Renters’ Rights Bill [HL] — House of Lords, 2016-06-10
Topic: Housing
Rosalind Grender (Liberal Democrats, Centre to centre-left): My Lords, the natural consequence of the chronic lack of social housing and the prohibitive cost of buying a home means that we now have a growing number of people who live in the private rented sector. Sometimes it would appear that this ever-growing customer base—almost one in five of the population, one-third of them families with children—have more consumer rights when they buy a white good, such as a fridge, than they do when they rent the home to put the fridge in. That cannot be right. The Bill aims to address that current imbalance. The rising demand for rented homes is pushing up costs and allowing some landlords and letting agents to take advantage of tenants who have relatively little power to object to high prices or poor conditions, or to make choices about which letting agent to use The law needs to change to make renting cheaper, safer and more secure for tenants. The Bill will reduce the costs of moving for renters by banning letting agents charging fees to tenants, a practice already outlawed in Scotland. The Bill will also make renting safer through mandatory electrical checks and give tenants greater protections against rogue landlords. The Government have helped tenants by introducing legislation on rogue landlords in the Housing and Planning Act 2016, but they stopped short of giving real power to tenants through information so that tenants know who those rogue landlords are. Under Clause 1, tenants would have access to that information. This change would put transparency and choice into the hands of the consumer, the customer, the tenant. A landlord can require a tenant to provide a reference, yet tenants are unable to apply the same principle to their landlord. If the list of employers who flout national minimum wage legislation can be made public, why cannot rogue landlords be made public, too In Clause 3, we return to an issue debated during the passage of the Housing and Planning Bill, which is that electrical safety checks should be compulsory. Clause 4 would prevent a rogue landlord obtaining an HMO licence. The points covered by Clauses 1, 3 and 4 were recently debated during the passage of the Housing and Planning Bill, and my noble friends Lord Foster and Lord Palmer will elaborate on them. I shall concentrate the rest of my remarks on Clause 2, which aims to end letting fees for tenants The cost of living for private renters has reached crisis point. Renting is the most expensive form of housing to live in, and with rising rents and increasing demand, renters are trapped, with limited choice. Tenancies are increasingly very short—often of only six months or perhaps 12—so renters often lack security and, as we all know, they constantly have the imminent threat of a rent rise hanging over their heads Unlike people in the owner-occupied market, one in four renters moved home in 2013-14. Just under a third of renters have moved three times or more in the past five years, and just under a quarter of them in London. Each time they move, the up-front costs are often the greatest barrier of all. In London, the median amount that renters must pay before moving is £1,500, and in many cases the cost is several thousand pounds. It goes up disproportionately for those on low incomes, who are viewed as a higher risk and so may be required to provide several months’ rent in advance. Indeed, of those who rent on a very low budget, a third have to borrow or use a loan to pay up-front fees and, disgracefully, 17% have to cut down on heating and food to cover the up-front cost of moving Costs vary from agent to agent and range from £40 to £780, with the average cost just under £400 per move. Many of those charges seem completely arbitrary. A credit check, for example, costs about £25 today, but some agencies charge a tenant £150 or more to carry one out. Marta, a lady who contacted the Debrief’s Make Renting Fair campaign, had asked to sign a three-year tenancy agreement. The agent said, "Fine, but you’ll have to pay three times the fee": that was three times £360 just to re-sign. I spoke to a young woman this week who is in a two-bedroom flat. She is the main tenant and happily paid £150 for an inventory check and other things at the start of her tenancy, but every time her flatmate changes, the new tenant is charged a £150 for an inventory check which, of course, never happens—what a rip off Citizens Advice, which in the past year has seen 80,000 people with a problem in the private rented sector, has seen an 8% increase in complaints about letting agents. One tenant described a fee of £180 to renew a tenancy agreement that is staying exactly the same, except for a change of dates. It requires a simple printing or photocopying job, and it is the renters who go into the office and sign the form, but they are charged almost £200 for it. We all accept that letting agents have some genuine costs in moving tenants into a property, but the appropriate payer of these costs is the landlord, not the tenant. It is the landlord who is the client, and most of the fees charged to tenants would be costs landlords would expect already to be covered in the amount they pay the agent. It is the landlord who can choose which agents they use and which is the most competitive agent in the marketplace. The tenant is choosing where to live, what the rent is and whether they can afford the deposit. They have no ability to pick and choose which letting agency they will use. Let us take the example of Jess, a client of Citizens Advice. She found a property that she wanted to rent in her local area, and the letting agent requested £600 to run credit checks and get references—let me remind the House that a credit check costs about £25—which was non-refundable if the landlord did not accept her as a renter. I am sure she would have loved to choose which letting agent she used, but she was not in a position to do that These agents are charging both landlords and tenants because they can get away with it. That needs to end, and that is what the Bill does. Imagine if this model were applied in a different market, say, to employment agencies. A company would ask the employment agency to find it a temp. On this model, the temp would be charged a fee as well as the company employing him or her. It just does not make sense Fees for tenants have already been successfully banned in Scotland following legislation in 1984, which was clarified in 2012. Research into its impact commissioned by Shelter shows that it has had only minimal side-effects for letting agents, landlords and renters, and the sector remains healthy. Only 17% of letting agents increased fees to landlords, and only 24% reported a small negative effect on their business. Not one agency manager interviewed said it had a large negative impact on their business, while 17% said they considered the change to be positive for their business. Research by Shelter suggests that even if the charges are passed on to landlords, in Scotland this has not led to an increase in rental charges. However, for the sake of argument, let us say it did. Instead of an up-front, prohibitive cost of £1,500 to move, that amount would be absorbed into a weekly or monthly rental sum. There would be no up-front charges, and those on housing benefit would have the possibility of the amount being absorbed into the monthly or weekly rent. Dorrington Residential, one of London’s largest residential landlords, works only with letting agencies which agree not to charge renters any fees. In its words: "Dorrington is able to run a successful residential investment business and give renters a fair deal by avoiding unnecessary charges, and we can’t see why other landlords—and the Government —do not follow suit" There is a clear case for the Government to take action in support of renters and end these fees once and for all We have debated many aspects of the housing crisis in this Chamber, and I recognise many faces from those debates. There are many things that are difficult to solve, but this is a simple thing that is very easy to solve. Today on the green opposite Parliament I met a group of young renters. The work that Generation Rent has done to stand up for renters’ rights and the Debrief’s Make Renting Fair campaign have provided a strong voice on these issues. There are more than 250,000 signatures on their Change.org petition. They support this Bill. This is a broken market where the consumer has little or no power, but it is a growing market and one the Government should serve well, like any other. Transparency has been tried, but evidence suggests that it is not enough as little has changed. We should ban these fees, clarify that the landlord pays the fee and make it a fairer marketplace for those who rent. I beg to move.