Examination of Witness

Renters (Reform) Bill – in a Public Bill Committee am 2:30 pm ar 14 Tachwedd 2023.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Ian Fletcher gave evidence.

Photo of Yvonne Fovargue Yvonne Fovargue Llafur, Makerfield 2:40, 14 Tachwedd 2023

We will now hear oral evidence from Ian Fletcher, director of real estate policy for the British Property Federation. We have until 3 o’clock for this panel. Could you introduce yourself for the record, please?

Ian Fletcher:

Hello. I am Ian Fletcher, a director of policy at the British Property Federation. Thank you very much for the invite this afternoon.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q Thank you for attending, Mr Fletcher. I want to ask you about build to rent. In terms of supply, build to rent is mainly catering to—let’s say—the top half of the market, rather than meeting mainstream supply. What do you think the impact of this Bill will be on the build-to-rent sector?

Ian Fletcher:

Build to rent is something that started over the past 10 years. It is trying to encourage institutional investment into market rented housing. It is not pitched at high-income earners. We do a survey each year that looks at the demographics of the build-to-rent sector, and I would say it is catering for medium earnings—often key workers and people of that nature—and supporting our core cities particularly, as a lot of investment has gone into a number of the core cities across the UK.

In terms of impact, a lot of the things we very much welcome in the Bill have, to some extent, been pre-empted by the build-to-rent sector: a number of my members are already members of an ombudsman voluntarily; the build-to-rent sector has proudly been at the forefront of welcoming pets; and decent homes is not something that will trouble the sector. The portal is something I have been campaigning for since 2007. There is a lot to welcome in the Bill.

Some challenges that are specific to build to rent are things like the Government abolishing rent review clauses and the lack of any minimum tenancy length in the Bill for landlords, which means that there could be a danger, particularly in properties in core cities, of significant churn.

Photo of Jacob Young Jacob Young Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

Q You mentioned the decent homes standard. Could you elaborate on your thoughts on that?

Ian Fletcher:

As I say, the stock of build to rent has been developed over the past 10 years, so it is unlikely not to be meeting the decent homes standard. Equally, the management of the property is done to a very high standard. That is something the sector is very proud of. I do not see any challenges in introducing decent homes into the sector from a build-to-rent perspective. We have sat around a number of tables with the Department as it has worked through the specifics of how the standard would impact the private rented sector, and I have not heard many dissenting voices in terms of this being introduced into the sector.

Photo of Karen Buck Karen Buck Llafur, Westminster North

When the Bill was first presented, the British Property Federation indicated some concerns about the relationship between a minimum tenancy period and the growth of the short lets sector and that this might be an additional boost to it, and I just wonder where that came from. What is your evidence for that? Indeed, have you conducted an analysis of the growth of short lets, the factors driving that and the connection between this and the legislative frameworkQ ?

Ian Fletcher:

It is something that we have been continually concerned about. In a London context, the removal of the planning constraints on the short lets market affects property across not only the rental sector but the leasehold sector.

It is a concern, I suppose, in terms of members. At the moment, you obviously have to take a minimum six-month tenancy, but what members often find is that you do not want to restrict subletting, because often that is helping the ultimate tenant, if they have to move for various reasons. You are finding that quite a lot of people are moving into these premises and then subletting to somebody who will take it on a short-let basis, so these are portals and things of that nature that, to some extent, are exploiting that situation.

Photo of Karen Buck Karen Buck Llafur, Westminster North

Q I appreciate that that is your view. Is it actually based on research that you have done, or on an evidence base, or is this mostly anecdotal? Do you have other ideas as to how the different sectors might be able to bear down on that problem, particularly the illegal element of it?

Ian Fletcher:

Clearly, the Government are taking forward reforms, particularly planning reforms, and talking about licensing. In the context of this Bill, we would like to see a minimum tenancy length of six months—four months plus the two months’ notice. However, we are mindful that there are good reasons why tenants might have to leave within that six months: they have been mis-sold a property or the property is substandard. In those circumstances, we suggested that the solution might be to allow them to appeal to the ombudsman to be able to break the tenancy.

Photo of Karen Buck Karen Buck Llafur, Westminster North

Sorry to gently push you, but I ask again: is your view based on an actual report or evidence base, or is this anecdotal?

Ian Fletcher:

It is anecdotal; there is no empirical evidence that I can give you.

Photo of Eddie Hughes Eddie Hughes Ceidwadwyr, Walsall North

I have visited probably only four build-to-rent sites, but it feels to me that you are pitching slightly above the median. It also feels to me that, exactly as you described, the quality of the product is pretty good and therefore the opportunity for there being any mis-selling of what you are getting feels more limited than in the rest of the market, where I have seen egregious cases of people being mis-sold something.Q

It feels to me that it is likely that your tenants will stay and all the people who I have spoken to who provide this type of accommodation give me the feeling that the type of people that you are attracting and the type of property you are offering means that people do not walk in and walk back out again very quickly. I would imagine that lots of your tenancies last considerably—when I say “lots”, I mean that a very significant percentage of your tenancies last over a year.

Ian Fletcher:

You were very welcome when you visited a build-to-rent building in Newcastle.

Ian Fletcher:

There are things to encourage the sector to provide long-term tenancies at the moment as well. As you will know, national planning guidance suggests that build to rent should be providing at least a minimum of a three-year tenancy.

I suppose the concern is that these are, as you found out from the site in Newcastle, very metropolitan and very popular areas.

Ian Fletcher:

You could end up in a situation where somebody has taken a two-month tenancy and is just using that as an opportunity to earn some money for themselves by renting it out at weekends for hen parties or things of that nature; it is almost sort of hotel accommodation in some respects. That is the concern of the sector—that you end up with a lot of churn in that respect.

I think there is also another concern. We have heard, quite rightly, from Ben and other evidence givers about the costs of moving from the tenant’s perspective. There are also significant costs from a landlord’s perspective where you are setting up a tenancy and then that is churned very quickly.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

Q In some of the evidence to the Levelling Up, Housing and Communities Committee, Grainger, a buy-to-let house builder, suggested that the triple-lock approach should be applied, whereby landlords are restricted so that they cannot raise rents by more than the lower of consumer price inflation or CPI, wage inflation or 5%. That was Grainger’s official position at the time.

I wonder whether you would support an idea that there should be some sort of matrix that prevents landlords from increasing rents above a certain level—that was nationally known, as it were, and that could be published by the Secretary of State, so that everyone had some security about what that ceiling is.

Ian Fletcher:

Those remarks are specific to a particular context.

Ian Fletcher:

The context is that at the moment the way rents are often set in the build-to-rent sector is to give the tenants some certainty. They will typically be index-linked. The Bill abolishes the use of rent review clauses, so you are not allowed to do that in terms of setting a rent beyond a year. We think that is a pity. Often, tenants appreciate the certainty of knowing whether their income will meet the rental payments going forward. I would not want somebody to be tied into those sorts of rent review clauses forever and ever, because economic circumstances change significantly, but for a short period of time that should be acceptable.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

Q Would you be against the idea of a nationally set ceiling?

Ian Fletcher:

I would be. I think that that is starting to look like rent controls, and that then comes with some of the adverse consequences of rent controls in terms of the quality of the stock. You tend to find with rent controls that the sector shrinks down and does not attract—

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

Q So are you opposed to the Government’s proposed ceiling on market rents?

Ian Fletcher:

That is the market. I am supportive of the market.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

Q The British Property Federation has said:

“The abolition of no-fault evictions needs to happen in tandem with…court reform.”

What indicator explicitly do you think should be hit for court reform to be sufficiently achieved?

Ian Fletcher:

I obviously saw the debate on Second Reading. I thought that the tests that the Secretary of State set out were relatively good ones. The thing that we have been particularly keen to see is the digitisation of the courts. That project has not advanced as quickly as I would have liked, but it will make a huge difference to the experiences of both tenants and landlords going to court.

A lot of the complaints that we hear about the courts are to do with communication and knowing where your case is in the system and how it is progressing, and digitisation will improve that significantly. I would like to see times coming down—obviously, it is at a 22-week median at the moment. I would like to see that come down to about 16 weeks.

Ian Fletcher:

Twenty-two weeks is the median time that a case takes to go from claim to possession at the moment.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

Q We have heard that within that period the court’s part is actually relatively strict; the bailiff’s part is the particular problem. Are you saying that it is the bailiff’s part that needs reform?

Ian Fletcher:

I think one of the Secretary of State’s other tests was that bailiff recruitment would improve. The other thing I would say is that the Levelling Up, Housing and Communities Committee recommended that there should be some sort of key performance indicators and regular measurement of them, which would give us the confidence that the courts are delivering what they should be delivering: speedy and efficient access to justice.

Photo of Yvonne Fovargue Yvonne Fovargue Llafur, Makerfield

If there are no further questions from Members, I would like to thank the witness for his evidence. We will move on to the next panel.