Ben Beadle and Theresa Wallace gave evidence.

We are now sitting in public and will move on to declarations of interest. I am a vice-president of the Local Government Association.

I declare an interest as a private landlord.

I am a landlord but only of registered social housing.

I am a member of the Acorn community union, which is giving evidence today.

I am a vice-president of the Local Government Association and my husband works for an organisation that has funded the Renters’ Reform Coalition.

I used to work at Shelter, which is giving evidence today.

My husband works for Shelter, which is giving evidence today.

I welcome both our witnesses to our session to answer questions following their evidence to the Committee on the Renters’ Rights Bill. Please introduce yourself briefly. Members will then ask questions about your evidence.

Ben Beadle:

I am Ben Beadle, the chief executive of the National Residential Landlords Association. We have 110,000 members, who provide for nearly a million homes in the private rented sector.

Theresa Wallace:

My name is Theresa Wallace and I am chair of the Lettings Industry Council. I think it is the only group that is made up of stakeholders across the property redress scheme, including tenant groups, landlord groups, professional bodies, government bodies and agents large and small.

Q Welcome, and thank you very much for attending today. To kick proceedings off, I am interested in hearing your first impressions of the Bill in respect of whether you think there should be a balance between landlords and tenants and whether the current drafting gets that balance right. I would be grateful if you could identify any differences in opinion between professional landlords and those who are sometimes described as accidental landlords—amateur landlords with one or two buy-to-let properties, perhaps for a pension.

Theresa Wallace:

I think the Bill has the best intentions, and we support a lot of its changes. However, I believe that as it is currently written there will be unintended consequences, one of which would be more homelessness. It needs some changes. We know that section 21 is going, but we have to accept that it will not solve the issues in the PRS. We have—the English housing survey has quoted this—more than one million tenants in the PRS in receipt of benefit for housing. The majority of those should really be in social housing. If we had those social homes, we would not have the current supply/demand pressures and rent pressures, and we would not have properties lower down in the market that are unfit for purpose and damp and that should not be there in the first place.

One of our problems is that a lot of the Bill will help tenants—renters—once they are in a property, but we have to stop those properties that are not fit for purpose being rented in the first place. I heard a story last week about a lady who is renting further up the country. She is paying £500 a month for a two-bedroom cottage. On the market, it would be worth £750 a month, so she is saving £250. Her property has damp and mould, which she will not be reporting to anybody because that is all she can afford to pay and she has nowhere else to go.

Q Can I bring you back to your opening statement? You said that there were likely unintended consequences from the Bill in its current form, and that one of those unintended consequences would be an increase in homelessness. Could you expand on why you said that?

Theresa Wallace:

There are various reasons. We need the private landlord at the moment, no matter what his property is like—a lot of them are in very good condition. Private landlords are very scared about this Bill and a lot of them are exiting. I know some of you might think that there are other places those properties can go, but we need them in the PRS—the tenants need them. We want to keep those landlords. We have institutional investment, but that is a very small percentage—I think it is 2% or 3%—for build-to-rent. Unfortunately, the build-to-rent model does not work financially in the places we need those properties, because of the way their financial model works and margins.

Q I am butting in again—I apologise. You say that private landlords are exiting the market already; what evidence do you have to support that statement?

Theresa Wallace:

There is evidence out there. With my agent’s hat on, I can say that we have evidence in the amount of landlords we have lost and the number of people looking at properties compared with before. I gather we have a 12% increase in properties on the market now, which is the highest since 2014, per agent.

Q What impact, if any, is that having on rental asks? If supply is being reduced, what is happening to demand?

Theresa Wallace:

Demand is up and supply is down, so that obviously does have an effect. It is not just an effect on rent: it is also an effect on the tenants who can secure the properties in the first place. The Bill is there help the people who are struggling, and in some places those are the people who will be penalised.

Q Ben, you have been patient. Perhaps you could do your best to answer the same question.

Ben Beadle:

With pleasure. We are largely supportive of many features in the Bill. There is a lot to be welcomed, and the Minister should take great credit for bringing in these reforms so quickly. One thing the industry has suffered with is the hokey-cokey politics of when we will see the abolition of section 21. Our position has been very clear: we do not oppose the abolition of section 21, providing the alternative is workable and fair, but there are two elements that do not quite strike the balance.

The first element is court reform and the need for landlords to have confidence in it. I appreciate that others might have viewed this as a delaying tactic in the past, but the reality is that we are waiting seven months on average to get possession of our homes, and that is for a fast-track situation with almost no proof needed. When we move to a section 8 ground, that will require more resource and more scrutiny, quite rightly, but without investment in the court system we will not deliver what either renters or landlords need.

In a survey of over 1,400 of our members, 60% of landlords said they were less confident or not at all confident that they will remain a landlord without suitable court reform. That declines to 37% if suitable court reforms are enacted. Our argument has always been that this is about confidence, striking the balance and giving support to responsible landlords, as well as delivering for renters.

The other area we have seen is that landlords will be provided with robust grounds for repossession; I may have missed them, but I do not see the doubling of notice for serious rent arrears or increasing the rent arrears threshold from two to three months as sending the right message or as fair and proportionate. Those tenancies will largely fail, whether it is two months, three months or six months, quite frankly.

What we want to do is avoid rent arrears building in the first place, so we are supportive of something like a pre-action protocol where responsible landlords can help to signpost tenants to manage their arrears. We did that during the pandemic. I worry that not addressing that point will send the wrong message. We have an average of 21 people chasing every home, so whatever nip and tuck we make around here, whether landlords are leaving or not, that is only going to worsen as confidence decreases.

Q You have mentioned confidence twice. In anticipation of the Bill, and now that it has been published, are you able to say what has happened to confidence in the real market for both accidental and commercial landlords?

Ben Beadle:

If you consider yourself an accidental amateur landlord, that is arguably part of the problem —I do not think we can have amateur landlords. Having a lettings business is a business. Whether you have one or 10 properties, you need to do it properly, and we try to support all our members with that.

We have been tracking sentiment in the sector for the last 12 years, across our membership, and it is at a record low. Only about 10% of our members are looking at actively investing in the sector, and about a third are looking at disposing of one of their properties or exiting the sector completely. I appreciate that that is sentiment rather than actuals, but we also have to point to the fact that we are seeing such a significant number of section 21s being used where a landlord is selling, and that still has not percolated through to some of the statistics. An average of 21 people applying for a rental property is not going to get better.

Thank you both very much.

Q I have three questions, starting with court improvements. There is a shared understanding between the sector and the Government that ensuring that the Courts and Tribunals Service is prepared for the implementation of the new tenancy regime is essential. You all know that we took issue with the previous Government’s legislation, which made the tenancy regime hostage to unspecified court reforms.

You mentioned investment, and I wanted to press you on precisely the type of improvements you want to see. You know that, together with colleagues in the Ministry of Justice, we are already taking forward improvements towards digitising the court possession process. What are the metrics you want to see in that process as improvements? On the understanding that —I think you will accept this—not every section 21 notice will read across to a section 8, so there will potentially be a bit of an increase, what do we need to see on the section 8 side and the tribunal side to ensure that the system is fit for purpose at the point that we switch it on?

Ben Beadle:

I have a couple of things to say on this, Minister. I agree that court reform has been almost like the Colonel’s secret recipe—nobody quite knows what is in it or what it looks like. It is incumbent on us to define what “the courts are ready” means in practice. For us, there are two or three areas that could be improved. First, we are getting many reports of applications that are made to the court actually running out of time because they have not been processed in time. You have the admin part of the sausage factory at the beginning, because it is not so much about the number of judges. I sit as a magistrate and I often sit around waiting for cases to come to me and to be input into the new common platform. There are delays built into the administrative process that cause frustration.

The other issue we have seen is the wait for a bailiff. Once you have patiently waited for your court hearing date and you have possession, that will be what it will be, but waiting for a bailiff can take months in some areas. Sometimes there are really poor excuses—earlier this year, we saw the stab-proof vests not being available. If it is a high-risk area, you need somebody waiting out in the car and somebody on the door. London is predominantly a high-risk area, which is why we see such slow eviction timescales.

Personally, we want to prevent evictions. Landlords do not go around evicting tenants willy-nilly, but when they have a legitimate case, we do expect it to be dealt with expediently. To me, court reform looks like sifting the cases more appropriately and more speedily; digitising that process so you see the ping and the pong of the evidence going backwards and forwards; and, when you get possession, an automatic link to the bailiff, rather than having to reapply. Those are three tangible things. Ultimately, though, it is seven months at the moment, and it needs to be lower.

Your point about sifting is well made. We want to see only cases that require a judgment coming to court.

Ben Beadle:

Indeed.

Q What do you think we should look at for options around improved alternative dispute resolution mechanisms?

Ben Beadle:

One of the things with section 21 is that you have an accelerated process because it is a matter of fact—if you have served all your relevant documents, it is “Tick, tick, tick. Away you go.” I think there is some merit in using that system for undisputed or very hard cases of mandatory grounds, such as where you have significant rent arrears and, although the landlord has tried, there is no chance of recovering that tenancy—hopefully the landlord has followed our pre-action protocol to signpost tenants where they need to go. There are some elements of the system that could be reused.

The other part is away from the court system and into the first-tier tribunal. We have had extensive discussions with the first-tier tribunal. Not many people challenge their rents at the moment; I think we all accept that. We want tenants to be able to challenge their rent, particularly if it is unfair or subject to a significant increase. But the way the Bill is constructed means there is no barrier, or no disincentive, to challenging your rent, and I do not think it quite strikes the balance. First, the tribunal can only award or downgrade the rent so, as a tenant, I have nothing to lose. Secondly, with the way the implementation is being put across, you run the risk of a real deluge on a system that is, frankly, antiquated—you have to fill out a Word document and email it to all parties.

Q Would you accept the corresponding argument from the other side that there are already very low numbers of tenants taking their cases to tribunal, and that if each of those tenants is looking at potentially one, two or three months’ worth of arrears if they challenge a rent increase and fail, that will act as a powerful disincentive against anyone going to tribunal at all?

Ben Beadle:

But that rent will not be applied until the date of the hearing, as I understand it, so although I understand the counter-argument, Minister, the point is that you could actually challenge a rent increase. You serve your two months’ notice; you challenge it; you wait for the tribunal to deal with it; you have your hearing cleared; and the landlord either gets it or the amount gets lowered, but that money is then not backdated.

Q That is useful. So you accept the “not backdating” point. I thought you took issue with the backdating and wanted it at the point of—

Ben Beadle:

No, no—well, I take issue with it, in that it is not fair and it is not proportionate in the circumstances, and it will do nothing to help on court reform. That is why we have set out a managed implementation for these things. I totally get your point that it was held hostage previously, but there are some really fundamental points around the court system being on its knees, and I think there is a way of implementing regulations so that that is mitigated. The first-tier tribunal is a classic example of where you could make some nips and tucks to what is set out, to protect the first-tier tribunal from a steep rise in cases because it will not be able to cope.

Q Understood. By the way, there is no dispute on the Government side of the Committee as to the fact that the court system is on its knees after the past 14 years.

I have one last general question, which maybe you could come in on, Theresa. There are broad framework powers in the Bill for both the database and the ombudsman. The database will be critical for landlords in understanding their obligations and demonstrating compliance, and the ombudsman will potentially provide routes to landlord-initiated mediation. As we come to flesh out the detail in secondary legislation, what do you want the database and the ombudsman to do? What is the most critical thing, from a landlord point of view?

Theresa Wallace:

I am very supportive of both, and I think we definitely need both. My fear is that the database could end up just being a landlord database, with the landlord’s name, the property details and the address, so that the local authorities know where those landlords are. That is part of it—I completely accept that—but I think that we have a huge opportunity with this landlord database, and so much could be done with it. We really could reach a situation where we could stop properties that are not fit for purpose being let, if the database is built with that end in mind and we can digitally upload certificates. I think that we absolutely need central registers for gas and electric, and we need one standard certificate for each so that they can easily be read digitally to see whether they are in date, whether there are any code 1s and all sorts of things. I think that that would be amazing, but I actually think that we should go a step further.

A long time ago, the Lettings Industry Council came up with a model of a property MOT. Think about how you MOT your car, and it is checked in the background that you have got your tax and your insurance. We could do that with properties. We could have very easy and simple pre-let checks, so that a property is viewed visually. You have energy performance certificate providers that go and do their EPC checks, and you could easily have online or face-to-face training for providers to do a visual check so that you can see if you have damp and mould, slips and trips or other things. I think that it could be done very cost-effectively, and I think that the portal would pay for itself as well as providing local authorities with some income for enforcement. Enforcement is something that we absolutely need, and I know there is not the resource for it.

Thank you.

Three other Members are indicating that they want to come in. If we bear that in mind, with the time, we can get everybody in.

Q My question is a really simple one. Do you think that rents in the private rented sector are currently fair and affordable?

Theresa Wallace:

It is a good question. I think that the demand is what has the effect on rents. I really believe that if we had those million social homes—I know we cannot get them overnight, but we should have a long-term strategy working towards that—you would have no pressures on rents because you would not have this imbalance in the demand and the supply, so rents would not be where they are.

Ben Beadle:

Yes is the straightforward answer, for me. The rents that we have seen increased by 8.4% in the year to September. That is high by any measure, and I think, as Theresa says, it is entirely down to a lack of social housing and a lack of new stock coming to the market. It cannot be normal that you get 21 people applying to rent a property. I know the Bill deals with advance rent. As a landlord, I never ask for advance rent, but I get people saying, “I will give you 12 months’ rent up front,” before they have even seen the property. I think this mad market is not normal, and obviously it will not be resolved by this Bill. I say that because—though there are a lot of really good things in it, such as the database and the ombudsman, which we are very supportive of—it tinkers around the edges of the fundamental issue here, which is supply.

I know the Government will address social housing and right to buy, and all those things, and they are absolutely right to do so. At the same time, we do need a vibrant private rented sector. We need that vibrant private rented sector now while we work out what to do with social homes, because there is a massive lead time. What I see at the moment is everybody harking back to the wonders of the ’70s, of social housing and council housing, and looking at that as a really great thing, but we see horrible stories of local authority properties in serious disrepair. We have lower satisfaction in the social sector than we do in the private rented sector. At the same time, we are focusing on making life really difficult for responsible landlords who have good quality accommodation to bring to market. We do not want to dissuade those people from bringing it to the market; we want to encourage them. I think the sequence of this needs to be that the Bill must deliver for responsible landlords and renters, and give them security, but it must also address some fundamental issues about supply.

Q Theresa, I was struck by your remarks about rising homelessness. You will be aware from the public P1E data about causes of homelessness that the end of a tenancy is the leading cause of homelessness at the moment. I would be interested to know more about why you think any changes to that would actually increase homelessness.

Theresa Wallace:

At the moment, a very small percentage of landlords actually terminate tenancies and serve section 21 notices. The majority of those landlords are selling, want to move back in or have rent arrears. It all comes down to our lack of supply, and losing more landlords from the sector. I think we will lose more landlords, and we are losing them at the moment—not just because of this Bill, I have to stress; they are leaving for all sorts of reasons. It might be retirement, or it might be the high interest rates that are affecting them. I do not think it is just the Bill, but our biggest issue is landlords leaving the sector when we do not have enough properties for renters.

Q Just so I understand, your argument is that there will be a reduction in supply, and that will cause more homelessness.

Theresa Wallace:

I think there is that, and there is also the matter of introducing this Bill on one date. I think that will cause more homelessness because landlords are panicking, so they will serve their section 21s while they can, to get possession of their properties, and they will come out of the market.

If, rather like with the Tenant Fees Act 2019, all new tenancies had to comply and existing tenancies had 12 months to do so, or until the end of their fixed term—that might be sooner—when the Bill came in and landlords saw it working in practice, they might see that things were not as bad as they had feared. Although I understand the reasons behind not wanting two levels, I think that doing it all on one day will have a knock-on effect for tenants. There are tenants who have long-term rents for two or three years, but once this Bill comes in, if they have already had their 12 months, they could suddenly find they have four months’ notice coming their way because their landlord has decided they want to sell or move back in. I do not think we are giving tenants the protection that they thought they had when they secured their tenancy.

Q You said the Bill will increase or reduce confidence, and you talked about the courts. You have not said much about the change to periodic tenancies. In your evidence, you talk about keeping fixed-term tenancies where tenant and landlord agree. What would stop landlords putting every tenancy on a fixed term, and what would be the practical difference of still being able to give two months’ notice yet being in a fixed-term tenancy? How would that be practically different?

Theresa Wallace:

Often a tenant has put their children into school, and they do not want to have to move within two, three or four years. It might be a fixed-term job contract for two years, or it might be caring for elderly parents—whatever the reason, it is often the tenants that are asking us for fixed terms. It is not us saying, “You have got to take a fixed term.” If they want a fixed term, we understand the need for flexibility, because circumstances can change, so let them still have their two months’ notice. We would prefer to see minimum terms of four months, but that is not for landlords; that is to stop properties going over to the short-let sector.

I spoke to an agent last year who does short lets as part of their business model, and the average short let was 91 days. I can see we are going to lose properties to short lets; they are going to be paying for long-term rentals at short-let prices. I see that as being an issue.

If a landlord is happy to commit to two years and say, “Look, I don’t want to sell and I don’t want to move back in; I can guarantee you two years,” but the tenant still has their notice period for their flexibility, I do not understand why that is not allowed, because that is in the tenant’s best interest. Now, the landlord can say, “I am not going to sell my property. I don’t need to move back into it. You can have two years on a rolling contract,” and he then might change his mind nine months down the line, and there is nothing to stop that.

Ben Beadle:

I wonder whether I can comment from a student perspective, which has not been picked up by the Committee yet. One of the areas that we are very worried about is the cyclical nature of the student housing market. I operate in Uxbridge near Brunel University. As Mr Simmonds well knows, tenants coming in want to have the security that the property is going to be available.

Where I do not think the Bill quite strikes the right balance is that I think it needs to maintain the moratorium period that was brought in under the previous Bill, because that did three things. First, it protected set-up costs for landlords. It costs a lot of money to set up a tenancy. I do not think we are going to see a huge change in behaviour in terms of churn, but I am sure we will see some behaviour change where tenants can give two months’ notice. Having a minimum six-month period—four months plus two—is sensible for that. Secondly, it is sensible from the point of view of not turning the private rented sector into Airbnb via the back door. Nobody wants that. Thirdly, it goes some way to protect the student cycle, which is in the interests of both landlords and tenants.

For the very last question—a short question and short answer—I call David Simmonds.

Mr Beadle, reflecting on what you said in respect of the right of the tenant to challenge rent increases, it seems to me, as drafted, that the consequence is that a tenant will always challenge the rent increase, because the worst possible outcome is that they defer having to pay the higher rent until they get the hearingQ , and the best outcome is that there is no increase. Is that the view of your members?

Ben Beadle:

Yes. Straightforwardly, yes it is. Landlords will have to act differently under section 13. I would encourage landlords to speak with their tenants. No one wants to get a section 13 notice through their door as a surprise, so landlords do need to have some soft skills about them and have a sensible chat with their tenants, but yes is the straightforward answer.

We have to bring things to a close now as the next witnesses are due in. I thank both our witnesses very much for coming and giving evidence this morning.