Private Tenants and Leaseholders (London)

– in Westminster Hall at 4:00 pm on 3rd March 2010.

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Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North 4:00 pm, 3rd March 2010

I am pleased that you are chairing this debate, Mr. Cook. In a sense, it is a continuation of yesterday's debate on housing in London, which was about the terrible shortages of housing, particularly of affordable rented accommodation. [Interruption.] I think I am losing the attention of some of the Members in the Chamber.

Photo of Frank Cook Frank Cook Labour, Stockton North

Order. Would Members please leave the Chamber quietly?

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North

Thank you, Mr. Cook. I shall start again.

I am pleased that we are having this debate today. In many ways, it is a continuation of yesterday's debate, which was about housing shortages in London, and the overwhelming need for rapid construction of a large number of affordable rented council places.

My constituency has, roughly speaking, about 40 per cent. of its residents living in council-owned or housing association accommodation, a fast-declining level of owner occupation-probably about 30 per cent. and falling-and the remainder of its residents in private rented accommodation, which is the fastest growing sector and one that causes many tenants and me a great deal of concern. I shall come on to that in a moment.

We have to open the debate by recognising the need for everyone to have a decent home to live in, in security, where they can bring up their children in reasonable space and be part of community life. Because of the large growth in the private rented sector, there is huge population turnover, certainly in my constituency, which is in inner London. Indeed, I suspect that many colleagues in other inner-London constituencies and inner-city constituencies all over the country experience this problem. It is disruptive for families, particularly children, who have to move schools as a result of it.

In short, we have three forms of private sector tenancy in this country. The biggest by a long way is the assured shorthold tenancy, which provides limited security under the Housing Act 1988. The assured tenancy provides greater protection than assured shorthold tenancies, but there are many fewer of them. The last kind of tenancy, of which there is a very small number, is the regulated tenancy, which is a derivative of the Rent Act 1977. The then Labour Government were resolute in controlling tenancies, providing security of tenure and controlling rent levels. It is that issue that I want to deal with first.

Rents in the private sector are absolutely enormous. Typically, to rent a flat of any reasonable size in my constituency would cost £250 to £300 per week, and upwards of £400. I have seen some flats at £500 per week. I constantly feel a sense of anger when I am in my advice bureau on Thursdays and Fridays and people come in to see me who are living in privately rented former council properties. I know that the council rent for an exact equivalent of the property would be around £100 per week, but they are paying £300 or £400 per week, the majority of which is paid by housing benefit. Somebody who had the good fortune to buy a council property under right to buy at some point in the past is making £300 per week more than they would have had to pay in rent if they were in council accommodation. That has an impact, which I will come to in a moment.

A serious problem that I pick up on all the time is that of repairs done, or not done, by private landlords. I am not saying that all private landlords are bad landlords, or that they are unreasonable or difficult people. They are not; some of them are extremely decent and generous people who manage their properties properly. However, I come across a large number of cases of people in private rented accommodation-they have been referred by the council or have got it themselves-who find it difficult to get any repairs done. They know full well the danger that if they complain too strongly, their tenancy will come to an end. The issue is one of security of tenure, as well as decent levels of repair and complaints not satisfactorily dealt with. Most tenants feel a sense of disempowerment in challenging a private landlord on what are often basic repairs.

There is a cost to all of that in housing benefit and local housing allowance. In my constituency and, I suspect, that of my hon. Friend Mr. Slaughter, who has just joined us, and those of many other inner-London MPs, the local authority is not able to put many people from the waiting list into existing council accommodation, so, through the rent deposit scheme, it puts them in private rented accommodation. Others simply go into private rented accommodation because they cannot even get on the council waiting list and certainly have no chance of buying anywhere of their own. Therefore, they claim housing benefit.

The housing benefit costs to all of us of high private sector rents are absolutely enormous. I have tabled some parliamentary questions on the subject. Generally, if a person on jobseeker's allowance or income support is in council or housing association rented accommodation and is entitled to housing benefit, they get 100 per cent. of the benefit because they are in socially rented accommodation. If they are in private rented accommodation, they get a proportion of it. I fully understand the desire of the Department for Work and Pensions to drive down housing benefit costs, but the reality is that we then end up expecting people on housing benefit to pay on top of what they receive in housing benefit in order to maintain a roof over their head.

I come across constituents who are paying £30 or £40 a week out of benefits on rent, in addition to what they receive as housing benefit. We all know what the levels of income support and jobseeker's allowance are-those people are left with hardly anything on which to survive. We have to recognise that there are enormous costs here.

Those who administer the housing benefit system will say that people are required to pay the equivalent of a local market rent-no more and no less. I can understand where that philosophy comes from, and the calculations that they make on many occasions, but the reality in large parts of inner London is that the payment of housing benefit fixes the market rent and feeds into the voracious appetite of the market continually to increase rents. I am not saying that there is a simple solution to this, but it is very expensive for the public purse, and it does not much help the people whom it is designed to help. We need a radical reform of housing benefit, and the Minister will probably agree with that. I am not sure whether he has the solution today. If he has, I will stop now.

The benefit trap is also a serious problem. If a person on jobseeker's allowance is encouraged to find a job, as they are by the jobcentre, and they get a job, that is good. However, at present, they will lose housing benefit fairly quickly, and, as a result of that, they will be much worse off in work than they would be on benefit. If they have to pay, say, £300 a week in rent, they must get a job that pays at least the equivalent of jobseeker's allowance plus £300 a week just to break even with their situation while they were out of work.

The Government have recognised that, have increased the amount of time for which housing benefit is paid, and have increased the in-work benefit, but that does not solve the longer-term problem of those on low pay, or those moving back into the labour market. Typically, women who are single parents move back into the labour market in their late 20s or early 30s. They are unlikely to get jobs on £25,000 or £30,000 a year in order to meet their enormous housing costs. We must see what we can do to improve that situation.

A great deal of evidence supports the fact that there are problems. The Government's response to the private rented sector housing review, published in May 2009, stated:

"Moving forward in partnership with landlords, tenants and local government representatives, we should continue to monitor and review the regulatory and incentive framework to ensure it is fit to deliver the consistent high standards and professionalism."

I welcome what has been done in that respect. I also welcome the attitude that the Government are now developing towards security of tenure in the private sector and reforms of the housing benefit system. I hope that the Minister is able to give me some relatively good news in that respect.

I should like to mention the situation faced by leaseholders. Large numbers of people bought their council property under right to buy, which was introduced in the early 1980s. With the right to buy a street property-a house-goes the freehold. That is a transfer from the public sector to an individual-the considerations of leaseholders clearly do not apply. However, those who buy flats always get a lease, with which goes a number of things, particularly service charges and capital costs, which apply to the large number of people who have purchased leasehold flats. The issues facing local authority leaseholders-I will mention housing association leaseholders in a moment-are similar, but not identical.

Some local authority leaseholders bought into council ownership in the 1980s without any real consideration of the longer-term implications of doing so, what capital works were required on the property or what the service charges could be. Many fly-by-night solicitors gave inadequate advice at that time, simply saying, "Buy your flat. You'll be okay."

When capital works come along-I support and welcome the decent homes standard and all the intentions behind it-they can be catastrophic for poorer older people who bought into council accommodation many years ago. I came across the case recently of an elderly woman, a retired nurse, who bought her council flat in the early 1980s and was now faced with a massive major works bill that she could not afford to meet. She could not get a mortgage because of her age and seemed unable to do anything about that other than to move out, share a small flat with her brother some distance away, and rent out her former council flat to pay the cost of the capital works-to do up the flat that she could not afford to live in. She has got herself into a crazy bind. I know that was not the intention behind those measures, but there are serious issues to consider.

The high costs of capital works and the often limited transparency in respect of those, in the perception of leaseholders in council accommodation, also need to be considered seriously. I am sure that colleagues from London-we have been joined by Simon Hughes-would bear out the great concerns of many living in council leasehold accommodation about the costs involved and their difficulties in meeting such bills. One asks for flexibility on the part of the councils and for a sense of fairness in the allocation of funds. Many hon. Members have become experts in the costs of scaffolding, surveying and carpentry, and every other cost that results from such works.

I shall now mention the important matter of leaseholders put in places by housing associations and people who have bought leases or part-ownership from housing associations. The idea behind that strategy was that those who did not own any property would be able to buy a share of a property and possibly staircase up their proportion of the ownership and pay rent on the remainder. In addition, they would have to pay a service charge, as all leaseholders do, and pay either into a sinking fund or pay their share of capital costs when major works came about.

To prepare for this debate, I spent an hour or so last Sunday morning talking to a group of leaseholders in a housing association development, which happened to be a Family Mosaic development, but the issues probably apply equally to all housing associations. Those leaseholders were concerned that, prior to 2002, building and repairs contracts were let by individual tender on a process that had been going on for a long time under a value-for-money regime, which seemed fair enough. Under that arrangement, leaseholders living in property owned by councils or registered social landlords were protected by process under section 20 of the Commonhold and Leasehold Reform Act 2002, in that they had to be consulted on any work that they would be asked to pay for-usually more than £250 per property-so there was a quite open process of consultation and agreement on what the costs would be. In 2002, that culture was changed and the registered social landlords-the housing associations-signed huge contracts with building firms to undertake long-term maintenance on many hundreds, if not thousands, of properties over several boroughs.

As a result, the local control went away. One suspected that the partnership arrangements with the housing associations provided nice work for the building companies because they knew they were getting paid, but more than occasionally there were serious questions about the levels of so-called savings made under those economies of scale. In reality, a lot of people were paying large sums for work that they were not clear about. Electors in my constituency have shown me cyclical maintenance bills that have risen astronomically between 1999-pre this system-and the current regime coming into effect. With that process goes a lot of tendering and sub-tendering of repairs.

I would be grateful if the Minister told hon. Members in this Chamber what kind of investigative and regulatory regime is placed on the housing associations in letting major repairs and maintenance contracts and-this is serious-what level of real involvement of leaseholders there is in most housing associations in any kind of meaningful consultation. I detect that the bigger the housing associations get, and the bigger the contracts get, the more remote becomes either the operative in the housing association-the official-or the tenant. I should be grateful if the Minister gave us some news about the powers and operation of the Tenant Services Authority.

To combat this scandal I would be grateful if the Minister considered the reintroduction of proper consultation on all cyclical maintenance contracts with tenants and leaseholders, or with appropriate residents' groups, so that there is some degree of transparency and openness in the whole process.

I am proud and happy to live in a vibrant, exciting area in which many people are making huge community contributions. But unless we can deal with housing, give people security of tenure and lower the overall housing costs for large numbers of people, the pressure that the market is applying will gradually become an unstoppable force, driving away the poorest and most needy people from inner London and other equivalent inner-city areas of this country. I am grateful for this opportunity to bring these matters to the attention of the House. I look forward to the Minister's reply.

Photo of Ian Austin Ian Austin Minister of State (Regional Affairs) (West Midlands), The Parliamentary Under-Secretary of State for Communities and Local Government 4:19 pm, 3rd March 2010

I congratulate my hon. Friend Jeremy Corbynon securing the debate. He is right: it seems as though it is the second half of the debate that was curtailed yesterday and that we are here to conclude that discussion.

I congratulate my hon. Friend on his commitment to improving the quality and quantity of housing, particularly affordable housing, for his constituents. He has campaigned for that ever since becoming a Member of Parliament. He has raised a series of issues, and I shall try to deal with each in turn, starting by picking up on some of his points about local authority leaseholders.

Like all home owners, local authority leaseholders have a responsibility to maintain their homes, and that includes contributing towards the cost of major repairs and refurbishments by their landlords to the buildings containing their flats and communal areas. We know that more than 10,000 council leaseholders, particularly in London, have received bills of £10,000 or more for major works and that some bills are much higher that. My hon. Friend is absolutely right about the problems and distress that that may cause for leaseholders.

We have put in place measures to protect leaseholders and to give landlords discretion to help, including directions dating from 1997 that require local authorities to cap charges for major works charges at £10,000 when works are funded from some specified Government grant programmes, or when specified criteria are met-for example, when the leaseholder would suffer exceptional hardship in paying the bill. Local authorities must consider each and every application against the criteria set out in the discretionary directions.

Local authorities must provide loans on specified terms to help leaseholders to pay service charges when requested in specified circumstances, and may offer loans on terms of their choosing in other circumstances. Local authorities may also buy properties back from leaseholders, and the Government part-fund that, paying 35 per cent. of the cost when it exceeds £50,000 in any year by allowing them to retain more capital receipts. Local authorities may spread payment of bills for major works over several years, and offer interest-free periods. They may also defer payment until the property is sold, charging interest in the meantime.

We have empowered local authorities to offer equity loans, and to purchase equity shares in homes on terms agreed with the leaseholder. We have ensured that leaseholders have statutory rights, including the right to challenge the need for major works and the cost of such works when they are believed to be unreasonable. They may do that by applying to a leasehold valuation tribunal. Leaseholders also have the right to be consulted and to comment on major works proposed through a statutory consultation process.

We know that some leaseholders are still concerned about large bills and believe that they have only a limited say in the scale and timing of the works. Some find the LVT process intimidating, even though LVTs may find in their favour. Some consider it unfair that the Government cap some bills at £10,000 but not others, and that councils will not use all their powers to reduce the burden. There have been calls for the Government to cap all large bills for major works at no more than £10,000.

Evidence suggests that for many leaseholders, those options work, but clearly a significant number still face problems. I have mentioned my hon. Friend's committed work, but I pay tribute also to my hon. Friends the Members for Islington, South and Finsbury (Emily Thornberry) and for Regent's Park and Kensington, North (Ms Buck), who have campaigned tirelessly to highlight the position in particular of elderly leaseholders on low incomes and of working couples and families who already have mortgage commitments.

In the Government's statement to Parliament in March 2007, we made it clear that we wanted to address the problems, and we followed that up with a number of measures. We encouraged local authorities to inform and advise all leaseholders facing particularly high bills for major works about the full range of payment options available and to share best practice to ensure that that happens everywhere. We arranged with the Greater London Authority for boroughs to be invited to bid for private sector renewal funding from the regional housing pot for 2009-11 to assist leaseholders who cannot pay by any other means.

We increased funding for the Leasehold Advisory Service-LEASE-so that it could develop its advisory, alternative dispute resolution and mediation services, for which demand continues to increase. As a result, LEASE is on target to deal with approximately 38,000 leasehold inquiries by the end of the financial year-an increase of almost one third on the previous year. We have said that work will continue with lenders and independent financial advisers, landlords and leaseholder representatives to develop the use of existing equity release and equity loan schemes. As promised, we legislated in the Housing and Regeneration Act 2008 to enable local authorities to offer equity loans to leaseholders and to buy back shares in properties

We have also commissioned an external review of how social landlords are dealing with leaseholders' problems with bills for major works. That report is being finalised and we intend to build on its findings to develop a way forward that is fair to leaseholders, landlords, tenants and taxpayers. We are committed to finding ways to help those leaseholders who are genuinely unable to find a way to pay.

I listened with great interest to what my hon. Friend the Member for Islington, North said about the problems facing housing association leaseholders. I am aware that service charges, including charges relating to management, may be a cause of concern to those who have purchased their property in some developments through the shared ownership route.

Photo of Andrew Slaughter Andrew Slaughter Labour, Ealing, Acton and Shepherd's Bush

I am pleased that my hon. Friend Jeremy Corbyn has secured this debate today I agree with him that it is related to yesterday's debate on affordability. Today, we are discussing the other end of affordability. Will the Minister consider seriously the problems facing council leaseholders who, because of the poor state of repair of their properties, and housing association leaseholders who, because of the entry costs and service charges, are finding that their properties are not affordable, and whether we should consider the definition of affordability for people who live in leasehold accommodation that is allegedly low cost? Tricks are often played on them, and they are told that something is affordable when it is not.

Photo of Ian Austin Ian Austin Minister of State (Regional Affairs) (West Midlands), The Parliamentary Under-Secretary of State for Communities and Local Government

That is an important point, which I will come to.

Purchasers living in flats are required under the terms of their lease to contribute towards costs through service charges, although providers may set up and manage a sinking fund to cover the cost of major works when the lease allows. When leaseholders contribute to a sinking fund, it may help to lessen the impact by spreading the cost over a longer period and minimising demands for service charges when the works become necessary. The Tenant Services Authority requires registered social landlords offering shared ownership schemes to explain the features of the scheme, so that applicants may make informed choices on whether the scheme is right for them. Applicants will have the level of service charge, rent, mortgage and other outgoings taken into consideration to determine whether the applicant is able to afford the purchase, as well as their ability to sustain home ownership in the long term. The TSA also expects RSLs to levy service charges that reflect the actual cost of services provided, and any increases should reflect the rise in actual costs. The Homes and Communities Agency expects grant-funded shared ownership schemes to be affordable to the intended client group.

Shared owners contributing towards the costs of repairs and maintenance through their services charges may challenge them through the leasehold valuation tribunal when they believe the charges to be unreasonable, and they may receive free advice about that and other rights available to them from the Leasehold Advisory Service. I am aware that service charges, including charges relating to management, are a matter of concern to those who have purchased their property. Free legal advice is available on the various remedies available to shared ownership and other leaseholders when faced with a service charge demand that they believe to be unreasonable.

In December, the Government issued a consultation paper setting out how we will reform housing benefit to deliver a simpler and fairer system of housing support that pays a fair rate of benefit to customers while protecting taxpayers. It also sets out our long-term aspiration to move towards a housing tax credit that is properly integrated into the wider tax and benefit regimes. As my hon. Friend the Member for Islington, North knows, housing tax credit is not something that we can implement overnight. Such changes will take time to achieve if they are to be affordable and achievable. We will ensure that the changes go hand in hand with wider housing policies to build more social and affordable housing in mixed communities.

The consultation sets out our next steps for reforming housing benefit and includes those measures that we want to implement quickly, as well as those that we will deliver as part of our longer-term reform of the benefits system. As part of the consultation, we sought views on how to set fairer and clear benefit rates. The local housing allowance is set at the median level of rents in an area and is intended to ensure that approximately half the properties available to rent in any area are affordable to people receiving housing benefit. That balances the needs of customers, enabling them to afford decent, quality accommodation, with the needs of taxpayers not to subsidise unreasonably high rents.

We must consider again how we set local housing allowance rates, and examine the effect of areas with pockets of high rents in driving up the median. We also want to consider how to define geographical areas for local housing allowance rates. We recognise that rents vary significantly throughout the country, but in London they are typically much higher than in other areas. High rents mean that, after housing costs have been taken into account, people are more likely to live in a low-income household in central London than in any other area of the country. There also tends to be wider variation-

Photo of Frank Cook Frank Cook Labour, Stockton North

Order. That terminates the time allocated for the debate.