or institutional, cannot afford to adopt this policy. After all, the so-called fair rents represent an average return of less than 2 per cent. on the capital value of the property, which is clearly ridiculous. This is why the pool of privately-rented accommodation is declining remorselessly year after year. It will go on dwindling virtually to extinction unless this Government start to do something about it.
Surely, no unbiased person can doubt the need of a pool of accommodation to let. I was interested to read a few months ago an article by the right honourable friend of the noble Baroness, Lady Birk, Mr. Gerald Kaufman, in The Times, in which he cogently questioned the Government's apparent belief that 100 per cent. home ownership is the panacea for all Britain's housing problems: the noble Baroness made much the same point. I think that the noble Baroness is right on this point, as was Mr. Kaufman, which makes it all the more regrettable that the Labour party as a whole is apparently ignorant of the full implications of the law of supply and demand as expounded so eloquently just now by my noble friend Lord Harris of High Cross.
To return to the issue of renting versus buying: as I pointed out in a debate on the Housing Bill during the last Parliament, it is not a great deal of use allowing an unemployed shipyard worker in, say, Cathcart to buy his council house at a discount. If he is offered a job in Britain's equivalent of the "sun belt", in other words, the area around Bracknell and Reading, he would be unlikely to be able to take it up. Either he would be unable to find a buyer for his house in the less fashionable part of Glasgow or, should he manage to sell it, it would realise less than one-third of the price of an equivalent house in Berkshire.
A larger pool of houses available for letting would not perhaps totally overcome this problem, but it would certainly provide a great deal more flexibility and would help with the mobility of labour, which we all agree is necessary for Britain's economic recovery. It is noteworthy—is it not?—that in many countries richer than our own, notably Switzerland and West Germany, the proportion of houseowners is much 1021 lower than in the United Kingdom. Conversely, in many countries much poorer than our own—notably some of the Eastern bloc countries—the proportion of home owners is much higher than in this country. There is therefore no correlation between the degree of home ownership and the degree of national wealth, whether it be measured by GNP or by any other criterion. Indeed, there are some who would claim that the excessive fiscal incentives to home ownership and home improvements given by all Governments since the war—and especially Conservative Governments—have been in part responsible for starving British industry of the capital investment needed for modernisation and expansion.
It might be argued by some, and certainly it has been argued by the Labour Party, that this Bill goes too far and that the problem could be solved by "tinkering" with the fair rent provisions. Undoubtedly some improvements could be made here. Wages are raised annually; salaries are raised annually; and of course repair costs go up annually: so why should not rents go up annually also? If it is objected that this would throw too much of a burden on overworked rent officers, then at least rents should be raised annually in line with the retail price index, as an interim measure.
Then again, in the Second Reading debate on the Agricultural Holdings Bill earlier this week speaker after speaker emphasised that the agricultural landlord was less interested in maximising his rent than in finding and retaining a good and responsible tenant. Exactly the same considerations motivate the small private landlord, who is generally happy to accept a good tenant at a moderate rent, possibly below the highest rent he could obtain in the open market. But the corollary is that the good landlord must be able to get rid of a bad or irresponsible tenant much more easily than he can at present—a tenant who keeps the house like a pig sty (a house, after all, that the tenant may wish his son or daughter to inherit in due course), the tenant who wrecks fixtures and fittings, or who plays his record-player at full blast at two in the morning, or the person who does not pay his or her rent. At present eviction procedures are far too cumbersome and expensive, and it is almost impossible to reclaim unpaid rent in such circumstances. I have no doubt that these two measures alone would bring more property on to the market—but not enough. This is why the Bill of the noble Lord, Lord Vaizey, is so important.
I can anticipate one argument which may be raised against this in another part of the House. It is concerned with accommodation in London. Britain is after all a tax haven—not for Britons but for people from overseas. It is also one of the safer places in the world for wealthy people to live in. There are fewer kidnappings, fewer muggings and fewer political assassinations than in virtually any other capital city in Europe, North America and certainly in South America. As a consequence, there are huge numbers of overseas people buying property in London: Arabs, Iranians, Greeks, Italians, Nigerians and of course Hong Kong Chinese, to whom we owe special consideration at this critical time. There is one well-known estate agency which sells one-third of its property to people from overseas.
1022 Many of these people come from countries where very little or no tax is payable, either income or capital taxes, and consequently they have money almost coming out of their ears. They can afford to pay the earth, and often do, for houses or flats, whether purchased or rented. This, of course, has a ripple effect in sending up the prices of more modest property all over London and in the London suburbs. I wonder whether the law of supply and demand can function properly in such circumstances. If not, perhaps some exception to decontrol might have to be made for the London area alone.
There is one other prerequisite for effective decontrol. At the moment the taxpayer subsidises the house buyer, the taxpayer subsidises the council tenant; but the landlord subsidises the private tenant: I have a feeling that the noble Baroness, by implication, agrees with this. If the landlord is no longer to subsidise the private tenant then the taxpayer must do so, whether by means of tax relief on rent paid or by some variation of the option mortgage scheme suitably adapted, or in some other fashion, so as to put the private tenant on an equal footing with the council tenant or the house buyer.
All these qualifications and provisos demonstrate how important it is to discuss this Bill in Committee. Decontrol, with its enormous potential long-term benefits to the country at large must be discussed openly and not swept under the carpet any longer. For that reason I urge your Lordships to give this Bill a Second Reading.
§ 7.36 p.m.
§ Lord Coleraine
My Lords, I rise to speak in sympathy with my noble friend's Bill because it contains a number of the radical changes which I myself would have wished to see enacted by the party which I support when it returned to power four years ago. Then would have been the time to liberate the private landlord and his tenant, to allow time to demonstrate again that responsible contractual freedom can be made to work. Nevertheless, now may not be too late.
I propose to address myself to but one of the radical proposals which my noble friend's Bill encompasses: the abrogation of the three-generation hereditary Rent Act statutory tenancy. Such tenancies can run for three generations, as can an agricultural tenancy, and much more easily. A child need only have resided with the parent tenant for the six months prior to the parent's death in order to claim a statutory tenancy for his life after the death. It is perhaps by a happy chance that your Lordships have this week discussed the provisions of the Agricultural Holdings Bill, because that Bill and my noble friend's Bill are both directed to sweeping aside fossilising legislation and creating a climate in which farms in the one case and homes in the other are again freely available to be rented.
One of the two arms of the machinery by which the Government propose to conjure up new agricultural holdings for letting is the giving of confidence to landowners by doing away with the three-generation agricultural tenancy. So, whatever other view my noble friend on the Front Bench may express about the Bill when he comes to reply, I hope that your Lordships may hear that the succession provisions of 1023 Rent Act legislation providing for three generations in succession are seen as inherently unsatisfactory.
I should like briefly to refer to the Agricultural Holdings Bill to throw some light on the Rent Acts. Your Lordships will know that if a young unmarried farmer took a tenancy in 1975 he then acquired under the 1976 Act rights of security for his unborn issue to the second generation. The 1976 Act acted retrospectively against his landlord, but that Act is not to be reversed under the Agricultural Holdings Bill, as I understand it. For it seems that is thought to introduce retrospective legislation against the unborn son—for in the example I am inventing the farmer is still unmarried. The effect of only abolishing the three-generation succession in respct of tenancies entered into after the passing of the Act will be to create the potential for three separate and divisive anomalies between pre- 1976 Act tenancies, post-1976 Act tenancies and post-1983 Bill tenancies.
So I say to your Lordships that, as regards the Rent Acts, the statutory succession rights of later generations should go, and should go in respect of all tenancies. Only those tenants who have already succeeded should be protected by the principle that retrospective legislation is bad legislation. I support my noble friend's Bill and wish it a Second Reading because, on balance, I consider that to pass the Bill would be better than to leave the law as it stands.
§ 7.41 p.m.
The Earl of Selkirk
My Lords, may I intervene for one moment? I agreed with the noble Baroness, Lady Birk, and I very greatly suspect that the Government draftsman would not find the terms of this Bill wholly congenial. But there is a really major principle involved in it and I should like to speak to that for one moment.
We have raised quite enormously the standard of living in this country in this century. This has been greatly due to home ownership which has been very much extended. Quite frankly, it is the work of building societies and it has nothing to do with the mass of Housing Acts which have passed through Parliament over and over again, and which have contained a great deal of heat and fury, which is not always the best basis for economic development.
We are in the position that owner-occupation is going forward extremely well. Local government houses have served an extremely useful purpose and will long be wanted, particularly for older people. I have no doubt about that. But the weak part of the situation in this country is rented property. Rented property is an essential element of our society and it is gradually being killed by the mass of legislation which is going through.
I agree entirely with my noble friend Lord Harris that we have made a mistake in using rented property for social purposes. That is wrong. Rented property should be given a free market on its own basis, and the social problems, which I accept are severe and must be dealt with, should not be used to turn the whole element of rented property upside down. I particularly ask the Government to look at this.
1024 The noble Baroness, Lady Birk, is afraid that the rents will be too high. But if they are too high nobody will rent a house, so nobody will build a house, although I expect that some clever builders will find houses which can be rented. But in present circumstances there will be no houses at all to rent, and then we shall not need to worry about them. As the noble Baroness said, it is easier today to buy a house than to rent one. That is an absurd position and it is one which merely impedes the economic development of this country. If necessary, I shall vote for this Bill, because it is of national importance that the Government realise that they must take action to open up a rented market of some kind or another.
§ Baroness Birk
My Lords, I have recently been on the same side as the noble Earl on the subject of housing, and I know that he has a great deal of compassion as well as common sense. But how does he propose to deal with people who cannot afford what he might consider to be a moderate rent? Is he prepared to tell the Government that they should increase public expenditure on house building in the public sector, so that people of lower means can afford to rent a house and live in it? Otherwise, they will be entirely squeezed out and the situation will get much worse.
The Earl of Selkirk
My Lords, the noble Baroness realises quite well that poverty is a separate question from housing and should be dealt with by social legislation. If you told ICI to operate a social policy rather than a profit policy, they would go bankrupt in no time. The housing market should be able to work on its own and, where there is hardship and severity, that should be dealt with as a social problem. That is the point I am making and it is quite wrong to upset the whole market by turning it into a form of social subsidy.
§ Lord George-Brown
My Lords, I have been listening to this debate and was not intending to intervene. I do not know very much about the subject, except that I was poor. As I listened to a stinkingly rich Labour Front Bench, I remembered what Bernard Shaw used to say. Solicitors, lawyers, landlords on that Bench know more about what the poor need than the poor themselves know. I agreed so much with what the noble Earl has just said. Okay, when we are poor, deal with us, help us, as a matter of social service, but do not deny us housing. What I do not think the noble Baroness understands, and what I do not think any lawyers or solicitors understand, is that we will not rent a house or a flat unless it is within our means and, at the moment, it is not. Properties are not being offered for let. I wish that the Labour Party would get hold of the point that they are denying to our people what they want, which is the ability to rent.
I shall give my vote to the Second Reading of this Bill just because it might open up the whole argument. Whether it is good in the end, whether it will come out quite as it goes into the sausage-machine, I do not know. But I want the argument opened up and I want the noble Baroness, Lady Birk, who, after all, is frightfully rich, to understand what some of us who are not frightfully rich understand—
§ Lord George-Brown
My Lords, the noble Lord is in the same situation as I am, except, of course, that he has a rather bigger pension than I have. So he is a little better off than I am. I know exactly what his pension is and he is a bit better off than I am. But neither of us is quite in the class of the noble Baroness, Lady Birk—
§ Baroness Birk
My Lords, I think that the noble Lord is overestimating. Furthermore, this debate is about housing. The noble Lord has said that he will support the Bill, which I do not think has to do with anybody's income. Unfortunately he is as wrong about my financial status as he is about the Bill.
§ Lord George-Brown
My Lords, if the noble Baroness really wants to challenge me about her situation and that of Mr. Ellis Birk, I will be challenged. She is exceedingly and, by my standards, quite stinkingly rich, and I suggest to her that she does not challenge me on that. She is in the millionaire class.
§ Lord George-Brown
I am not being silly. The noble Baroness is very rich. I would advise her to leave that alone. We are talking about poor people who need to rent flats in London and I think that they will be helped by passing this Bill. They will not be helped if we refuse it a passage. The noble Lord, Lord Ponsonby, is another landlord. The Labour Front Bench is now made up of landlords, solicitors and rich people. Could somebody speak for poor people? I, as an SDP member, am happy to speak for poor people and I consider that we ought to pass the Bill.
§ 7.49 p.m.
§ Lord Skelmersdale
My Lords, I find myself in some embarrassment at the end of this debate, not because of what the noble Lord, Lord George-Brown, has just said, but because two hours ago or thereabouts I made a speech in your Lordships' House in which I said that the principle was not at issue. We were talking about details. Here, with the greatest respect, it is the other way round and I hope that I do not get myself too muddled.
I should like to thank my noble friend Lord Vaizey for giving this House the opportunity to discuss a subject upon which feelings run very strongly—the private rented sector. It is the first time that the subject has been debated in this House since the last general election. I also recognise my noble friend's close interest in the subject. As he mentioned, the debate on housing policy in this House in June of last year was prompted by his Motion calling attention to the difficulties created by current legislation affecting the relationship of landlord and tenant. Much of that debate centred around the situation that now exists in the private rented sector—as, indeed, has this.
At this point I should say that it is with very much regret that my noble friend Lord Bellwin, who has vast experience in this field and who served on the Francis Committee of Inquiry into the working of the Rent Acts, is not able to be with us today.
1026 I have listened with great interest to the points which have been made during the course of the debate. But when I say that the debate is about principle, I mean that I do not intend to answer at this stage the detailed points which have been raised. If by the time I have made my speech noble Lords feel that it would be in the interests of the House that I should do so, I shall be very happy to comply. However, I should like to pick up one point that was made by my noble friend Lord Mountgarret. He said that this is a marvellous opportunity to go into Committee and look at areas which need to be looked at. May I remind my noble friend that, as the noble Baroness, Lady Birk, said, we are debating the Bill in front of us as it stands. If we were to follow his ideas, as he would have us do, we should be in Committee for weeks. He knows, and my noble friend Lord Selkirk knows with his long experience of this House, that this is not the way we operate. Speaking now as a representative of the noble Viscount the Leader of the House, I would say that in my opinion—and, I am sure, in his—this is not the way that the House should be treated.
I must begin by stressing the importance this Government attach to this particular sector of the housing market. I know that much has been made of the decline in the number of homes available for private renting and I know that this is one of the considerations which my noble friend took into account when formulating the Bill before us today. But let me remind the House—a point touched on by the noble Baroness, Lady Birk—how important a part the private rented sector still plays in the housing market. As recently as 1981, as the latest Census information shows, 11 per cent. of English households—some 19 million households in all—fell within the private rented sector. And the comparable figures for Wales, Scotland and Northern Ireland confirm that private renting is still a significant force in the United Kingdom as a whole. Altogether, we are talking of 22 million households, out of a total of 21 million households in the United Kingdom.
My noble friend Lord Selkirk was obviously bearing this point in mind when he spoke, but he went on to say that the private rented sector was the weak link in the Government's housing policy. I did not see a smile on the face of the noble Baroness, Lady Birk, at that point, but she might well have wondered to herself, as she has on other occasions out loud, whether in fact the Government have a housing policy.
Whatever policy is decided upon with regard to the private rented sector, it has to take these figures into account. But as my noble friend Lord Vaizey also reminded us, the sector is particularly important for certain groups of people who, for varying reasons, do not wish or cannot buy their own homes and are not housed in the public sector—particularly, as we have heard, the elderly, the young and those who need to remain highly mobile.
For these reasons, and for others which will I hope become apparent, this Government are fully committed to the private rented sector. We recognise that it has a vital role to play and that this role will and must continue in the future. I should therefore like to make it quite clear that our commitment is a continuing one, and I am delighted to have the opportunity to reaffirm that commitment today.
1027 The Government are not insensitive to the problems which exist in the private rented sector. To demonstrate this, I should like to spend just a few moments reminding the House of our efforts and achievements in this field since the previous Administration took office in 1979. The situation then was that the Rent Acts, by conferring lifetime security of tenure on tenants and up to two successors, were deterring landlords from letting and were leading to a decline in the role of the private rented sector in meeting housing need—a fact referred to by my noble friend Lord Coleraine. That is why, in the Housing Act 1980, we introduced a number of important measures designed to remove disincentives to letting and therefore encouraging expansion in the private rented sector—measures, incidentally, which my noble friend Lord Vaizey poured a considerable amount of cold water upon in his introductory speech.
One of the most significant of these—my noble friend mentioned it briefly, as did the noble Baroness, Lady Birk, though, I felt, with a rather jaundiced view—was the introduction of shorthold, under which non-resident landlords are able to let for a fixed term if they wish, provided that certain conditions have been met. The 1980 Act also made it quicker and easier for resident landlords to regain possession of the part of their homes that they have let. My noble friend Lord Vaizey suggested that anybody contemplating a stay abroad would be unable to let their home during their absence for fear of never getting it back again. With respect, this is simply not so. The 1980 Act made significant changes to safeguard the ability of temporarily absent owner-occupiers who let their homes to regain possession, and to do so speedily. Providing owner-occupiers let under Case 11 of Schedule 15 to the Rent Act 1977, they can claim "mandatory" possession. This means that the court must grant possession in appropriate circumstances —for example, when the landlord wants to return to his house and live in his own property.
The Act also made a number of changes to the rent registration system, including a reduction in the period before which a rent can normally be reviewed from three years to two. The procedures for the registration of fair rents were simplified and the provisions regarding the payment of rent arrears strengthened.
My noble friend did not mention another form of tenancy to emerge from the Housing Act 1980—assured tenancies. The response to the assured tenancies scheme has been most encouraging. So far, well over 100 bodies have been approved to let property on assured tenancies outside the Rent Acts, and new applications continue to arrive. I see great opportunities for this scheme and wish to see it continue to grow. It serves a valuable purpose in helping to meet the market which undoubtedly exists for good quality housing for rent, and it does so on a basis that offers a real incentive for fresh long-term investment in privately rented accommodation.
The Housing Act 1980 applies only to England and Wales, but the Government's initiatives in the private rented sector do not stop there. In Scotland, broadly similar legislation has brought about a simplification of arrangements for private renting. In Northern Ireland we have recently introduced shorthold by 1028 means of the 1983 housing order, and since the introduction of the 1978 rent order there have been five annual reviews of rent levels, leading to far more realistic increases in those rent levels. Through the housing order we have brought about changes in the administration of the rent order, following a review of the working of the order. The arrangements governing the improvement grant system in Northern Ireland have also been strengthened to provide further incentives to private renting.
I readily admit—a point made by the noble Baroness—that the impact of these measures has so far been limited. For one thing, it is too early to make any final judgments about new initiatives, such as shorthold and the assured tenancy scheme, although the first signs are encouraging. More disturbingly, the destructive attitude of the party opposite, particularly their threat to abolish shorthold if they ever regain office, has, I believe, discouraged many lettings in the private rented sector which might otherwise have expanded the sector. One might have hoped that the Labour Party's 1983 manifesto would reveal a more enlightened attitude. That hope would have been in vain. The threat to repeal shorthold was trotted out once again, together with a package of measures imposing even more restrictions on private landlords. For some inescapable reason—inescapable, at least, to me—this was then topped up during the campaign with a commitment to an immediate one year rent freeze. Little wonder that the electorate so decisively rejected that manifesto on 9th June.
To say that the Bill before us today goes in the opposite direction to the Labour Party's approach to the private rented sector is, I suppose, something of an understatement. The Bill seeks to remove all controls upon private renting. This will be achieved by repealing all the legislation listed in the schedule to the Bill. There are, of course, a number of technical defects in the schedule, but I do not think that I need go into them at this moment. My noble friend made the general intention of his Bill perfectly clear.
The Government have some sympathy with the points of view which have been expressed by my noble friend, by the noble Lord, Lord Harris of High Cross, and by other noble Lords during the course of this debate. But perhaps I might remind the House of a speech which my honourable friend the Minister for Housing and Construction made at this year's Conservative Party conference. He said something to the effect that the long period of legislation designed principally to protect tenants had dried up the supply of the very accommodation which in some parts of the country is desperately needed. He reckoned that successive Governments had succeeded unwittingly in injuring precisely those whom they were trying to protect.
Having recognised the problem (which everyone in the House today has) the question is: what should be done about it? My noble friend's Bill is certainly one approach, but it is, I submit, an extreme one, and its effect would be far-reaching. It would remove all protection on rents and security from all tenants to whom the Rent Acts apply. It is not a course of action that should be embarked upon lightly, and the Government would need strong convincing that to move in one bound to a totally free market represented 1029 the right way of tackling the complex issues of the private rented sector.
When he spoke at Blackpool, my honourable friend said that he would be re-examining the private rented sector and reviewing all present legislation to see whether it can be improved. He did so in a way that made it perfectly clear to me and to others of us in that hall who were listening that he intended to adopt a fair approach. He was determined that in our policy we must ensure that tenants can still feel secure in their homes and get a fair deal for the rents that they pay: but, equally, that landlords must have the confidence to continue letting and, it is to be hoped, increase their lettings.
But the result of such a review would of course need primary legislation and a considerable slice of Government time. I cannot say today what the outcome of the Government's current look at the private rented sector legislation will be. The issues are complex and require careful consideration; but I would ask the House, in considering its attitude to my noble friend's Bill, to exercise patience and to remember that the Government have this whole area under review.
At the very beginning of my speech I referred to the words of my noble Friend Lord Mountgarret, and perhaps this is the appropriate moment, as I finish my speech, to return to the main point, as I see it. The purposes of Private Members' Bills in this House are many and varied, and I know that I do not have to elaborate on that subject today. I do feel, however, that the House has had a very useful Second Reading debate at a most opportune time in view of my honourable friend's intentions to study this whole problem.
I agree with my noble friend Lord Vaizey that the situation in the private rented sector is far from perfect, and I have listened with great interest to the views expressed in our debate. I trust that my noble friend will be guided by the Government's general intention of giving fair treatment to the landlord as well as the tenant, and will not press for the adoption of such a dramatic approach as is implicit in this Bill—which, I say again, is the one subject we are debating this evening.
The views of my noble friend and of other noble Lords have been fully aired today, and I would ask my noble friend to consider most carefully whether, to coin a phrase, the right approach would be to treat this discussion as a Short Debate and not to press for a Second Reading of his Bill tonight, but to withdraw it now. In the unlikely event—and I hope that it is an unlikely event—that this matter comes to a vote, I will not, therefore, feel able to join my noble friend Lord Vaizey in the Division Lobby.
§ 8.6 p.m.
§ Lord Vaizey
My Lords, ours has been an interesting debate and I will not follow the usual winding-up procedure of going through each speech in great detail. I must, However, refer to the noble Baroness, Lady Birk. Not being her Inland Revenue inspector, I am not as expert as perhaps I might be on the subject, but in the first of the noble Baroness's five speeches this evening she argued that this measure was monumentally irrelevant. I believe we had hoped that 1030 the achievement of a new leadership for the Labour Party under two very interesting and sensible people in the House of Commons would have led to some attempt to use the next five years to rethink some of the basic questions which come before Parliament. Personally, I found all the noble Baroness's speeches monumentally irrelevant—and, I will say why if I may, without going into the details of the House of Commons Select Committee report which seems to have formed so large a part of the debate.
First, there is no doubt at all that if it were possible for home owners to let their houses the supply would rise dramatically. The central point which I argued in my speech and which I hope will figure very prominently in my honourable friend's thought processes as he addresses himself to this question is that as the number of home owners rises in society the number of occasions on which those home owners would wish to let their own property to other people for short or long periods will increase. This has been true in every other society in the world where there is no rent restriction of the very onerous type that we have. In the growth of other forms of tenure (mostly home ownership) and the fact that, as I understand it, only four houses have been built for rent under the provisions of the 1980 Act so far—and this is 1983—one is absolutely reinforcing the point made so eloquently by many of your Lordships.
The second point I wish to make concerns the noble Baroness's statement that the law of contract is incredibly inequitable as between a rich person and a poor person. But when one goes into Sainsbury's or Marks and Spencer's one is dealing with huge concerns owned by people whose income tax inspectors would doubtless speak very interestingly about the amounts of money those companies make. But do we feel oppressed? We enter into a contract to buy commodities from them, and they have been major architects of the rise in ordinary people's standards of living.
§ Baroness Birk
My Lords, I did not really wish to interrupt the noble Lord again, but he cannot really compare going into Sainsbury's or any other shop with housing. The reason why it is inequitable is because there is such a shortage of housing; it is not a choice between one soup or another.
§ Lord Vaizey
My Lords, if the noble Baroness will contain herself from making a sixth speech this evening, there would of course be an acute shortage of kippers—you would have to go into Sainsbury's and bribe the checkout girl to get you some kippers—if the law said that the price of kippers should be the same as it was in 1915. If the noble Baroness, despite her intelligence, beauty, cleverness and wit, cannot appreciate that point at this stage in the evening, I somewhat despair. What a view she has of her fellow citizens!
It is also interesting that every reference to a tenant is to somebody absolutely on the brink of destitution. My Lords, the people who want to rent accommodation are precisely people like us, people in ordinary jobs, in ordinary occupations, who earn ordinary incomes, who want to get somewhere to live. At the moment the only people who can rent accommo 1031 dation, other than from the council, as was eloquently pointed out, are rich Arabs and diplomats, people who live in the posher areas of London, Regent's Park and so on. It is just not possible to argue to the contrary. Lord Hams of High Cross really did hit the nail on the head when he pointed out that in the last housing debate and in this debate every single economist in the place saw that obvious truth, and, were Lord Roberthall here tonight, judging from his contribution to the debate we had in June 1982, 1 have no doubt that he would say now what he said then.
These Acts were conceived in wartime shortages. They have now become a vested interest which one declining political party feels it needs to back because it gets votes. The disappointing aspect of my noble friend's otherwise extremely amiable and comprehensive reply to the debate—his statement of the Government's position—was that even in so handsome a position all he can say is that they will hold the matter under review. My Lords, I quite frankly do not feel that that is good enough. The fear of Rachmanism, as was pointed out so eloquently by my noble friend Lord Bauer, arose precisely because the houses were not decontrolled. Rachman's game was to push the people out because they were protected. The law did not protect them adequately, nor does it now. That is why there is so much work for liberal-minded solicitors like the noble Lord, Lord Mishcon, who interrupted me earlier.
My Lords, I do hope that the House will support me in the Lobbies on this Bill.
§ 8.12 p.m.
§ On Question, Whether the Bill shall be now read a second time?
§ Their Lordships divided.
|Division no. 1|
|Bauer, L.||Monson, L.|
|Coleraine, L.||Morris, L.|
|Croft, L.||Rugby, L.|
|Ferrier, L.||Spens, L.|
|George-Brown, L.||Vaizev, L. [Teller.]|
|Harris of High Cross, L.[Teller.]|
|Dean of Beswick, L. [Teller.]|
|Stoddart of Swindon, L.|
§ The Deputy Speaker (Lord Murton of Lindisfarne)
My Lords, as it appears that fewer than 30 Lords have voted, in accordance with Standing Order No. 54 I declare the Question not decided, and the debate thereon stands adjourned.