Clause 5 - Houses in multiple occupation

Home Energy Conservation Bill – in a Public Bill Committee at 12:15 pm on 26th February 2002.

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Photo of John Baron John Baron Conservative, Billericay 12:15 pm, 26th February 2002

I beg to move amendment No. 51, in page 3, leave out lines 14 to 37 and insert

'''house in multiple occupation'' means a house which is occupied by persons who do not form a single household.'.

Photo of Joe Benton Joe Benton Labour, Bootle

With this we may discuss the following: Amendment No. 52, in page 3, line 14, leave out from 'house'' to end of line 25 and insert

'where its occupancy is or would be subject to more than one tenancy agreement whether written or verbal'.

Amendment No. 53, in page 3, line 37, at end add—

'(e) a building which has been converted into self-contained flats in accordance with Building Regulations;

(f) service tenancy agreements.'.

Clause stand part.

Government new clause 7—Meaning of ''house in multiple occupation''—

'(1) Section 345 of the Housing Act 1985 (meaning of ''multiple occupation'') is amended as follows.

(2) In subsection (2)(b), for ''by a single household'' there is substituted ''as a separate dwelling.

(3) After subsection (2) there is inserted—

''(3) The Secretary of State may make regulations prescribing—

(a) circumstances in which a person is, or is not, to be regarded as occupying a house, or

(b) circumstances in which persons occupying a house are, or are not, to be regarded as forming a single household.

(4) Regulations under paragraph (b) of subsection (3) may (without prejudice to the generality of that paragraph) secure that persons occupying a house are regarded as forming a single

household only where there is a prescribed relationship between each member of the group and any one or more of the others (as the regulations may require).

(5) In subsection (4) ''prescribed relationship'' means any family or other relationship of a description specified in the regulations.

''(6) The Secretary of State may also make regulations prescribing descriptions of houses which (whether or not otherwise falling within the definition in subsection (1)) are not to be regarded as houses in multiple occupation within the meaning of this Part.

(7) Regulations under subsection (6) may frame a description of house by reference to any features of the house (including the nature of its use or occupation).

(8) Regulations under this section—

(a) may make different provision for different circumstances;

(b) may make incidental, supplementary and transitional provision; and

(c) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.''.'.

And the following amendments thereto:

(a), after proposed new subsection (3)(b) of section 345 of the Housing Act 1985 insert

'(3A) Regulations made under subsection (2) shall include in any definition of ''house in multiple occupation'' a house occupancy of which is or would be subject to more than one tenancy agreement whether written or verbal.'.

(b), in proposed new subsection (6) of section 345 of the Housing Act 1985, leave out from second 'of' to end and insert

'buildings which are, or are not, to be regarded as houses'.

(c), in proposed new subsection (7) of section 345 of the Housing Act 1985, leave out from first 'of' to '(including' and insert

'building by reference to any features of the building'.

Amendment No. 43, in title, before 'make' insert

'to amend the definition of house in multiple occupation in Part 11 of the Housing Act 1985;'.

Photo of John Baron John Baron Conservative, Billericay

I have tabled amendments because I am concerned that if the Bill's definition of a house in multiple occupation is allowed to stand, landlords will leave the sector, the sector will shrink and tenants, above all others, will be harmed.

I have tabled amendments Nos. 51 to 53 and amendment (a) to new clause 7. Amendments Nos. 52 and 53 should be viewed together. Ideally, the Committee will accept amendment No. 51, and I shall not have to press Nos. 52 and 53; if it does not, I shall have to press the others to a vote.

At this point, I should declare an interest, as I always do on such occasions. I am a landlord and own two and three-bedroom flats and five and six-bedroom houses.

As I mentioned when the Committee last met, one of my concerns about clause 5 is that we may introduce too much red tape and too many costs—I am not talking only about licensing and registration fees. The private rented sector might then shrink, which would harm tenants. Now that we can table amendments that stand a chance of being discussed, I should say that the Bill's definition of an HMO is central to my concern.

I am aware that the Government have tabled new clause 7, and I shall include one or two references to it.

Before we get to it, however, I shall concentrate on the Bill as it stands. The Bill proposes to change the definition of an HMO from

''a house which is occupied by persons who do not form a single household''


''a house occupied by adult members of more than two families.''

New clause 7 raises the possibility of keeping single households within the definition of an HMO, but only where there is a prescribed relationship between each member of the group.

Whether intentionally or not, the Government have introduced a fundamental change, because the new definition will include landlords who let to house or flat sharers. As the law stands, three young professionals or students who reside in a three-bedroom flat and who have signed an assured shorthold tenancy—tenants and landlords freely enter into such agreements, which typically also involve a managing agent—would not be considered as an HMO. If the definition in the Bill is allowed to stand, such a property would not only be considered as an HMO, but could be liable to registration or licensing, depending on the local authority's attitude. We must recognise that that change would affect a huge proportion of properties in the private rented market, which have hitherto escaped registration or licensing schemes because they are not defined as HMOs. Until now, flat and house sharers have been seen as a single household.

The Bill is aimed at bedsit-type accommodation, and we are all in favour of eradicating slum landlords who provide substandard accommodation and take advantage of their tenants. If the definition is allowed to stand, the Bill will cast its net far too wide and will cause a shrinkage in the sector, as happened in Scotland.

The new definition would cover a group of friends, for example students, who sign an assured shorthold tenancy, and who are, therefore, jointly and severally liable. In that situation, there is one agreement and a sense of community. There is no sense of community in bedsit accommodation with slum landlords, where there is a lock on each bedroom and the tenants operate independently. The slum landlord has more opportunity to take advantage of the situation, and I wholeheartedly agree that we should address that problem. However, local authorities have the power to intervene in such situations because the machinery to confront slum landlords already exists. For example, closure notices can be issued by local authorities to deal with overcrowding. Local authorities can also issue section 352 notices to ensure that certain works are implemented on a property, often within 21 days, so one does not have to wait long for improvements to take place.

Changing the definition of an HMO is like taking a sledgehammer to crack a nut. It is entirely unnecessary and will harm tenants because it will restrict the supply of accommodation and restrict choice. If we over-regulate, initiative and enterprise will stand less chance of success, which would be a shame for the private

rented sector. A little history may be helpful in this context.

The Housing Act 1988 introduced assured shorthold tenancies. That removed the restrictions placed on the market by the earlier rent Acts, which gave tenants security of tenure and left landlords unable to obtain vacant possession. In effect, the Housing Act 1988, reinforced by the Housing Act 1996, freed up the rental market. It is, therefore, no surprise that, according to the figures of the Department for Transport, Local Government and the Regions, the private rented sector declined to a low point in 1989, with about 1.7 million tenancies in existence. In the year 1999–2000, it increased to 2.3 million tenancies as a result of the liberalisation of the market. That is evidenced by the fact that, again according to figures from the DTLR, between 1999 and 2000, the number of assured shorthold tenancies increased from approximately 500,000 to 1.5 million, while the number of regulated tenancies decreased from 600,000 to 200,000.

There can be little doubt from those figures that the Housing Acts of 1988 and 1996 revived the sector, but Britain still has a far smaller rented sector than many other European countries. A healthy rented sector is vital to the national economy as it assists mobility in the workplace. With modern labour practices, the days of a job for life are behind us and the labour force will have to be much more mobile. Therefore, mobility of labour is extremely important.

A healthy private sector market is also in the nation's best interest because it helps education. The sector provides much-needed accommodation for students. That will increasingly be the case if the Government are to meet their education targets, especially the measures that they are introducing on further education. However, we are contemplating a Bill that, by changing the definition of an HMO, will threaten the sector to an extent and make for its contraction.

We must remember that the sector comprises mostly small operators who could readily invest elsewhere. For example, they could invest in commercial property. Many people think that there are massive profits to be made or massive profit margins in the private rented sector, but that is not the case. If there were, there would be far more corporate investors. The sector typically comprises people who invest in one or two properties at most to supplement their income, often for retirement.

There is a danger that a good number of those people will leave the market because of wholesale licensing schemes that could be enforced by local authorities. Meanwhile, the small minority of people who disregard the law—we all want to get rid of them—will continue to do so anyway. Our job is to make life as difficult for them as possible, without harming the vast majority who are perfectly reasonable landlords.

We need only consider the chaos in Scotland to see what can happen. Mandatory licensing for HMOs was introduced on 1 October 2000. The relevant legislation allowed great variation between local authorities in

terms of fees set and the requirements that those authorities sought. We all know that vastly different fees were charged as a consequence. I am conscious that new clause 7 would limit the fees to £112 per letting, so that issue is covered to an extent. However, local authorities have also placed a wide variety of requirements on HMO landlords.

UNITE, which specialises in providing student accommodation, has supplied figures about a case in Glasgow in which bills over and above registration fees amounted to £10,000. That involved simply making an application in respect of HMOs. In the end, such fees will be passed on to tenants. As a result of legislation, there has been a noticeable reduction in the availability of properties, especially at the lower end of the market, and that affects students. I ask the Committee seriously to consider that. We do not want the Bill to affect the availability of such accommodation.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

My hon. Friend is on the subject of student accommodation and UNITE. Has he read the student living report published by UNITE, which described a level of student accommodation of which many students, including me when I was one, could only dream? Does he agree that policy should be directed towards encouraging such companies, which provide high quality accommodation at affordable prices, rather than reducing supply?

Photo of John Baron John Baron Conservative, Billericay

Yes, I have seen that report. It reinforces the point that we have to allow operators as much freedom as possible, especially in terms of the provision of student accommodation. We must not tie them up in red tape and costs, as we must ensure a decent supply of student accommodation. That has not been the case in the Scottish experience and tenants, especially students, have been made to suffer.

It may be anathema to some Labour Members, but I believe that if we care about driving up standards, the best way to do so is to encourage healthy competition. The more choice tenants have, the more they will gravitate to better accommodation and the more landlords will be prepared to invest. Landlords will not invest if there is too much interference from local authorities as a result of widespread registration; they will simply invest in other forms of property—commercial property, for example—or leave the market altogether. Meanwhile, those landlords who do remain will simply pass on registration costs to tenants, who will have little choice but to pay as a diminishing amount of accommodation will be available to them. In the end, it is the tenants who will suffer. The landlords have a choice as they can leave the market, but tenants need accommodation.

I shall make three or four more points about widening the definition of HMOs, the first of which relates to planning. The extension of the definition of HMOs to include properties with more than two families could sweep into the definition nearly all shared houses. Such a definition would result in recategorisation for planning purposes. If a property is categorised for planning purposes as an HMO, there

is no assurance that the planning authority in question will give the landlord the ability to recategorise for single occupancy when the property is sold.

In several incidents recently, local authorities have tried to restrict the power and use it to the detriment of the local housing market. For example, in Hammersmith and Fulham and in Camden, reports state that local authorities, worried about the availability of—

Photo of Joe Benton Joe Benton Labour, Bootle 12:45 pm, 26th February 2002

Order. The hon. Gentleman's remarks are leading towards amendments Nos. 45 and 46, which will be discussed later. I ask him to return to the amendment.

Photo of John Baron John Baron Conservative, Billericay

Thank you, Mr. Benton. I shall do so.

Hon. Members have all spoken in favour of the purpose of the Bill, which is ostensibly to encourage energy conservation, and includes targets to ensure that that is achieved. However, I question whether part 3, and the licensing of HMOs, will make a significant contribution to achieving that goal. HMOs represent about 40 per cent. of the total private rented sector and within HMOs, 25 per cent. represent shared housing. It must be assumed that local authorities are aware of the location of those HMOs. Therefore, only a proportion of them will not meet the energy-saving targets in full. Although the proposal may be of some help, it is superfluous to achieving the aim of parts 1 and 2: the eradication of fuel poverty. It is not quite an afterthought but it is not essential to the success of the Bill, and I ask the Committee to think about it.

I am worried about the definition of an HMO in clause 5, although I am conscious that new clause 7 brings in a modified definition. What is a family, nowadays? What will be prescribed relationships? A family is not an easy concept to define and the courts will be kept busy determining the definition. For example, could a family include non-marital relationships? Could it include homosexual relationships, or monogamous relationships for both heterosexual and homosexual groups? Are prescribed relationships to be based on friendship or on sexual relationships? Those questions must be asked or there will be confusion in the implementation of the Bill, which we are keen to support. Part 3 threatens the clarification of what is applicable.

We should examine local authorities' records. We are enabling them to have a much greater say in the running of HMOs, particularly from an energy and fuel point of view, but greater involvement in the sector is not necessarily a good thing. Indeed, local authorities' record of managing residential properties varies from area to area, and some can be very bad. Without wishing to name examples—although I have them here, if any hon. Member is interested to find out after Committee—more than half of council homes fail to meet government standards in some local authority areas. In some instances, as many as 5,000 homes are described as unfit for human habitation. If those homes were in the private sector they would be closed down, and yet we are asking those authorities to start ruling on the condition of HMOs, which will leave room for all sorts of discrepancies. The latest results from the Government's survey of English housing

show that the highest levels of customer satisfaction are among, believe it or not, private tenants. The report by the Department for Transport, Local Government and the Regions indicates that nearly twice the proportion of council tenants say that they are dissatisfied with their landlords than those in the private sector—about 20 per cent. compared with roughly 10 per cent.

In moving the amendment, I am suggesting that we revert to the old definition, which has broadly worked, and allow the courts to decide whether there is a discrepancy in determining what is an HMO. We should allow the sector to expand as it has done in recent years, as it helps the economy and government policies on education and, above all, gives tenants greater choice. We have seen what can happen when a market shrinks because of over-regulation, as happened recently in Scotland, or planning issues, as we have seen in Hammersmith and Fulham, where the number of HMOs has declined markedly. There are difficulties with the proposed new definition of an HMO in both new clause 7 and the Bill. How does one define a family or a prescribed relationship? Although local authority involvement in the private rented sector may be good in some cases, it is not necessarily so and could cause a great deal of irritation to many landlords for no good reason.

Finally, as I have said on many occasions, I wholeheartedly support parts 1 and 2 in trying to eradicate fuel poverty. However, part 3 is largely superfluous to that aim. If we want to drive up standards in the private rented sector, healthy competition should have a major part to play. Part 3 would negate healthy competition, and on that basis I commend the amendment to the Committee.

Photo of David Drew David Drew Labour/Co-operative, Stroud

I shall raise mainly technical questions for the Minister, but I must respond to the comments of the hon. Member for Billericay (Mr. Baron), which I generally support. He has probably had some of the same briefings as me. My starting point is the misconception that, with HMOs, we are always talking about older properties that are in need of repair, which is why energy conservation and the need to address fuel poverty are so important.

New and corporate landlords—UNITE is an obvious example—are entering the area of accommodation for students and people who work in the national health service. I am sure that we can all think of new blocks being built in our own areas that will take care of people on a multiple-occupancy basis, but which take anything but the usual form of such units of accommodation.

There is a difficulty inasmuch as clauses 5 and 6 run together, and we cannot sort out a definition of houses in multiple occupation without talking about registration and the fees that will be charged. However, I will restrict my remarks to clause 5. My right hon. Friend the Minister will move new clause 7, which I hope will clarify some of the issues. There are

good ideas in clauses 5 and 6, and I hope that if I ask some technical questions, the Minister can help me through this. They are mainly about what is currently in the Bill. I am a little confused about whether we will deal with self-contained flats through the new clause, and if so where they stand with the definition of HMOs.

Much of the accommodation to which I am referring and the hon. Member for Billericay had recourse to consider is university halls of residence and accommodation for health service employees. Where do they stand with regard to the new clause? That matters because the definition of HMOs will have a significant impact on the registration of such buildings and units within buildings and, more particularly, the fee structure that will apply.

I agree that there are problems, and there are precedents on which we can call. Scotland provides the obvious one. There seems to be a differential between what different local authorities in Scotland have done on charging fees. I am aware that that relates to clause 6, but the definition is so important that if we can get it right, we can perhaps help to ensure that the registration process and the fee that follows are also correct.

The final issue is how we treat the different elements of these newer units of accommodation. It would be helpful if my right hon. Friend would clarify whether private sector operators who work in partnership with public sector institutions will be treated in the same way. If a private operator provides accommodation on behalf of a university, there should be parity in the treatment of the registration and the fee structure that applies. It would be unfair if the university charged one fee for its own accommodation, but the private deliverer of similar accommodation had a different fee structure.

The main point is that we must get this legislation right. It is about encouraging new people into the sector as well as dealing with what already exists. Although in certain respects I disagree with the hon. Member for Billericay, the measure is important. HMOs are an important part of the way in which we consider fuel poverty and its eradication.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

I support the amendment tabled by my hon. Friend the Member for Billericay, although not because amendments Nos. 45 and 46, which we shall reach later, stand in my name. In light of the earlier exchange between the Minister and the hon. Member for Brighton, Kemptown, however, I am tempted to say, ''I'll support yours if you support mine.'' I offer support because I agree with much of what my hon. Friend said about the existing position and defining a single household. That has probably been made over-complex. Indeed, if we consider the new clause

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.