I beg to move amendment 76, in clause 7, page 8, line 31, leave out from “determination” to the end of line 36 and insert—

“(4AA) Where the rent for a particular period of the tenancy is to be greater than the rent for the previous period by virtue of a notice, determination or agreement

(4AB) Any provision relating to an assured tenancy to which this section applies is of no effect so far as it provides—

(a) that the rent for a particular period of the tenancy must or may be greater than the rent for the previous period otherwise than by virtue of a notice, determination or agreement mentioned in subsection (4A), or

(b) that the rent for a particular period of the tenancy, where greater than the rent for the previous period by virtue of a notice, determination or agreement mentioned in subsection (4A), must or may be greater than the rent for the previous period increased by the Bank of England Base Rate.”

This amendment would mean that the maximum rent increase can only be an increase in line with the Bank of England Base Rate.

With this it will be convenient to discuss clause stand part.

At the beginning of today’s sitting, the Minister and the shadow Minister asked the Committee to bear with them, because it was their first time leading the Committee stage of a Bill in their respective positions. I ask the Committee to spare a thought for the hon. Member for Bristol Central and me, as it is our first time being elected an MP, our first time in a Committee and our first time dealing with this Bill. There are a number of amendments that we would introduced but which have not yet made it through to the amendment paper.

I want to start with the concept of market rent. The Liberal Democrats made it clear on Second Reading that we are supportive of the Bill as a whole, particularly abolishing no-fault evictions, for which we have long campaigned. It is an excellent move. We are also supportive of the provisions by which tenants can challenge rent increases on the basis that they would be going above market rent. However, there is a fundamental problem with the concept of market rents, which are currently calculated by virtue of looking at a range of advertisements on Zoopla or wherever and seeing what they say. That is not an accurate reflection of the actual rents that people are paying.

Landlords advertise the rent they would like to receive. Only a very small proportion of tenancies are subject to advertisement at any one time, so the vast majority of tenancies are not captured by adverts. Adverts only represent a tiny percentage of rents, which are quite often paid at less than the market rent advertised or desired by landlords. It will be a slightly different rent and may have been agreed for all sorts of different reasons.

Market rent is an artificially high indicator for judging what an appropriate rent should be. We would like to table amendments at a later stage in relation to the database to capture what actual rents are being paid and introduce that as the benchmark for an appropriate rent, rather than having the traditional understanding of market rent, which, as I say, is completely flawed.

In the same vein, the amendment would limit any in-tenancy increase in rent to a percentage of the Bank of the England base rate, which is different from inflation and other indicators that are often used. The rationale is that landlords face increasing costs from time to time, as we all do due to the economy, but the increase in costs that they face and want to pass on to tenants are generally more likely to be related to the cost of interest or their borrowing. Therefore, that is the appropriate measure for landlords to look to, and that should be considered appropriate for a rental increase. It is also often less than the much more volatile changes in market rent that are related to inflation.

Inflation is very unstable and can relate to grocery prices and so on as well as feeding into rent demands. Landlords might argue that inflation has gone up, so they need to put up their market rent. That is not really a credible argument. We would relate rent increases to a much more realistic, modest and accurate reflection of what landlords’ expenses are and use the Bank of England base rate as an appropriate limit on the amount of rent increase and any in-tenancy rent increase. That is the rationale behind this amendment.

The Bill will empower private rented sector tenants to challenge unreasonable rent increases. This will prevent unscrupulous landlords using rent increases to evict their tenants—a form of section 21 by the back door. Clause 7 amends section 13 of the Housing Act 1988 to achieve this. It provides that all rent increases for private landlords will take place via the existing section 13 process. That will ensure that tenants always have the right to challenge an unfair rent increase. Any rent increase outside this process, including rent review clauses, will be outlawed and invalid.

We will also give tenants longer to prepare for rent increases, with landlords having to provide two months’ notice to tenants. Landlords will still be able to raise rents in line with market rents once a year. These changes will not level the playing field for tenants if they are unable or do not feel confident to enforce their rights. That is why we are reforming how the tribunal will work. I will turn to that in clause 8.

Clause 7 exempts “relevant low-cost tenancies” from the rent-increase changes that the Bill is making. That means that current rent-increase provisions will be retained for social tenants who have an assured tenancy of social housing within the meaning of part 2 of the Housing and Regeneration Act 2008, where the landlord is a private registered provider of social housing.

As the hon. Member for Taunton and Wellington made clear, amendment 76 seeks to limit rent increases to no greater than the Bank of England base rate, and it retains provisions in the Bill that set out how rent increases can occur. I am grateful to the hon. Member for bringing this issue to the Commons. Several witnesses in evidence sessions also made the case for greater regulation of rents, and others contributed written evidence on these points. I would like to expand on the Government’s approach before turning to the detail of the amendment.

The debate around rent controls can quickly become complex regarding both the definition and the evidence available. What is agreed is that there is a broad spectrum of possible regulation, and different approaches have been tried around the world—and, indeed, within the UK. Perhaps the better question to ask is how we should regulate the private rented sector to achieve the best outcomes possible for tenants. That leads us to look at how the regulation of rents fits within the broader context of the entire system, including security of tenure, quality standards and better enforcement.

The Government have taken that wider approach by placing protections against excessive rent increases within an overarching set of reforms to the private rented sector. The interaction between security of tenure and rent regulation is therefore critical; if rents are too strictly controlled but evictions are too easy, tenants are left at the mercy of landlords’ whims, even if they pay the rent. If tenants have legal security from arbitrary eviction but there is no limit on rent increases, they can effectively be evicted by excessive economic rent hikes.

Many international comparisons can be cited. All should come with a health warning, but I think it is instructive to look at the experience of Sweden. The result of harder rent caps has seen the emergence of a huge, unregulated sub-letting market, which, in many ways, is the worst of all worlds, as it leaves the most vulnerable groups exposed to high costs and minimal protections.

The principle of some form of regulation of rents is already established in England. Rents for certain assured periodic tenancies are already subject to some form of regulation, as the tribunal system is there to prevent excessive increases, but as we heard in last week’s evidence sessions, it has been weakened to the point that it does not provide enough protection for tenants. That is why we have taken steps to strengthen the rent determination system and empower tenants.

In Scotland, we have seen over recent years the temporary introduction of stronger rent controls—rent freezes followed by rent caps. Anna Evans, who led the research into the Scottish experience, noted in her evidence last week that once rent freezes were introduced in Scotland, landlords were more inclined to increase rents when tenancies changed. Good landlords want stable and long tenancies but, when a new tenancy begins, landlords are strongly incentivised to set rents at, or close to, the cap, which may be at a higher level than they would have chosen in the absence of such regulation. We also heard, regarding new-build investment in the Scottish PRS, that there has been stagnation rather than growth over recent years.

As the hon. Member for Taunton and Wellington made clear, his amendment seeks to limit a rent increase to no greater than the Bank of England base rate, which is currently 5%. We believe that any attempt to use a simple metric on rent increases risks unintended consequences. Let us take an example: limiting rent increases to inflation might sound fair, but it would have resulted in rent rocketing when inflation spiked following the mini-Budget in 2022. I acknowledge that the hon. Member referred to the base rate, but others have argued for inflation-linked rent increases in the past, so my point is that there is always a price to be paid. That price can also be paid in the supply of new homes and the development of the build-to-rent sector, where we believe that these types of direct interventions discourage investment, limiting supply and leading to declining property standards.

Instead, our Bill works to strengthen tenants’ rights as a whole, with the ending of no-fault section 21 evictions being the key change. Our proposed changes— giving tenants the power to challenge excessive in-tenancy rent increases—are designed to fit with that increase in security of tenure. With every change to one part of this complex set of regulations, we must be mindful of the interactions with other parts, and the combined impacts on the system as whole. We believe that the Renters’ Rights Bill strikes the right balance. It introduces a series of powerful changes that will improve the PRS overall, including protections against unfair rent increases. We are confident that this will make a material difference to the lives of tenants. I therefore ask the hon. Gentleman to withdraw his amendment.

I thank the Minister for his response on those points. We would argue that the current metric for market rents is actually more closely linked to inflation, and more likely to be affected by inflation, than would be the Bank of England base rate, which is obviously a separate—

Order.

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.