Clause 5 - Houses in multiple occupation

Part of 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 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.