The Renters Rights Bill has now moved to the House of Lords and the second reading took place on 4th February. You can watch the speeches on the Parliamentary TV website. The Hansard report is here.
There is quite a different atmosphere in the Lords.
The members seem somehow to be nicer and more respectful to each other, and you get the impression that on the whole they genuinely like each other.
There were also some very detailed and pertinent points made which had not been made in the Commons. I’ll highlight them below.
Initial speeches
The bill was introduced by Baroness Taylor of Stevenage who outlined the bill and its purpose, being a manifesto commitment to improve the experience of tenants in the Private Rented Sector.
The initial talk for the opposition was given by Baroness Scott of Baybrook, which I thought was a very good speech.
She pointed out that most landlords own one or two properties and are not professional landlords. The bill will place unacceptable burdens on them. She mentioned the problems of resourcing the Courts, and the loss of the clause in the Renters Reform bill which would stop tenants giving notice in the first six months of a tenancy. She, along with many of her colleagues, pointed out that many landlords will be leaving the sector as a result of the enhanced regulation both in this bill and the energy efficiency reforms being introduced by Ed Miliband.
She suggested that there may well be interested parties challenging the government over the rights to their property (presumably under the Human Rights legislation) which would delay in the implementation of the bill and so help nobody.
Baroness Grender for the Liberal Democrats welcomed the bill and said that her party supports the fundamental principles in it of rebalancing the relationship between landlord and tenant. She was disappointed that the Conservates had sought to block it in ‘the other place’.
She was also disappointed that the bill does not deal with the high level of rents and suggested they be linked to the Bank of England base rate. They will want to look at this in the Committee stage.
She is also concerned about enforcement of the new law (she was not alone in this) and wants MoD housing to be included (as was requested in the Commons debates but rejected by the government). She hoped that the database would be set up to be a game changer rather than a ‘tick box exercise’.
Other points made
Space did not allow me to reference all the speeches made, and I apologise to those who have not been included. I have also had to leave out many excellent points by those referenced and have tried to deal only with new points and those critical of the bill. People wishing to read the debate in full will find it on Hansard.
Lord Best accepted that the bill may result in an exodus of landlords. He suggested that this may be no bad thing if Council and housing association housing can be increased, saying
The PRS has found itself performing a role in place of councils and housing associations, which suits neither the tenants nor the public purse. The Bill could help achieve some rebalancing between the private sector and the social sector.
Although the government has promised to build more social housing, this might also be a good moment to promote the purchase of properties formerly in the PRS to house low income families. Suggesting that
the Government look at an exemption from capital gains tax for the sales of properties from private landlords to social landlords. Such support would pay for itself in reducing the need for ever-rising housing benefit payments. Such an incentive could propel the rebalancing between sectors after so many years of decline for social housing. If the PRS were to continue to shrink by about 2% annually, the outcome could be positive, with both an additional 500,000 home owners and 500,000 more social tenancies.
Lord Bishop of Lincoln suggested that the decent homes standard should be extended to all temporary and asylum accommodation. He is also concerned about grounds for eviction which could affect tenants who are terminally ill.
Lord Willetts was concerned about student accommodation which he said the housing department had never understood. Pointing out that
students receive maintenance loans in three separate payments during the year. Many rents historically have been structured around the payment of maintenance loans. There is now an assumption of a monthly rental payment model and no scope for landlords to offer tenancies structured around maintenance loans. Have there been any conversations with the education department about changing arrangements for the payment of maintenance loans so that they match the envisaged new payments of rents? Those are the kinds of practical issues that matter and are acute if there is no understanding of the problems facing students.
He suggested that the ground 4A exemption should extend to the smaller student accommodation and also allowing 12 month academic year tenancies. Going on to say
In future, low-income students might find it harder to access the diminishing amount of lower-rent accommodation. Maybe they are supposed to stay at home and become commuter students. Some people want to see that. A very good social rule of thumb is that the more affluent someone’s family and the higher their social class, the greater the distance they go away to university. The low-income students will be staying at home and commuting, while the students from affluent backgrounds will pay high rents in high-quality, purpose-built accommodation a long way from home.
Lord Etherton, a retired Judge, was also concerned about the effect of the bill on the Courts, but was mainly concerned with the issue of financial penalties. He pointed out that some of the penalties are to be imposed if the Local Authority are satisfied ‘beyond reasonable doubt’ (the criminal standard of proof), whereas others refer to ‘the balance of probabilities’ which is the civil standard of proof. Going on to say
One has to question whether the employees of a local housing authority, who have no legal training and no criminal trial experience, can properly and accurately swing from one standard of proof to another.
He is also concerned about the imposition of the higher penalties saying
It is not right for the employees of a local housing authority who have no legal training and no criminal trial experience to be free to impose a financial penalty of larger sums—up to £40,000—on their assessment of whether the ingredients of a criminal offence had been committed.
He also criticised the introduction of the mental state of ‘recklessness’ pointing out that this is a difficult concept which has given rise to case law.
It should certainly not be left to local authority employees to reach their own conclusion on the application of “recklessness” in criminal law. The only state of mind that should be capable of giving rise to an offence under the Bill is “intention”—that is to say, actual knowledge or actual intention of the landlord to do the matters comprising the ingredients of the offence. That is clear, easy to understand and fair.
Lord Shipley suggested that students being allowed to leave student accommodation part way through the academic year would result in financial losses leading to landlords deciding to leave the student housing market. More information on the decent homes standard and how improvements are to be resourced are needed as 1/5 of PRS homes do not meet the standard.
He also suggested that it might be helpful for Local Authorities to be able to inspect PRS properties even if a tenant has not complained as tenants are often intimidated against making complaints. Saying finally
At its heart, this Bill is about standards in the private rented sector. It is not about pursuing good landlords but about pursuing bad ones and improving standards. For that reason, I strongly support the Bill in its overall intentions.
The Earl of Kinnoull was concerned about the availability of insurance for pet damage saying
Insurance, generally, is against things that are unlikely; it is never against things which are inevitable. The puppy has not been born that does not chew, and it is inevitable that dogs will cause some damage to a home. Other pets will cause damage to homes—for instance, to fitted carpets. It is not surprising, therefore, that, to date, no comprehensive pet damage insurance policy exists in the UK market. I was responsible for many years for underwriting operations in continental European countries and I never came across any similar insurance there either.
Ending by saying that at present, no suitable insurance product is available meaning that the insurance provisions in the bill do not work.
The Country Land and Business Association has surveyed its membership and found that 44% of rural private landlords are planning to sell or change the use class of their properties in the next two years. During that same period, only 21% are planning to build new properties. … A diminished supply of properties will inevitably lead to a price increase for consumers.
Going on to say
the new grounds for possession that refer strictly to “agricultural” landlords and workers must be broadened to include the 85% of rural businesses which are not involved with farming or forestry. If accommodation cannot be recovered quickly from previous employees, this economic system will break,
He was also concerned about the damaging effect that cats can have on songbirds saying
As a result of this real threat to biodiversity, landlords should be allowed to ban cats from some of their properties which are in particularly sensitive rural areas; for example, near SSSIs or NNRs.
As regards the introduction of the bill he pointed out
More than 4.5 million households will need tenancy agreements updating; letting agent staff and landlords will need to undertake training, and insurance and mortgage providers will need to adjust policies and rates. I hope the Government pay attention to that and allow time for it to happen before the Bill becomes law.
I am sure we all hope this. His final comments echo what I have heard many landlords say:
Overall, rural or not, I stand by the fact that landlords want to keep tenants. They do not want voids, which are very expensive. I balk at the sentiment brought by this Bill, which assumes that private landlords in this country are, on the whole, bad. They provide a very valuable service which often—through mere geography —housing associations or councils are unable to provide; indeed, they complement them. The vast majority of landlords are excellent people, who are human and want to develop a relationship with their tenants. I have concerns that provisions in the Bill pertaining to challenging rents at tribunal where there is no downside for the tenant could put pressure on those trying to foster positive relations as more vexatious claims are pursued.
This Bill will penalise the whole sector, and the ramifications will be felt across the country for years, putting extra pressure on already-struggling housing associations and the diminishing number of municipally owned council houses.
Lord Thrulow, who was for many years a chartered surveyor also had warnings about the bill and was worried about landlords exiting the market as many have done in Scotland. He had some interesting comments on Local Authorities:
The impact on local authorities is principally one of resourcing. They have a big role to play in this Bill; there are going to be legions of surveyors having to be trained up in the decent homes standard and the implications of the ability to operate Awaab’s law. There is going to be a significant increase in the need for computers, IT and digital recording, which will include ongoing maintenance. We are a country of some 50 million people—we are not a country like the Nordics, New Zealand or others, where they are dealing with 10% of the size of our population—and these recording systems are immensely expensive to maintain. We are asking local authorities to become policemen, and that is not their role. They will have to enforce the new rules and regulations, which is going to be culturally difficult and will require a lot more employment, training and resourcing. Who is going to pay for it? We know that the local authority system is basically bust financially.
Lord Truscott was worried about the move to periodic tenancies:
The inability to negotiate upfront payments, as we have heard, will hit the self-employed, foreign students, those with a poor credit history and vulnerable people. It also risks a legal challenge under common contract law. No one has yet satisfactorily explained to me the benefits of moving to periodic tenancies and scrapping assured shorthold tenancies; it seems a solution in search of a problem.
He expressed concern that with the loss of longer fixed terms the sense of community in many apartment blocks will be lost. Many landlords will move to Airbnb or holiday lets.
Baroness Janke was worried about the ability of Local Authorities to enforce the new law, and also about discrimination of disabled tenants and problems of accessibility of those in wheelchairs.
Baroness Jones of Moulsecoomb said that we need a living rent to match the living wage. Maybe there could be a national commission to set this?
Barnonee Eaton pointed out that the bill is particularly prejudicial to the build-to-rent sector, which has the potential to deliver more homes. She is also concerned about the rules for challenging section 13 notices:
Section 13 notices have not yet been digitised is an issue that, in this day and age, needs urgent attention. Section 13 notices being challenged by any and all renters simply to delay a rent increase will serve to achieve only one goal: discouraging landlords looking to provide rental homes and investors looking to create new rental homes.
She points out that this will discourage investment.
Lord Carter feels that the bill has not struck the right balance:
On the good landlords side of the balance, allowing rent arrears to accumulate over three months before enforcement action can be taken risks intimidating those landlords into leaving the sector, with all the undesirable consequences which will ensue. A landlord is not a charity, and some depend entirely on the rent to pay mortgages or for their daily living costs. The relationship between tenant and landlord has to be a two-way street. Similarly, banning landlords from obtaining rent in advance will create greater risk for landlords and make them risk-averse in selecting tenants. This can only be detrimental to the latter.
Lord Marlesford considers the bill to be fundamentally flawed
the private rented sector in housing is part of the capitalist system. Landlords are a form of entrepreneur. While their profession must certainly be monitored and called to account, with appropriate penalties for abuse, it must be allowed to attract investment. The rents at the moment are barely adequate to provide a return on capital, low as it may be. There are few properties which produce a taxable rent of 3%. Most of them are 2% or less.
I recognise that there are those, some of them in the Government, who dislike private landlords. However, I suspect that even the Chancellor would recognise that there are no economic resources available to replace the system. The Government have housing targets to reach. These are imperilled by the present Bill. Let us hope that the experience and expertise of your Lordships’ House will allow it to be improved
Lord Cashman pointed out that the bill does not protect the interests of those living on houseboats and asked that the bill extend their rights.
Lord Black said he would like to see more guidance provided on the pet provisions and what constitutes unreasonable grounds for a landlords refusal.
Lord Cromwell pointed out that most landlords are not really those this bill is aimed at
The Bill risks … helping mainly middle-class renters to gain and assert their rights. Unless we get much more serious about enforcement, which means properly resourcing it against truly exploitative landlords, life for those at the bottom of the housing ladder, where the direst needs and worst poverty coexist, will remain untouched despite this well-intentioned Bill—as it presently stands.
Lord Tope asked that the bill’s decent homes standards also apply to Home Office accommodation for refugees and asylum seekers as there is widespread evidence of poor standards across asylum accommodation and barriers to implementing effective enforcement action.
Lord Davies was concerned about older renters who may be discriminated against
Many are long-term tenants on fixed incomes, facing significant rent hikes, leaving them at risk of eviction and potential homelessness. Unlike younger renters, older tenants often struggle to relocate due to mobility issues, limited financial means and a shortage of suitable age-friendly housing.
He also mentioned the question of properly funding local authority enforcement.
Lord de Clifford was unhappy about the loss of fixed terms
Landlords and letting agents will incur most of the costs of letting a property at the beginning of the tenancy and will therefore be out of pocket on a regular basis. Why do the Government feel the need for such a short starting period to tenancies? Do not landlords deserve some protection for the cost of moving a tenant into a property?
Lord Howard considered the bill a ‘rotten idea’. For example the rules about rent tribunals:
The tribunals’ job is to determine what the market rent should be and to ensure that rent increases do not exceed it. If rents never go above an existing market rate, the market rate will not change; it will stay exactly the same. To state the obvious, landlords let their premises in return for rent. To create a situation where the return on investment is static because the rent never goes up, but costs go up, can result only in a reduced supply of rental accommodation.
Berlin, he pointed out, had to end their scheme after two years.
Lord Desai said that in this country we have a distorted housing market due to the subsidization of home ownership. Which discourages people investing in stocks and shares. He also commented
if you are going to index rents, you should not index them to the consumer prices index. I urge the Government to ask the Office for National Statistics to construct a housing costs index. Landlords may have to pay for repairs and so on, which are different kinds of costs from the consumer prices that go into the consumer prices index. Landlords may find that it costs much more to repair a property or keep it in good shape than buying bread or sausages. We ought to do at least that little thing in favour of the universally disliked landlords.
Lord Inglewood pointed out that houses are wasting assets and a critical part of our national infrastructure. This is one reason why the act has to work for both landlords and tennats if it is to work in the national interest.
Lord Northbrook said that there was no implementation plan for the bill. He also suggested, as regards rent appeals
tenants should first be able to establish from the Valuation Office Agency whether a proposed rent increase is within market rates or not. This would make use of the VOA’s experience on local market rents and reduce waiting times for cases that need to be decided by the tribunal.
He was also concerned about guarantees
Given the end of the fixed-term tenancies, it is unlikely that a guarantor would be willing to guarantee a tenant’s rent indefinitely. The Bill’s potential to close off the market from those overseas is in direct contrast with the Chancellor’s ambition to encourage more high-skilled workers to UK and the Education Secretary’s recent message welcoming international students to the country.
And also about the prospect that the landlords database and selective licensing schemes will duplicate each other.
Lord Trees had some interesting comments on assistance dogs which although protected under the Equality Act 2010, there are still reports of landlords being unwilling to allow them.
I suggest there is a clear argument in favour of a tenant’s right to have an assistance dog in private rental accommodation. However, there is an issue, as there is no official recognition of assistance dogs. There is a need for some central registration of such animals and owners to unequivocally identify them—perhaps analogous to the provision of blue badges for preferential parking for people with certain disabilities.
He also pointed out the problems with fumigating flea infested properties, which can cost up to £1,000. Which may be difficult to cover with insurance.
Lord Jamieson believes that in its current form the bill risks doing more harm than good. As has happened in Scotland. He is also concerned about court readiness and asked what resources have been allocated.
In conclusion, the need for more homes in the private rented sector is urgent. Savills estimates that, by 2031, we will need as many as 1 million additional homes for private rent to keep up with rising demand. How, then, can we afford to risk policies that may drive landlords out of the market and make this shortage even worse? As the noble Earl, Lord Lytton, said, how do we strike the right balance between protecting tenants and maintaining a healthy rental market that supports investment and meets the needs of renters across the country? It is crucial that the Government listen to the voices of landlords, housing experts and tenants who have raised concerns about the impact of the Bill
And finally
Baroness Taylor summed up the debate. So far as the abolition of section 21 and fixed terms is concerned, she said
The new tenancy system for the private rented sector will be introduced in one stage. At this point, it will apply to all private rented tenancies and existing tenancies will convert to the new system, including those that currently have a fixed term. New tenancies signed after the date will also be governed by the new rules: thereafter, no private landlord will be able to serve a new Section 21 notice. This single date will prevent a confusing two-tier system and give all tenants security in their homes immediately. …
We just do not accept that fixed terms offer the best structure for renters. They oblige them to pay rent regardless of the standard of the property or whether it is best for their circumstances, and they restrict renters’ freedom to move if they need to.
As regards supply she said
While we understand that the new system may spark a period of adaptation, we do not believe that the reforms will lead to the sort of landlord exodus that some have mooted. The sector has doubled in size since the early 2000s, and there is no evidence of an exodus since the reform has been put on the table. In addition, the recent 2023-24 English Housing Survey indicated that the size of the PRS has remained broadly stable since 2013-14.
As regards the courts, she said
we are working very closely with the Ministry of Justice to assess the impacts of our legislation on the courts and tribunals, and to ensure that the justice system is prepared for the implementation of the Bill more generally. Our discussions with the MoJ cover a range of options for managing the impact of these and our other housing reforms, including mitigations to help avoid disputes arising in the first place, thereby keeping away some of this from the courts, and to manage the risks that are associated.
As regards Local Authority enforcement, she said
we want to pursue a “polluter pays” approach, which will see bad landlords meet the costs of the enforcement against them. We are supporting that by extending and increasing civil penalties, which will be ring-fenced for that enforcement. However, I accept that more must be done. In accordance with the new burdens doctrine … we will ensure that additional asks on local authorities as a result of our reforms are fully funded. We will look hard at how best we can further boost capacity and capability, to create that sustainable funding system over the longer term.
They are going to consider further the points raised about asylum accommodation and the rights of houseboat owners and residents. They are hoping that the market will respond to the need for pet insurance. The issues surrounding students will be discussed in committee. The government has no plans to introduce rent controls.
The bill will now pass to a Committee of the Whole House on a date to be confirmed.
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