Baroness Kennedy of Cradley:

Moved by Baroness Kennedy of Cradley

61: After Clause 20, insert the following new Clause— “Restriction on landlord’s ability to require tenant to provide guarantor(1) A relevant person must not, in any of the circumstances set out in subsection (3), require a person, as a condition of the grant of a relevant tenancy, to provide a guarantor in relation to the observance or performance of the tenant’s obligations under the tenancy.(2) For the purposes of this section, requiring a person to provide a guarantor includes accepting an offer by that person to provide a guarantor.(3) The circumstances are—(a) that the person has paid a tenancy deposit or has been assisted under a deposit scheme,(b) that the person is required to pay rent in advance of one month’s rent or more,(c) that on a reasonable assessment of their means the person’s income (including state benefits received and any other lawful source of income) is sufficient to enable them to pay the full rent due under the tenancy,(d) that arrangements will be made for housing benefit or the housing element of universal credit to be paid directly in respect of rent to a relevant person,(e) that the relevant person has entered into a contract of insurance under which they are insured against non-payment of rent, or(f) such other circumstances as may be prescribed by the Secretary of State.(4) In any other case where a relevant person lawfully requires a person, as a condition of the grant of a relevant tenancy, to provide a guarantor, the sum for which the guarantor may become liable under the relevant guarantee may not exceed a sum equal to six months’ rent.(5) In any case where a relevant person lawfully requires a person, as a condition of the grant of a relevant joint tenancy, to provide a guarantor, the sum claimed under the guarantee may not exceed such proportion of the loss as is attributable to the act or default of the individual tenant on whose behalf the guarantee was given; and if such proportion cannot be proved, may not exceed the sum obtained by dividing the total loss by the number of tenants.(6) In this section—“guarantor” is a person who enters into a guarantee in relation to a relevant tenancy; a “guarantee” is a contractual promise to be responsible for the performance of an obligation owed by the tenant to a relevant person under the tenancy if the tenant fails to perform the obligation;“deposit scheme” includes a scheme whereby a sum payable by way of deposit or a bond or guarantee is provided by a local authority, registered charity or voluntary organisation for the purpose of providing security to a landlord for the performance of a tenant’s obligations under a tenancy;“tenancy deposit” has the same meaning as in section 212(8) of the Housing Act 2004;“relevant person” has the meaning given by section 16M(1) of the 1988 Act.”Member's explanatory statementThis new clause would restrict the circumstances in which a landlord can request a guarantor.

My Lords, I declare my interest as a trustee of the Nationwide Foundation. Amendment 61 seeks to address a growing and deeply concerning issue in the private rented sector: the overuse, and often misuse, of guarantor requests. This amendment was expertly moved by my noble friend Lady Lister of Burtersett in Committee, and I thank her for her support today along with that of the noble Baroness, Lady Grender, and the right reverend Prelate the Bishop of Manchester—all of whom have given continued support to addressing the issue of the overuse of guarantors.

I am sure that noble Lords across the House will accept that landlords should retain ways to manage financial risk. However, the increasing use of guarantor requests is creating a new form of exclusion, particularly for vulnerable renters. This is what Amendment 61 is about: it is not about banning guarantors altogether but restoring proportionality and fairness in their use.

Guarantors have become a significant barrier to housing for many. Recent data from Generation Rent shows that almost 30% of renters who moved in 2023-24 were asked to provide a guarantor. A further survey by Shelter and YouGov showed that over 100,000 private renters per year are blocked from renting a home in the private rented sector due to a guarantor request they cannot fulfil.

Meanwhile, only 2.9% of landlords attempted to claim unpaid rent from a guarantor in the last two years, despite an estimated 1.85 million tenants being asked to provide one. Guarantors are therefore becoming commonplace, yet they are rarely needed in practice and often never pursued when payment issues arise. Noble Lords may be asking why. A YouGov survey by Shelter asked the same question. When questioned, 25% of private rental landlords said that they asked for a guarantor because “My letting agent advised me to”. Another 16% said, “I thought it was standard practice”, while 12% said, “I’d heard from other landlords it was a good idea”. Simply put, guarantors are over-requested, largely unused and, worst of all, increasingly serve as a proxy for discrimination.

When a tenant can show that they can afford the rent through a standard affordability assessment, the additional requirement of a guarantor becomes both unnecessary and unfair. It many cases, it adds to an already substantial financial burden, alongside the five-week deposit and the first month’s rent in advance. The evidence shows that this practice disproportionately affects people on lower incomes, those without access to financial support networks and groups already at greater risk of housing discrimination: women, single parents, renters with disabilities and black and Bangladeshi households are all significantly more likely to be asked for a guarantor. A renter with a disability is 20 % more likely to face such a request, and a black renter is 66% more likely. These figures cannot be anomalies; they are a pattern. In Committee, we heard from my noble friend Lady Lister of Burtersett about older renters securing their pensions, being asked intrusive questions and then being required to provide a guarantor. From the noble Baroness, Lady Grender, we heard of a self-employed single mother being asked for a guarantor even though she was earning £45,000 a year—well above the UK median income. Too many renters simply do not have someone in their network who can act as a guarantor. Unless this issue is addressed, we risk entrenching a two-tier system in the rental market: one for those with access to wealth and another for those without.

The justification for these requirements often rests on an overstated fear of rent arrears, yet government figures show that only 2% of private renters were in arrears in 2023-24, and the English Housing Survey puts it at 5%. Of course, that is not negligible, but it does not warrant such widespread and disproportionate use of guarantors. There is an eviction ground for rent arrears, which is the primary backstop for when tenants fail to pay their rent.

Moreover, Amendment 61 aligns with the National Residential Landlords Association’s own guidance that guarantors should be requested only when a tenant cannot fully demonstrate that they can afford the rent. This amendment strikes a balance, allowing landlords to use guarantors when genuinely necessary, while protecting tenants from unjust exclusion. It is supported by a wide range of voices: Shelter, Independent Age, UNISON, Renters’ Reform Coalition, the Mayor of London and others. It is also worth noting that this amendment not only calls for legislative clarity but invites the Government to go a little further by introducing national guidance on fair and proportionate tenant referencing. Such a move would help standardise best practice and prevent local variation from undermining equality in the rental market.

In summary, this amendment is proportionate and reasonable and would not remove a landlord’s right to safeguard their interest, but it would ensure the right is exercised in a way that is just, consistent and in keeping with the spirit of the Bill. I hope that my noble friend Lady Taylor of Stevenage is minded to accept this amendment, but if that is not the case, I ask my noble friend four final critical questions. With guarantor requests increasingly becoming standard process, rather than when they are needed, will the Government issue guidance to landlords on when to request a guarantor? Will the Government look at what support they can provide for people who are at risk of homelessness because they cannot find a guarantor? Will the issue of guarantors be examined in detail as part of the post-Bill implementation work? Will my noble friend commit to working on these issues with Shelter, the Renters’ Reform Coalition, noble Lords in this House and many others on these issues, to find other ways to support the growing number of renters being locked out of the PRS because of the overuse of guarantors?

Without this amendment or government action to address the issue of guarantors, the Bill’s measures to tackle discrimination risk being undermined by the very practices it seeks to reform. I beg to move.

My Lords, I will speak briefly against Amendment 61. It is well-meaning, but I am afraid it is a blunt instrument full of unintended consequences. I do not deny that to require a guarantor for most tenancies is disproportionate and unnecessary, and the Bill makes welcome provisions to regularise what has become standard practice for the most part. However, I want to alert your Lordships’ House to some perverse consequences for three particular types of potential tenant who are among the quietest voices: the foreign student; the groups of students; and those with impaired reputation or difficult personal circumstances. Guarantees make the unrentable into rentable, in some cases. It makes opportunities exist when refusal would otherwise be the only other choice.

Let us dwell for a moment on the case of the foreign student. The foreign students come from far away; they have no reputation, there is no covenant strength and they may not even have arrived in the United Kingdom. They certainly do not have a UK bank account at this point and they probably do not have a UK mobile phone either. In many cases, the only way in which they can secure a property to live in before they arrive is to have the support of a guarantor; a guarantor allows them to have a roof over their head.

Then we have the groups of students. I refer to the case of my daughter, when she went off to Newcastle. There were seven students who were friends, although none of them really knew each other that well; they certainly were not related to each other, and there were no family bonds to tie them, whereas the Bill contemplates that the tenant is a single tenant. It is quite reasonable for a landlord renting to students, if they cannot have payment in advance—I will not talk about that because we discussed that on day one of Committee—to require some sort of guarantor so that the downside risks can be compensated. Not all students want to live in expensive halls of residence; they are disadvantaged at an early part of their lives.

Let us think also about those with an impaired reputation—people who may have left prison or are suffering from domestic abuse or family breakdown. I have been a guarantor for hundreds of families in these sorts of situations, but the Government seek to make my well-meaning interventions unlawful. Let me explain. Sitting in your Lordships’ House, I see the Minister and my noble friend Lord Jamieson who, like me, have been leaders of councils. We know that councils, in certain circumstances, have to step in to avoid homelessness. We know there are not enough registered social landlords and that the private sector landlords are our friends—they are part of the solution, not the problem. However, we cannot expect the private sector landlord to be the only one who takes a chance to get that person, who may have become homeless, a roof over their head.

In common with many other councils, my council—and I am proud that we pushed this hard—went for guarantees. We stood as guarantor for somebody in difficult circumstances so that the private sector landlord, who was prepared to take a chance with us, could provide a home. This is an essential part of managing a housing market. It is all about supporting the most vulnerable. It works; it is a success. If you have been a council leader—I am sorry that I failed to identify the noble Baroness, Lady Scott, who has also been a council leader in these circumstances—this is about helping families get back on their feet.

In considering Amendment 61, I ask noble Lords: in what universe can this misdirected, misguided and counterproductive amendment help those with the quietest voices get a roof over their heads? Providing a guarantor is the way in which the unrentable can rent, and there is nothing fair about keeping people in bed and breakfasts if they could, via a guarantor, be housed. I cannot support this amendment.

My Lords, I am pleased to support my noble friend Lady Kennedy of Cradley, and I am grateful to her for taking over the Amendment. She is much better placed than I am to speak to it, and has done so very persuasively. The noble Lord, Lord Fuller, called it a blunt instrument and was hyperbolic in his description of the amendment. According to Shelter, the Bill and this amendment would restrict the scenarios in which a landlord can legitimately request a guarantor to those in which a prospective tenant cannot prove that the rent is affordable to them.

So it does not seem to me that the amendment excludes the groups that the noble Lord described. If it does so, then perhaps we can have a refined version of it, but the fact is that there are problems without an amendment of this kind. My central argument in Committee—

The noble Baroness talks about the burden of proof. In the three examples I gave, proof is not available. I can understand the intent and the well-meaning behind Amendment 61, but if it is to form part of the Bill, noble Lords need to ask themselves how those people in difficult circumstances are going to demonstrate the proof. They cannot, so a guarantor is the only way forward.

This Amendment does not preclude the use of guarantors; it just limits their use. I will leave it at that. As I said in Committee, if there is a better way of doing it, then fine—perhaps the Government could bring forward an amendment that ruled out any unintended consequences. I am not convinced that there are any—but anyway.

My central argument in Committee took as its starting point the very welcome provision in the Bill that will prevent landlords demanding multiple months’ rent in advance, which, as my noble friend the Minister explained, can be used to discriminate against certain marginalised groups. I then warned that the requirement of a guarantor could easily become an alternative tool of discrimination, as my noble friend said.

As has already been explained—but I will repeat—the amendment would not prohibit guarantors but would limit their use, so as to reduce their potentially discriminatory impact. I am afraid that my noble friend the Minister did not really address this argument in her response in Committee. Does she not accept the evidence that I and my noble friend have presented that requiring a high-earning or home-earning guarantor is all too often used in a discriminatory way? I am thinking in particular, as my noble friend said, of social security recipients, disabled tenants and members of racialised minorities, who are disproportionately likely to be asked for a guarantor.

Given the Bill’s strong anti-discrimination stance, which I am of course very supportive of, I am at a loss as to why my noble friend the Minister did not take this argument more seriously. Perhaps she could address it today and, ideally, accept the case made by my noble friend or commit to bring forward her own amendment to achieve the same end at Third Reading that will perhaps address the problems that the noble Lord, Lord Fuller, raised. At the very least, I hope she will be able to answer the questions my noble friend posed as a kind of fallback option.

My Lords, I have added my name to this Amendment in the name of the noble Baroness, Lady Kennedy of Cradley, and am absolutely delighted to support it. We spoke about this in Committee, but I still feel that there is an opportunity here. This is not about banning all guarantors—if that needs clarifying—and that is made very clear in the wording of the amendment. This is about trying to stop the blanket use of guarantors, which, I am afraid, is occurring and is highly discriminatory.

The noble Lord, Lord Fuller, referenced student groups. But I am a little bit confused, because my understanding is that the student groups that have been in touch with me over the last few days about this amendment are in support of it—unless the noble Lord has any examples of student groups that have been in touch with him that are against this amendment, then I am happy to sit down to allow him to tell me.

I have not canvassed student groups, but I know the example of my own family—my daughters went to Oxford and Newcastle—and the strictures that were placed on them. So I am talking from my personal experience rather than that of the representatives of other organisations.

It is my understanding that student groups are happy with this Amendment and against the blanket use of guarantors. The current use of guarantors is, I am afraid, a proxy for discrimination against vulnerable groups. There is evidence that black renters are 66% more likely to be asked for a guarantor—I know that has already been said, but it is so profoundly shocking that it bears repetition. If you are on benefits, you are 60% more likely to be asked; if you have a disability, it is 20%. The great Equality Act 2010 is being driven over with the use of guarantors and I am delighted to support this amendment.

I read with a lot of care the Front-Bench speeches in Committee. The noble Lord, Lord Jamieson, suggested that guarantors can be a lifeline for those with poor credit or no rental history, but on these Benches we genuinely believe that nothing could be further from the truth. The harsh and stark reality is that 550,000 private renters were unable to secure a desired home in the last five years because they lacked a guarantor.

There is not a single organisation that I am aware of that campaigns and advocates on behalf of people who could be described as those who need that kind of lifeline, who are on no or a low income, which opposes this amendment. That includes working-class, international, estranged and care-experienced students who struggle to find suitable guarantors because they do not know anyone in those highest quartiles, which are the only guarantors that many landlords will accept. They just do not have those contacts or connections.

The noble Lord further suggested that tenants have market discretion or choice if a landlord is imposing a blanket guarantor policy. That defies the logic of the current marketplace, where the low-income tenant is never in the luxury position of shopping around. Again, that choice rests only with those whose income is in the higher quartiles.

On the Minister’s point in the same discussion about guarantors providing confidence, we must ask: at what cost to fairness? Landlords already have really robust tools: a five-week deposit, the first month’s rent up front, and affordability checks. As the noble Baroness, Lady Kennedy, said, guarantors are rarely invoked in practice. Like the noble Lord, I am currently a guarantor for my son, who is a student, so I completely understand that this is what we currently do. But in the past two years less than 3% of landlords have ever attempted to claim lost rent from a guarantor. When they did, it was 16 times more likely to be difficult than easy. Landlords have other, much more appropriate business risk management tools, such as rent guarantee insurance, rather than relying on a tenant’s family member, and so many of these tenants do not have a family member who is earning way above the median income, which is what is demanded.

Even before this legislation has come into effect, there is a worrying rise. A 2024 Generation Rent survey of its supporters found that 30% of private renters who had moved in 2023-24 had been asked for a guarantor—up from 22% of people who had moved in 2019. Always in this context, I fear that the debate is held on a presumption that renters lack responsibility somehow, unlike other tenures. However, as the noble Baroness, Lady Kennedy, said, only 2% of tenants were reported as in arrears in 2023-24. The vast Majority of tenants are responsible individuals, who, by the way, often forgo other things, such as heating and eating, in order to pay rent, because they understand the severe consequences of not doing so and because the market is so limited for them.

This amendment is not a radical proposal. As Generation Rent and Shelter argue, it simply ensures that guarantors are used sparingly, appropriately and only when absolutely necessary, when a prospective tenant genuinely cannot demonstrate that they can afford the rent. This entirely aligns with the National Residential Landlords Association’s own current guidance.

When the Minister responds, if the Government are unable to stop this loophole for discriminatory practice, will she at least make it clear, either today or perhaps in a letter to follow, that guarantors should be used only as a last resort, that the Equality Act should be used if there is further evidence of discrimination, and that landlords already have the means to ensure that tenants pay through other mechanisms? I hope that her words today will ensure that the widespread use of guarantors is not the next version of no-fault evictions.

My Lords, I thank the many who have spoken in this debate, particularly the three noble Baronesses who have spoken very passionately to say that we need to support some of the most vulnerable in our society. I agree that we need to support them.

As my noble friend Lord Fuller pointed out, many councils use the fact that they can act as a guarantor to enable many of the most vulnerable to access a home which they would, in other circumstances, not be able to. There is clearly an appropriate role for the guarantee. As the noble Baroness, Lady Grender, just mentioned, there is a shortage of rental accommodation—I think the figure is something like 12 people chasing every available rented home. We need to think about this when we are discussing this Bill. How do we encourage more people to rent their home so that we have a more dynamic market, with more availability there?

It is widely recognised that we need more rental homes, as is the importance of small landlords, particularly in rural areas. We also need to recognise that many of these small landlords have only one or two homes. For many of them, it is a substitute pension, and many of them have mortgages on these homes. If that is the case, they need security that they will get the rental income; otherwise, it is just too high a risk. Some noble Lords have said that the risk is small, but if it is your only asset and you have got a mortgage on it, you may not feel able to take that risk. As we have discussed before, without this, many would have no choice but to exit the market, meaning fewer rental homes and fewer people able to access a home—more people on the street. That is a particular issue in rural areas with small landlords.

Guarantors play a crucial role in the rental market. They provide an essential layer of security, offering landlords the reassurance that the rent will be paid, even if the tenant experiences financial difficulties. As we have mentioned earlier, for tenants, particularly students and young people or those without a strong credit history, a guarantor can be key to securing a home which might otherwise be out of reach. This is partly why we are so passionate about enabling rent in advance. That provision is especially helpful for individuals facing barriers, such as overseas students without UK credit records, or those who simply have no one to act as a guarantor.

With that context, I understand why the noble Baroness, Lady Kennedy of Cradley, has brought forward this Amendment. However, I regret to say that, on this side of the House, we cannot support it. First, it is overly prescriptive and would constrain landlords from making what is, in many cases, a reasonable response to financial risk. Secondly, preventing landlords requiring a guarantor in such circumstances could have the unintended consequence of discouraging them from renting to high-risk tenants altogether. Thirdly, it would undermine a market-led approach to risk mitigation. Finally, the amendment would afford a broad and, we believe, inappropriate delegation of power. Combined, this would, as I said earlier, reduce the supply of available homes, increase the cost to a tenant and mean fewer people are able to get their own home. For these reasons, we cannot support this amendment.

My Lords, I thank my noble friend Lady Kennedy of Cradley for her Amendment 61 and for bringing her expertise and experience to both today’s debate and discussions we have had previously on this issue—as did my noble friend Lady Lister when she moved a similar amendment in Committee. I also thank the noble Lords, Lord Fuller and Lord Jamieson, and the noble Baroness, Lady Grender, for speaking.

The use of guarantors within the private rented sector is an issue which I know is of great interest to the House. Let me start by saying that the Government recognise that obtaining a guarantor can be a difficult task for some prospective tenants, and I understand concerns that it can be used as a further barrier to tenancy in some cases. As the noble Baroness, Lady Grender, indicated, where it is being used to discriminate, equalities law may apply. I will consider, for our information-sharing exercise on the Bill, whether there is more we can do to inform people in this regard.

However, it would be irresponsible for this or any Government to legislate to tackle one issue without considering the impact of such action on the system as a whole. This amendment would make it unlawful for a landlord to accept an offer from a prospective tenant to provide a guarantor in a very broad set of circumstances, including in the case of any tenant who has paid a tenancy deposit. We must not underestimate the risk that such action would pose to those who rely on guarantors to access the private rented sector. Without the option of providing a guarantor, many prospective renters, including those moving out of home for the first time, the self-employed and those with historic debts, would find it difficult to secure a private tenancy, and some would find it impossible.

While the scope of the prohibition contained in the amendment is broad, I recognise that there is an interest in the House in a more targeted restriction on the use of guarantors. Why should, for example, a tenant who can demonstrate an income of three or four times the annual rent be required to provide a guarantor? In answering this question, I must stress to the House that landlords generally take account of several factors in addition to income when determining whether a potential tenancy is likely to be sustainable. This includes the prospective renters’ form of employment, rental history and broader financial circumstances. If we were to say that renters with a certain level of income can no longer provide a guarantor, we would restrict those whose circumstances may be perceived as risky from putting themselves on an equal footing with other prospective tenants. Without the ability to offer a guarantor, and all else being equal, it is likely that, to give one example, a self-employed renter in a hot rental market would find it challenging to secure a property if facing competition from a renter on a permanent contract with the same income.

All this being said, I recognise that there is interest in this House in cases where a person is unable to find a guarantor, particularly where such a person is at risk of homelessness. I hope the House will therefore allow me to set out briefly the support and options which may be available where this is the case. First, it is worth noting that the measures we are introducing, which restrict payments of rent in advance at the start of a tenancy, do not apply to local authorities. This means that local authorities will continue to be able to pay upfront rent to help people on low incomes or at risk of homelessness to secure a property. Local authorities may also offer guarantee schemes to help people on low incomes or at risk of homelessness, as the noble Lord, Lord Fuller, commented. These local authority guarantors can be particularly important, for example, for care leavers who may not have a guarantor otherwise, or for a domestic abuse victim who has fled and has necessarily to avoid contact with people who may be guarantors. In some cases, professional guarantor services can help prospective tenants acquire a tenancy guarantor in circumstances where they would not otherwise have been able to do so.

My noble friend asked whether the Government would issue guidance to landlords as to when a guarantor request would be appropriate. While I recognise the concerns which underlie this question, we currently have no plans to publish guidance on the use of guarantors—although, as I said, I will consider whether we need to give further guidance on when that may be discriminatory. This is because there is no one-size-fits-all approach to determining whether a tenancy will be sustainable. Landlords must be able to make informed decisions when selecting tenants. Good landlords assess tenant suitability in line with each individual’s circumstances and do not apply blanket policies to their tenant assessment process.

I am happy to confirm to the House that our evaluation of the Bill’s impact—the approach that I set out when we debated the previous group of amendments—will include an assessment of any changes in the use of guarantors. In addition, we will continue to speak to stakeholders across the sector about the use of guarantors as a way of supporting renters into homes. To respond to my noble friend Lady Kennedy, I am always happy to meet her, Shelter, the Renters’ Reform Coalition and others if it will help us to debate that issue.

There is a supply and demand imbalance in this country, which the Government are seeking to tackle through our ambitious milestone of building 1.5 million safe and decent homes over this Parliament. However, while we are in this situation where there is such strong competition for privately rented housing in some parts of the country, I do not think it would be helpful to support a measure which would risk doing more harm than good to renters seeking to access the private rented sector. I hope that on that basis, my noble friend will consider not pressing her new Clause to a vote.

My Lords, I thank every noble Lord who has spoken on this group. I reassure my noble friend Lady Taylor of Stevenage and the noble Lords, Lord Fuller and Lord Jamieson, that the intention behind this Amendment is clear: it is not about banning guarantors. On this side of the House—and, I am sure, on all sides of the House—we appreciate that landlords need to manage their financial risk. They have a number of ways to do this. The amendment would not ban guarantors; it simply seeks a way to end discrimination and ensure that guarantors are not overused and commonplace, and that they are used when they are genuinely needed. It is about restoring proportionality and fairness to the use of guarantors.

I thank my noble friend Lady Taylor of Stevenage for her reply, and her engagement and understanding on this issue, and for continually meeting me and other stakeholders. Of course, we are disappointed that the Government will not accept the amendment, and I am particularly disappointed about the guidance not being issued. However, I appreciate the issues around the guidance, about discrimination and the discriminatory nature of the overuse of guarantors, and her commitment that guarantors will be included in the evaluation of the impact of the Bill. Of course, I am always very happy that she will meet me and other stakeholders.

I am firmly of the belief, as I am sure other noble Lords are, including my noble friend Lady Lister of Burtersett and my friend, the noble Baroness, Lady Grender, that the overuse of guarantors seriously undermines the anti-discrimination intentions of the Bill. We welcome the guidance from my noble friend the Minister. Having said that, I will not be pressing it to a vote, and I beg leave to withdraw my amendment.

Amendment 61 withdrawn.

Clause 21: Notices to quit by tenants under assured tenancies: timing