Examination of Witnesses

Renters (Reform) Bill – in a Public Bill Committee am 3:11 pm ar 14 Tachwedd 2023.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Dr Julie Rugg and Professor Ken Gibb gave evidence.

Photo of Yvonne Fovargue Yvonne Fovargue Llafur, Makerfield 3:29, 14 Tachwedd 2023

We will now hear oral evidence from Dr Julie Rugg, senior research fellow at the Centre for Housing Policy at the University of York, and from Professor Ken Gibb, professor in housing economics at the University of Glasgow, who joins us via video link. We have until 4 pm for this panel. Will the witnesses please introduce themselves for the record?

Dr Rugg:

I am Dr Julie Rugg from the University of York, where I am a reader in social policy.

Professor Gibb:

Hello. My name is Ken Gibb. I am a professor at the University of Glasgow and I direct the UK Collaborative Centre for Housing Evidence.

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

Q Thank you both, and good afternoon. Given your extensive expertise in this area, could I ask a general question about whether the Bill strikes the right balance between the interests of landlords and the interests of tenants? I would like your thoughts specifically on the grounds for possession, linking the abolition of section 21 to “court improvements” unspecified, and other things that might, in your opinion, be missing from the Bill.

Dr Rugg:

That is a very big question. I do have concerns about the Bill as it currently stands. We have become quite focused on the abolition of section 21, and I can understand why, but the abolition of section 21 does not deal with the reasons why a landlord might serve a section 21 notice. My feeling is that, if the Bill goes through as it stands, it will give tenants the impression that they have greater security than they in fact have.

One of the biggest concerns with the Bill as it stands relates to possession on the ground of the landlord selling the property. The fact that the landlord is selling is one of the biggest reasons tenants are asked to leave, and a lot of landlords are exiting the market. The Bill does not prevent that, so that will continue. We have to think about how we neutralise the market. At the moment, the market is weaponised for both landlords and tenants in ways that are very unhelpful.

We have to think about how to calm everybody down and start thinking about what the problems are in the market. One of the biggest issues in the market at the moment is the lack of supply. That is quite problematic for tenants, and it is one of the reasons there is a lot of energy around section 21. Abolishing section 21 is not going to deal with supply issues. From the evidence we have at the moment, it is very likely to make supply issues worse.

Professor Gibb:

My perspective on this stems to a large extent from the experience we had in Scotland after the introduction of some aspects of the Bill and some of the kinds of measures that you are now proposing. I would echo what Julie says, in that we made these changes, which brought some confidence to tenants—that is what some research tells us—but some fundamental issues remained unchanged.

Despite investing in tribunals—in justice, as it were—there is still a strong sense of asymmetry in access to justice, which is to the detriment of tenants. People supported the changes, which are very similar in terms of the grounds for possession and so on, but none the less we find ourselves with a similar housing rental market in Scotland, which exhibits a great deal of shortage and very high and accelerating rents.

The counterfactual is what it would have been like without the changes. It probably would have been worse, but the changes have not stopped those kinds of things happening. In a sense, they probably are not supposed to do that. It is not enough to do these necessary things to make the rental market work more satisfactorily.

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

Q Thank you both. First, could you clarify your initial points? What effect do you think the reforms we are proposing would have on supply in the private rented sector? On a different tangent, what are your views on how we should strengthen councils’ enforcement powers to crack down on criminal landlords?

Dr Rugg:

On the issue of supply and section 21, counterfactually, a lot of landlords let because of section 21; they do not evict people because of section 21. Section 21 gives them the confidence that, if they run into severe difficulties, they will not have to go through a protracted court process in order to end a tenancy. This is particularly pressing for smaller landlords, who might find themselves paying two or three mortgages at the same time, with tenants that are problematic. You can understand the reasons why risk is hugely important to landlords a lot of the time. Antisocial behaviour is really problematic. If there is a tenant causing lots of problems in the neighbourhood, the landlord wants to get that situation to a close as fast as possible.

Abolishing section 21 would increase landlords’ perception that there is risk in the market. An area that will be problematic is that landlords who come to the sector with property—perhaps they have inherited it or they have started a partnership and there is a spare property—will think very hard about whether to bring that property to the market. I think that is one of the consequences we will see. The market does not look like a very friendly place to landlords at the moment, and that is the big issue we have around supply.

How we help local authorities deal with criminal landlordism is something that I am particularly concerned about at the moment, because it is part of a big project I am working on. Local authorities have very different approaches to dealing with enforcement action in their area. One of the issues is that there is an awful lot of variation in political—i.e. councillor—attachment to the notion that this is something they should be dealing with, so councils invest at different levels in their enforcement activity. That is a democratic issue, and that is something we cannot do anything about, but I agree with the notion that Dr Dawson introduced that we really need some baseline standards that everybody can expect to adhere to.

One thing we have not really mentioned is the use of letting agents. They cover an awful lot of property in the market, but we do not expect them to show responsibility for the quality of the property they are letting. In a sense, I think that is soft policing, if we think that letting agents should have greater responsibility for ensuring that the properties they have responsibility for meet the standards that we set for the sector. In some ways, that would relieve local authorities of some of the burden of inspecting all properties. At the moment, local authorities are obliged to inspect only a certain proportion of properties that sit under licensing regimes. An awful lot of the sector sits outside that and is covered by letting agents. I think we are missing an opportunity to think about how we skill up different parts of the market to improve property quality.

Professor Gibb:

I think one of the reasons I am here is that yesterday my colleagues and I published an evidence review for the Department for Levelling Up on the question, “Is there evidence that increasing non-price regulation has led to disinvestment in the private rented sector?” That is clearly a very important question for the kinds of policies being proposed here. In producing the review—it is an international evidence review over the last 20-odd years—we found that it is very hard to answer that question, because there is very little research that directly speaks to it, but you can infer from some of the peer-reviewed literature, and there is actually very little evidence that that is the case.

In other words, we believe that there is probably a constellation of factors that drive disinvestment in the sector, and it is very hard to identify whether increasing regulation, per se, is behind that. The fact of the matter is that in England, there was increasing regulation in the last 20 years, while the sector was growing. There is also evidence internationally that where regulation has increased in the short-term lets market, there might have been a short period of disinvestment, but there has not been disinvestment in the longer term. In the longer term, investment tends to have stabilised and continued to grow.

So we have been quite struck that there is very little evidence to that effect. That is not to say that there is not disinvestment going on, but it is a much more complicated thing. Another problem is that often we have several regulations being introduced at the same time, and it is quite hard to unpick the causal forces of individual things. The bottom line is that we found it quite hard to identify that increased regulation was causing disinvestment or was correlated with it.

Photo of Karen Buck Karen Buck Llafur, Westminster North

Q Julie, your report from a few years ago was helpful in encouraging people to think about the private rented sector not as a homogeneous whole, but as having different markets within it. Given what you said, and with the Government—rightly, in my view—going ahead with abolishing section 21, I wonder what you think the impact will be on the different markets. What are the warnings there that you have just given us, in particular on the most vulnerable, at the lower end of the market? What safeguards could be introduced to ensure an adequate supply of decent accommodation for people entering the different layers of the market?

Dr Rugg:

I am better able to speak about the lower end of the market, because that is the area that I specialise in. We had some comments earlier about build to rent, and there are some concerns about the build-to-rent sector, but I will not go into those here.

Thinking about the lower end of the market, the proposed regulation seeks an end to “No DSS”, as a catch-all. I do not think that that will necessarily work particularly well. Landlords seek not to let to people in receipt of benefits for two reasons: first, because they might have some prejudiced view about the people who tend to be in receipt of benefits, and that is something that is certainly not right; and the other set of reasons sits around frustration with the benefits administration and the level of benefits being paid.

I have researched landlords and housing benefit for many years—too many to mention. In the past, landlords who routinely let in the housing benefit market enjoyed quite good relations with their local authority and they worked together to deal with problems that their tenants might encounter in the benefits market. The introduction of universal credit has completely taken that link away. A lot of landlords are feeling quite exposed now: they have tenants with quite high needs having problems with their benefits, and they simply cannot do anything about it. That is a problem that we need to think about.

One of the earlier speakers referred to the rent control that sits in the local housing allowance system. That is hugely problematic. It means that tenants who receive local housing allowance simply cannot shop around the market, because the rent levels are far too low for them to act as effective consumers. Essentially, they are having to shop where they can, and some landlords are definitely exploiting that situation, letting very poor-quality property on the understanding that the tenants do not have very much choice.

Professor Gibb:

I do not have much to add, except to say that I completely agree on the local housing allowance. We have just been doing some research in Scotland that suggests that the levels are far too low to be effective for the great majority of people. It is really welcome to think about the market rental sector as a series of segmented markets. We should therefore not expect regulation that covers the whole area to have equivalent effects in different parts of that area.

The only other thing I would say is that we also need to think as much as we can about housing as a system, recognising the importance of social and affordable housing alongside the bottom end of the rental market, and thinking about how those things can connect together and about the value that increasing investment in social and affordable housing would bring.

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

Q Dr Rugg, I want to follow up on the maladministration of universal credit, and some of the difficulties that landlords have had since the introduction of universal credit and the local housing allowance going from 50% to 30% and now probably to sub-20%, because of the cuts. We know that possession grounds 8 and 8A are about the failure to pay rent and about rent arrears. There are some weak protections around universal credit in that, but they are non-discretionary grounds in a court, so do you feel that that goes far enough to build the relationship that you were describing between landlord, universal credit and tenant, or could more be done in the legislation?

Dr Rugg:

I think we need to re-establish a relationship between landlords and the universal credit system, so that landlords who are encountering problems can talk to someone in detail about those problems. It is a very basic requirement that some landlords have, that when there are individual tenants who might be falling into difficulties they need to talk to somebody about that case, and about the specifics of the case of an individual who might have high support needs. Thinking about how we support landlords through those cases—and we are talking about specialist landlord lines within the universal credit system, so that landlords can seek advice for particular cases—that is not unreasonable; that is the kind of support that we need to re-engender, so that landlords feel that, when they have difficulties, they know exactly where to get advice from.

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

Q Should those two grounds be discretionary or mandatory, bearing in mind that often, through dialogue and discussion, a different outcome could be sought?

Dr Rugg:

The issue of what rent arrears mean is really quite complicated. Tenants can get quite confused about exactly what their rent arrears mean—whether it is because their housing benefit has not been paid or their shortfall has not been paid. Sitting within that, I think we need to be a little clearer about what rent arrears mean in a housing benefit context, so that that is clear for the landlord and the tenant.

Professor Gibb:

This reminds us that the legislation that is being talked about today has to be understood alongside another critical part of the private rented sector, which is the local housing allowance. In a sense, there is something odd about making these changes and treating the LHA levels that it operates at as a constant or a given. In a sense, we are almost trying to fit in bits of legislation and policy on the basis of something that is clearly quite problematic for a lot of people, because the levels are so low.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q Would the proposed single private sector ombudsman provide sufficient and efficient redress for renters?

Dr Rugg:

It is good that renters will have the option of going somewhere to get neutral advice. The best advice that you can give to the sector is advice that supports tenancies—that does not support the landlord or the tenant, but seeks to support sustainable tenancies. At the moment, that advice is just not available, coming into the market; you can either, as a landlord, ask for landlord-based advice, or you can go to one of the lobby groups and ask for that kind of advice. Getting some advice that sits in the middle, where everybody can trust that the advice is neutral and accurate, is very important.

Professor Gibb:

I completely agree.

Photo of Yvonne Fovargue Yvonne Fovargue Llafur, Makerfield

If there are no further questions, I would like to thank both the witnesses very much for their evidence.