Clause 40 - Power to make domestic energy efficiency regulations: England and Wales

Energy Bill [Lords] – in a Public Bill Committee at 12:30 pm on 14th June 2011.

Alert me about debates like this

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission, Chair, Public Accounts Commission 12:30 pm, 14th June 2011

I am advised that if the hon. Lady wants to move amendment 30, this is the appropriate moment to do so.

Amendment proposed: 30, in clause 40, age 25, line 41, leave out ‘may make regulations’ and insert

‘shall make regulations to come into force no later than 1 April 2016 setting a minimum energy efficiency level for domestic PR properties and’.—(Luciana Berger.)

Question put, That the amendment be made.

The Committee divided: Ayes 8, Noes 11.

Division number 4 Decision Time — Clause 40 - Power to make domestic energy efficiency regulations: England and Wales

Aye: 8 MPs

No: 11 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Photo of Luciana Berger Luciana Berger Shadow Minister (Energy and Climate Change)

I beg to move amendment 121, in clause 40, page 26, line 13, leave out ‘.’ and insert ‘, and

(c) provide for the establishment of a national or local register of domestic PR properties for the purpose of distributing information relevant to this Act to landlords of domestic PR properties and their tenants and for other purposes relevant to this Act.’.

The amendment would allow the Secretary of State to establish a register of landlords for purposes connected with the Bill. The basis for the amendment is that a national or local register of landlords, tightly defined as being for

“purposes relevant to this Act” would reduce enforcement costs, increase compliance, improve energy efficiency and help landlords to get access to appropriate information about the green deal and other schemes such as the landlords energy saving allowance. In June 2009, the Department for Communities and Local Government looked to establish a national register for landlords, but that was rejected by the present Government in June last year. No official record of private sector landlords exists, but we know that some landlords are members of the National Landlords Association.

In 2008, a little more than 14% of all English households were housed in the private rented sector. The 2008 Rugg review estimated that the private rented sector in England contained around 2.6 million properties in 2006, up from 1.8 million in 1988, and the sector has continued its growth since 2006, with more recent estimates suggesting that by the end of 2008 more than 3 million English households were in the private rented sector. The sector is dominated by small landlords: in 2006, 73% of all landlords were individuals or couples; a little more than 70% of landlords owned fewer than 10 properties and 84% of individual or couple landlords owned 10 or fewer properties.

That information is contained within the 2009 DCLG “Impact Assessment of a national register for landlords”, which stated:

“We do not want to go back to the days of over-regulation which caused the sector to contract in the post war era. That is why we have not gone down the path of full licensing of private rented sector properties along the lines of the Scottish system…But we do want to help local authorities enforce legislation designed to protect the most vulnerable and we do want to ensure that the  vast majority of good landlords are not stigmatised by virtue of the existence of the few who are unprofessional and, sometimes, criminal in intention.”

Unfortunately, in June 2010 the Minister for Housing and Local Government made

“a promise to good landlords across the country: the Government has no plans to create any burdensome red tape”.

How does the Minister intend to monitor the take-up of the green deal in domestic private rented properties? Has he done a study of what the expected take-up of the green deal will be in domestic private rented properties? Without a register for the purposes of the Bill, how does he intend to ensure that all F and G-rated domestic private rented properties are kitted out under the green deal by 2018? How does he intend to root out rogue landlords who do not fulfil their green deal obligations? How does he intend to ensure that all domestic private rented property landlords are aware of all the green deal obligations and information? How does he intend to ensure that all domestic private rented property tenants—particularly those in F and G-rated homes—are aware of all their landlords’ green deal obligations and of green deal information, such as the right of tenants to request?

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

I rise to echo the arguments made by my hon. Friend the Member for Liverpool, Wavertree. There are three key points in the amendment—one of the most progressive this Committee has dealt with—namely, information, cost to local authorities and consumer empowerment. On information, it is clear that a register of landlords will give the Government a huge advantage in pushing the green deal. I note the Secretary of State’s comments:

The Green Deal will be a revolution… The most ambitious energy-saving plan ever put forward.”

If he is to achieve that, he needs to reach out to those in the private rented sector and empower them. There is no better way to do that than to have a database of landlords, so that landlords can be aware of the benefits of the golden rule, the advantages that the scheme will give their properties and the advantages of the ECO. As things change and develop, if the Government have a register of landlords they will be in a far better position to meet their own target of work on 14 million properties completed by 2020. I read that figure somewhere; I will stand corrected if that is not the case.

At local level, a register would allow local authorities to deal with landlords in a progressive and positive way, and it would help them to roll out the Government’s programme. Local authorities will be key to the proposals, but they may be swamped by complaints or by having to deal with the worst cases that come through their doors. If we do not accept the amendment, we may be dumping a huge cost on local authorities, which will have to trace landlords in such cases. As someone who has worked in local government, I can tell the Committee that officers spend hours and hours trying to find out who a landlord is and trying to deal with the tenant at the same time. The landlord often cannot be found, because the property has gone through a letting agent or a management company; it is really difficult to trace some landlords. Without a register of landlords, the cost to the local authority will grow.

I am concerned, because it is fair to say that some local authorities in areas where there is a large private rented sector are facing some of the biggest cuts. Where  will the resources they need come from? A local register of landlords would be a cost saving to local council tax payers by enabling their authorities to deal effectively with private landlords and tenants who approach those landlords seeking assurances or pursuing complaints about the green deal. It would be an important step forward.

The third reason is consumer empowerment. There is an opportunity for local authorities to receive a commercial charge. I have mentioned organisations such as NetMovers and others, which are shameless promoters; they would be willing to pay local authorities for access to a register and database. I should have expected the Government to be on the side of consumers and to welcome consumer empowerment. If such information were made publicly available, consumers would have a much better choice as the private sector steps in to provide information about rented properties to potential tenants.

There is a clear consumer-driven argument why we should have a local or national register. I am sure that the private sector would be willing to step in to provide such information. At the moment, local authorities keep a lot of information on the private rented sector as well as registers of landlords, but such information is not holistic. It might contain just those who have been accredited, or who have been subject to enforcement action elsewhere. There are different lists with several silos of activities in which local authorities are engaged. The bringing together of such a register for the purposes of the green deal would allow local authorities to provide a better service and enable them to provide information to consumers. I have set out the three main reasons for such a proposal.

In E.ON’s submission to members of the Committee, it states that a key challenge for the private rented sector is

“to increase the market value of energy efficiency”,

so by empowering consumers, landlords will be put in a position whereby they must improve and approach a green deal provider and assessor. They will be put on the back foot when trying to compete in a market, so such a measure will increase consumer choice, as well as drive up standards and increase the energy value within the market value of a property. E.ON says that a register will

“provide additional incentives for landlords to make improvements to their properties”.

Although energy performance certificates do help, E.ON continues:

“the information provided is often not interpreted as financial savings by potential tenants”.

We get round that. This information would add to the market value and consumer choice. I expect the Government to be on the side of consumers, on the side of choice, on the side of private enterprise and on the side of the free market, so the third point, on marketisation and information to the general public, is the key.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

The amendment is essential as it would make sure that the measures on energy levels in rented properties work in a meaningful way. I imagine that local authorities will be required to undertake much of the work on determining where landlords operate and who is doing  what in terms of energy efficiency. As my hon. Friend the Member for Hyndburn said, at the moment, local authorities have a fractured knowledge of what properties landlords rent out and their condition. The Housing Act 2004 gave local authorities a limited licensing power and obviously they how have a register relating to that, but that licensing applies only to houses in multiple occupation of a certain size—three storeys and five residents, I believe—so licences and therefore registers cover not just a limited amount of the total, but a tiny fraction of it.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons) 12:45 pm, 14th June 2011

My hon. Friend is making a good point. The Minister for Housing and Local Government is a strong advocate of selective licensing, which aggregates data in the private rented sector. That is another silo of information that is part of this matrix that local authorities can use when dealing with the private rented sector.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Indeed, the Secretary of State in his latest proposals on HMOs envisages only licensing in very limited numbers of areas across the country where an article 4 direction has been undertaken. Therefore not only would the information be partial across the country, it would be in the hands only of certain proactive local authorities. We are legislating here for something that applies universally across the whole country so that after a certain period any landlord anywhere in the country who wishes to rent out a property will have to abide by certain minimum energy efficiency standards. In approaching any form of enforcement, local authorities will not just have their hands tied behind their backs, they will have no hands at all, so to speak.

As an illustration, the properties that are licensed and therefore registered in Southampton under present HMO and Housing Act legislation number 900 out of a total of about 9,000 that are estimated to be landlord rented properties. There is, therefore, a long way to go before we could say that even a remotely comprehensive register was in place. When proposals were put forward previously to develop a national landlord register, the suggestion was not that a national licensing route should be followed but that a much more user-friendly, limited and genuinely useful national web-based register should be developed.

Such a register would, according to the cost-benefit analysis, have a net benefit in terms of its ability to provide information and property advertising, perhaps at the expense of NetMovers, and other resources which would accrue to the benefit of both landlords and tenants. Crucially, it would provide a comprehensive view of whatever part of the country and, without any great endeavour, would enable a landlord’s compliance with letting arrangements and the energy efficiency of that property to be questioned.

The alternative is that the matter would pretty much lie in the hands of those people who are negotiating to rent a property. Someone might pick up during the course of negotiating a rental agreement with a landlord that the property did not comply with the Bill, which I hope we will put on the statute book. That assumes a number of heroic acts on the part of the person who takes out that rental arrangement. They must look at the energy performance certificate and report the level it  is at, which someone then has to pursue. At that point the only way of identifying the landlord is by direct reference to the leasing arrangement. We need a much better method than that to ensure that the arrangements work.

The simplest and best method is a simple, easy to operate and not onerous web-based national register of landlords, which may fit the bill. The last assessment estimated the average annual cost of such a web-based register to be some £40 million. A limited registration fee would deal with the development costs. As I have described, the annual benefits that accrue would outweigh the annual cost over time. That is not a particularly onerous or unreasonable regulatory burden.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

My hon. Friend makes a good point. Does that £40 million figure factor in those private sector companies that provide consumer advice and would be willing to pay for it? That sum would then be offset.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Indeed, the offsetting of the £40 million annual cost is quite clear, although not necessarily from within the same pot of expenditure. The offsetting benefits are about treble the annual cost, which could be part of the offsetting process.

The amendment should not give anybody any sleepless nights, not even in the Treasury. On the other hand, it would ensure that we achieve what we all want to achieve. The amendment would benefit the overall stock, particularly properties in the private rented sector, which have the lowest SAP rating across the country. That SAP rating can be brought up to scratch. Tenants would get a better deal, good landlords would benefit and, overall, we would save substantial amounts of emissions from our properties.

The amendment is part of a mechanism that goes with the grain of what we are doing to bring about such aims, both in this Committee and on the Floor of the House. I would be interested to hear whether there are any good reasons for opposing it. I cannot think of any right now. On the contrary, I think it is an essential part of the process, which we all want to see succeed.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I am grateful for the opportunity to rehearse the arguments on the amendment, because important points have been raised by a number of stakeholders outside the Committee. The amendment, if accepted, would provide for a national or local register of domestic private rented properties.

The hon. Member for Liverpool, Wavertree summed up the nub of the argument when she said that we have to bear in mind that the private rented sector has been steadily contracting, more or less consistently, since the second world war—[Interruption.] Expanding since the second world war? I thought she said contracting—sorry, I do not mean to misquote her.

The bottom line is that we are now in a fragile economy. We are in a situation in which a lot of people are trying to get into the housing sector. There is demand, so we need a vibrant private rented sector. There is a fine judgment to be made between the social and climate change objectives of the policy that we are putting in place and the overarching health and resilience of the private rented sector. We cannot simply ignore  the interests, views and economic interests of the private rented sector landlords, upon whom we ultimately depend to make accommodation available. We want to attract more entrants into the market.

My hon. Friends the Ministers at the Department for Communities and Local Government undertook a significant review of the issue. The Minister for Housing and Local Government, having looked at the issue very thoughtfully, confirmed that there are no current plans for a national register, as the sector is already governed by a well-established legal framework. It would involve an additional cost and burden that would have to be borne somewhere.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

I accept that there is a cost, but it is to the landlord or the local authority. It would cost the local authority a substantial amount of money to chase landlords, so is the Minister saying that the council tax payer should pay and the landlord should be exempted, or the landlord should pay and the council tax payer be freed from that burden?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I am saying very clearly that the sector is already governed by a well-established legal framework. As things stand, we do not see a compelling argument why we should move towards a regime that would impose significant regulatory and financial burdens. I appreciate the simplicity and clarity of the Opposition arguments in favour of heavier regulation of the sector. I understand the intent behind that, but it would impose a further burden either on the taxpayer or on the private rented sector. We are committed to fewer regulatory approaches, greater discretion and localism and, wherever possible, avoiding putting further economic and regulatory burdens on to businesses.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

The Minister is making a robust defence, but I still do not think that it holds up. We need to go beyond the Committee stage. I want to press him on the point about encouraging more landlords into the sector. I want to hear what he has to say about consumers and choice. They seem to be bottom of his list.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Absolutely not. What consumers want most of all is a wide range of properties to choose from, which means ensuring that the Government do not discourage new entrants into the market. We need to be sensible about imposing new burdens and additional regulatory or financial penalties, which might put off new entrants and people investing in the sector, or could even dissuade landlords, who might withdraw from the sector. We need a healthy, vibrant sector, which is not served by over-regulation. As I have said, my colleagues at DCLG have looked at the matter in some detail and have come to the conclusion that the sector is already governed by an existing established framework. However, we will set out in secondary legislation the steps that local authorities must take to identify relevant properties.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

When the Minister sets out the regulations, will he provide an impact assessment of the costs that will arise from undertaking the processes, particularly those described in clause 40(2)? Will he be setting those costs, particularly to local authorities,  against the previous impact assessment of the costs on an annual basis of a web-based register arrangement?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I did not get everything that the hon. Gentleman said, but—

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

Adjourned till this day at Four o’clock.