Clause 5 - Statutory procedure for increases of rent

Renters (Reform) Bill – in a Public Bill Committee am 12:30 pm ar 23 Tachwedd 2023.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown 12:30, 23 Tachwedd 2023

I beg to move amendment 200, in clause 5, page 5, line 17, at end insert—

“(4F) It shall be an implied term of every assured tenancy to which this section applies that percentage increase between the existing rent and any new rent specified in a notice given under subsection (2) shall not exceed whichever is the lesser of—

(a) the percentage increase in the rate of inflation (calculated by reference to the Consumer Prices Index) since the date on which the existing rent took effect; or

(b) the percentage increase in median wages in the local authority area in which the dwelling-house is situated, calculated over a three-year period ending on the date on which the notice was served.”

This amendment specifies that the annual increase in rent requested by a landlord may not exceed the lesser of either the Consumer Prices Index or wage growth in the relevant local authority area.

Photo of Ian Paisley Jnr Ian Paisley Jnr Shadow DUP Spokesperson (Communities and Local Government), Shadow DUP Spokesperson (Culture, Media and Sport)

With this it will be convenient to discuss the following:

Amendment 159, in clause 5, page 6, line 23, at end insert—

(1) Any increased rent which is paid otherwise than in accordance with section 13 or section 13A is recoverable from the landlord by the tenant as a debt claim in the courts.

(2) The Secretary of State may, by regulations, provide for such claims to be recoverable by proceedings in the First-Tier Tribunal, rather than the courts.”

This amendment would ensure that in instances where a private landlord increases the rent without issuing a section 13 or section 13A notice the tenant can seek to recover costs through a debt claim in the court. It also provides the government with the power by regulation for such claims to be recoverable by tribunal.

Clause stand part.

Amendment 201, in clause 6, page 7, line 3, leave out paragraphs (b), (c) and (d) and insert—

“(b) leave out from ‘shall determine the rent’ to end of sub-section and insert ‘in accordance with subsection 13(4F)’.”

This amendment would require a tribunal to determine an appropriate rent in accordance with proposed subsection 13(4F).

Amendment 197, in clause 6, page 7, line 13, at end insert—

“(3A) After subsection (1) insert—

‘(1A) In making a determination under this section, the appropriate tribunal must have regard to the original rent agreed with the tenant and subsequent changes in—

(a) Local Housing Allowance;

(b) the average rent within the broad rental market area as assessed by the Valuation Office Agency or as listed in the Property Portal;

(c) the consumer price index; and

(d) median income growth.’”

This amendment would allow the tribunal to take into account not only new rents in the market but current rents in existing tenancies, changes in wages, inflation, and local housing allowance when making a determination.

Amendment 198, in clause 6, page 7, line 25, at end insert—

“(5A) After subsection (5) insert—

‘(5A) Where a notice under section 13(2) has been referred to the appropriate tribunal, then, unless the landlord and the tenant otherwise agree, the rent determined by the appropriate tribunal (subject, in a case where subsection (5) applies, to the addition of the appropriate amount in respect of rates) shall be the same or below the original rent and the increase in consumer price index or medium income growth, whichever is lower over the period since the tenancy started.’”

This amendment would limit tribunals to an upper cap of CPI or medium income growth, whichever is lower, for rent increases.

Amendment 199, in clause 6, page 7, line 25, at end insert—

“(5A) After subsection (5) insert—

‘(5A) Where a notice under section 13(2) has been referred to the appropriate tribunal, then, unless the landlord and the tenant otherwise agree, the rent determined by the appropriate tribunal (subject, in a case where subsection (5) applies, to the addition of the appropriate amount in respect of rates) shall be set using the statutory guidance on in-tenancy rent increases laid before Parliament by the Secretary of State.’”

Amendment 199 and NC66 would require the Secretary of State to issue guidance to tribunals on the determination of in-tenancy rent increases, and require tribunals to take such guidance into account when making determinations.

Amendment 160, in clause 6, page 7, line 27, at end insert—

“(7A) After subsection (8) insert—

‘(8A) Where a notice under section 13(2) has been referred to the appropriate tribunal then, unless the landlord and the tenant otherwise agree, the rent determined by the appropriate tribunal (subject, in a case where subsection (5) above applies, to the addition of the appropriate amount in respect of rates) shall be the same or below the rent specified in the section 13 notice and the rent as determined by the tribunal shall only become payable once the decision of the tribunal has become final.

(8B) A decision becomes final only on the latest of—

(a) the determination of any appeal;

(b) if earlier, on the expiry of the time for bringing a subsequent appeal (if any); or

(c) by its being abandoned or otherwise ceasing to have effect.’”

This amendment would ensure that where a rent assessment is carried out by a tribunal, the rent subsequently determined by that tribunal cannot be higher than that originally requested by a landlord in a section 13 notice.

Amendment 190, in clause 6, page 7, line 38, at end insert—

“(c) no more than the rent proposed by the landlord in the notice served on the tenant under section 13 of the 1988 Act.”

This amendment would mean that the rent payable after a tribunal determination can be no higher than the rent initially proposed by the landlord in the notice served on the tenant.

Amendment 161, in clause 6, page 8, line 20, at end insert

“which must be no earlier than two months following the date of determination”.

This amendment would ensure that in cases of undue hardship tenants would have a minimum of two months from the date of determination before a new rent became payable.

Amendment 162, in clause 6, page 8, line 21, leave out subsection (4) and insert—

“(4) A date specified under subsection (3)(b) must be no earlier than the date on which the determination becomes final, with a decision only becoming final on the latest of—

(a) the determination of any appeal;

(b) if earlier, on the expiry of the time for bringing a subsequent appeal (if any); or

(c) by its being abandoned or otherwise ceasing to have effect.”

This amendment would remove the requirement for a date determined by a court for rent to become payable in cases of undue hardship to not be later than the date of the determination.

Clause 6 stand part.

New clause 58—Requirement to state the amount of rent when advertising residential premises—

“(1) A landlord must not advertise or otherwise offer a tenancy of residential premises unless the amount of rent is stated in the advertisement or offer.

(2) A letting agent acting on behalf of a landlord must not advertise or otherwise offer a tenancy of residential premises unless the amount of rent is stated in the advertisement or offer.”

This new clause would require landlords or persons acting on their behalf to state the proposed rent payable in the advertisement for the premises.

New clause 59—Not inviting or encouraging bids for rent—

“(1) A landlord must not invite or encourage a prospective tenant or any other person to offer to pay an amount of rent for residential premises that exceeds the amount of rent stated as part of the advertisement or offer of the premises as required by section [

(2) A letting agent acting on behalf of a landlord must not invite or encourage a prospective tenant or any other person to offer to pay an amount of rent for residential premises that exceeds the amount of rent stated as part of the advertisement or offer of the premises as required by section [

(3) Subsection (1) does not prohibit a prospective tenant or other person from offering to pay an amount that exceeds the stated amount of rent.”

This new clause would prevent landlords or persons acting on their behalf from inviting or encouraging bids that exceed the amount stated as part of the advertisement or offer of the premises.

New clause 62—Limit on amount of rent that a residential landlord can request in advance—

“In Schedule 1 to the Tenant Fees Act 2019, after paragraph 1(8) insert—

‘(9) Where rent is payable in advance, the maximum that may be charged is equivalent to the amount specified in paragraph 2(3).’”

This new clause would ensure that the maximum amount of rent that could be lawfully requested by a residential landlord in advance of a tenancy commencing would be 5 weeks’ rent for tenancies of less than £50,000 per annum and to 6 weeks’ rent for tenancies over £50,000 per annum.

New clause 66—Rent increase regulations—

“The Secretary of State must lay before Parliament, from time to time, guidance for tribunals on the determination of in-tenancy rent increases under a section 13(2) notice, such guidance shall include reference to Local Housing Allowance, average rents as assessed by the Valuation Office Agency or published on the Property Portal, consumer price index and median income growth.”

Amendment 199 and NC66 would require the Secretary of State to issue guidance to tribunals on the determination of in-tenancy rent increases, and require tribunals to take such guidance into account when making determinations.

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

I will speak to amendments 197 to 201 and new clause 66. I also support the other amendments put forward by my Front-Bench colleagues: amendments 160, 161 and so on.

The reason for these amendments is generally to probe the Government. The intention of the Bill is to stop landlords evicting people with no reason. It might well be through no fault of the tenant, or it might be that the landlord has genuine reasons, but it is still through no fault of the tenant. The danger is that without proper safeguards on economic evictions, landlords will be able to evict through the back door by whipping up the rent. The explanatory note from the Department for Levelling Up, Housing and Communities acknowledges the need to prevent back-door evictions, and that is why there are clauses to strengthen some of the rent tribunals’ work. We all welcome that.

However, there are a few particular problems with the current definitions of the rent tribunal. The Secretary of State himself says that 20% and 30% rent increases are “unacceptable”. However, the reality is that those kinds of rent increases could, in certain markets, still be acceptable in the rent tribunal, primarily because the rent tribunal looks at current market rents. Off the top of my head, I believe that the wording around current market rent refers to the rent that the landlord would be able to get if they were to put a property on the market, or in that phraseology. The problem with that is fewfold.

First, current market rent is based on the market rent of newly let properties, not of properties that have a sitting tenant. Quite understandably, if there is a sitting tenant, a landlord may not require as high a rent. They have not just had to deep-clean the property. Most good landlords—we all accept that they are the majority—make repairs to a house between tenancies and make sure it is back up to speed after general wear and tear. For a sitting tenant, those changes due to wear and tear will probably not be made, or they will have to make some of those improvements themselves. Asking the tenant to pay the general market rent is not a fair allocation of what the rent would be.

Tenants might have moved in and started paying a rent that was accessible on local housing allowance. Changes might then have happened around the area, or the area might have been gentrified, but the landlord may not have made any changes themselves—they have not invested anything more in the property. Suddenly, the rents go up and make that house unaffordable on local housing allowance. That does not seem fair to me either. The landlord has not invested. Clearly if the landlord has invested, there could be increases in rent. Under certain circumstances, we all think that rent needs to go up; it could not be fixed at one number forever.

I have therefore tabled a number of amendments. Amendments 200 and 201 state that the landlord may increase rents only according to the consumer prices index or median wages in the local area. This is effectively the clause that Grainger puts on its new properties. Grainger said in evidence that it does this routinely. It is not something that will come as a horrible surprise to lots of landlords, because many of the good ones—many of the big institutions—do it already.

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

With respect to the hon. Member’s point, the Committee has heard other evidence that Grainger does not do that. Grainger did it specifically in relation to their fixed-term rents. Since we are abolishing fixed terms, I do not think his point applies.

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

Grainger currently does it on its fixed-term rents, and almost all new rents are fixed-term rents for a period of time. The Minister is right: we do not know what Grainger will do in future. However, Grainger did not say that it would abolish them for sure in future either. I would expect Grainger to continue some sort of mechanism where there is that discussion. That is one suggestion I put to the Committee, and I would like to have the Minister’s thoughts on it.

Another of my suggestions, in amendment 197, is that rather than restricting what a landlord can put forward, they can propose any rent that they wish, as they can at the moment; however, if the tenant genuinely feels that it is unacceptable, they should be able to go to the tribunal. All I am doing in amendment 197 is allowing the tribunal to consider a number of different factors, not just what the current new market rents are. Because we will have this fantastic property portal, which will eventually list all rents, and to which the courts will have access, the courts should consider what the current rents across the whole market are in a local area.

I am allowing the courts to consider what the local housing allowance increases might be. If a house was marketed at local housing allowance, and it was given particularly to people in receipt of universal credit or housing benefits, the courts could consider what a fair increase in local housing allowance would be for that tenant and property, bearing in mind that the landlord was happy for that property to be rented at local housing allowance initially.

Photo of Helen Morgan Helen Morgan Liberal Democrat Spokesperson (Levelling up, Housing and Communities), Liberal Democrat Spokesperson (Local Government) 12:45, 23 Tachwedd 2023

I am interested in what the hon. Gentleman suggests, and I am broadly supportive of it. If we get this right, we should see a stable private rented sector where rents do not go up very much each year; they might fall in some local areas, depending on local circumstances. Does he envisage allowing rents to drop, or does he envisage them always going up by some kind of consumer price inflation-linked level?

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

That is an interesting question. In amendments 200 and 201, they would be linked to CPI or median local rents. Where that has been introduced in Belgium, two-thirds of landlords declined to increase rent at the rate of inflation, so it has not particularly caused a constant push to always increase.

In amendment 197, I am talking about a negotiation between the tenant and the landlord. If they do not agree, the tribunal can consider not just what the current market rate would be if the property were to be put on the market brand-new, but a number of other indicators, and come to a conclusion. It might well be that if market rents have decreased in an area, the tribunal would be able to come to that consideration; I am not forcing the tribunal, but allowing it to come to that consideration. Some of these amendments allow more flexibility, and I always think that flexibility in these issues is probably right. Amendment 197 also allows the tribunal to consider CPI and median income growth.

However, amendment 198 says that the tribunal might consider all those things, but even then it can never increase rent above CPI or median wages. It might well be that the tribunal wants it to go down, and it might find a different place, but there is a ceiling. Amendment 197 allows the tribunal to consider; amendment 198 puts a cap on what the tribunal can impose. Amendment 199 and new clause 66 give the Secretary of State the power, from time to time, to lay before Parliament statutory guidance or a statement outlining the consideration that courts should take into account in their rent deliberations the maximum amount by which they can increase it. I think that is the most flexible. It allows the Secretary of State, from time to time, to look at the wider market and be able to say, “It needs to be locally driven,” or, “It needs to be national indicator-driven.”

As I have already discussed, the market is changing, and there is not just one market throughout the UK. We would not necessarily have to find a single indicator that would work for everyone. We have development areas, areas where house prices have slumped and areas that are going through gentrification. We have properties that are increasing in value because of infrastructure inputs. If High Speed 2 was ever to happen, property prices might increase in parts of the north. If Labour gets in, perhaps we will see some actual improvements in rail and other infrastructure in the north of England, and that will help the market. Of course, we have had many promises that have never been delivered so far.

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

I digress, but I do believe that all of Britain will have a better deal under Labour—although, of course, I would say that.

Amendment 199 would give the Secretary of State the flexibility to work out what the local markets are, and they could even devolve that to local or regional bodies. It would give them the ability to say, “I’m laying down a statement to say that there is no restriction of the total amount whatever,” or they could say, “Certain areas have restrictions, and certain areas have none.” The Secretary of State should consider introducing the ability to do that, given that certain areas are more problematic than others, and also the ability to look at indicators that might be relevant from time to time. At the moment, the courts cannot consider Secretary of State guidance on this matter because they are bound to consider only one thing. All I am saying is that they should consider market rents and the Secretary of State’s guidance.

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

The hon. Gentleman suggested that the Secretary of State could devolve that decision. The Mayor of London has asked for powers to introduce rent controls in London. Does the hon. Gentleman agree with the Mayor of London?

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

We are talking about in-tenancy rent controls, and I think there are cases where they should be devolved and cases where they should be decided by the Government. Different Governments will take different approaches, depending on the need of the local area. Out-of-tenancy rent controls are a different matter and are not covered by the Bill. I will not be distracted, because I am sure you would pull me up for going into a different area, Mr Paisley.

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

I also support some of the other important amendments in the group. Amendment 160, from my hon. Friend the Member for Greenwich and Woolwich, is about ensuring that rents cannot be above the initial section 13. What I mean by that—I am sure my hon. Friend will discuss it further—is that if the landlord says, “I want a rent of x,” and the tenant says, “That’s unreasonable,” and takes it to the tribunal, the tribunal cannot issue a higher rent than what the landlord was asking. We heard a lot of evidence about how that would have a chilling effect and prevent people from going to the rent tribunal.

The whole premise of the Bill—even the Government acknowledge this—is that what prevents economic evictions is the threat of going to the court or tribunal. Nobody wants to go to the rent tribunal, so landlords propose decent rents; there is self-control and self-restraint. If there is no upper cap on what the rent tribunal can decide, a landlord who is happy to accept a lower amount might end up dancing out of the court because they were suddenly offered more than they asked for. That does not seem fair to me; that does not seem fair in any form of the market. That is important.

Of course, if we give courts the ability to consider Secretary of State guidance, that could be included in the Secretary of State guidelines, but I assume the Minister will reject that proposal, so it is important that there is a backstop. Amendment 160 is important for that backstop.

Then there are some amendments about undue hardship. I support them, and other hon. Members will talk about them. It is important that the Government give some indication of how they think tribunals should interpret these measures. I also say that because it is in nobody’s interest for every single rent to be challenged in the tribunal in the first few years of the new system. That will not help the tribunals, renters or landlords. Landlords need guidelines. If landlords are just told, “Punt a rent and find out what happens in tribunal,” we are letting down landlords as well. Providing some clearer guidelines, either in the Bill or through the Secretary of State, would reassure landlords that when they want to raise their tenants’ rents reasonably, they can do so.

Finally, I have heard some concern externally that if we limit rent increases, a landlord who forgoes a rent increase over one or two years will be unable to match the rent up later. All my amendments refer to when the tenancy started, so the court and tribunal could consider what the rent increases have been throughout that tenancy. Of course, sometimes a landlord will say, “I will not increase your rent for a few years, because I do not need to, but when I do get round to doing it, I will increase it to what it would have been had I done it annually.” That is fair enough, and my amendment allows for it. No landlord would be disadvantaged by the amendment; it would provide security for landlords, security for tenants and flexibility for the tribunals.

If there is any movement from the Government on any of my very reasonable amendments, I would love to hear about it.

Ordered, That the debate be now adjourned.—(Mr Mohindra.)

Adjourned till this day at Two o’clock.