Letting Agents — [Annette Brooke in the Chair]

– in Westminster Hall at 2:30 pm on 27th February 2013.

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Photo of Sarah Champion Sarah Champion Labour, Rotherham 2:30 pm, 27th February 2013

It is a pleasure to serve under your chairmanship, Mrs Brooke.

I requested this debate because of my concern about the growing problems faced by tenants and landlords across the country at the hands of unregulated letting agents. I am concerned that the Government appear to be making no moves to address those problems. We need a regulated sector for the protection of all. I make it clear that I am criticising not all letting agents but a minority who bring the profession into disrepute.

My parents have been in private-rented accommodation with the same landlord for the past 30 years. They receive an excellent service, pay a fair rent and have clarity on their position. Increasingly, however, that is not the case for all. I find more and more constituents are being exploited by unscrupulous agents.

With the economy flatlining, we are facing the biggest housing crisis in a generation. The Government’s housing and economic policies are making that worse. House building is down; homelessness and rough sleeping are up. We have a market in which people struggle to get mortgages, and, unfortunately, most of us cannot rely on the bank of mum and dad.

A result of the growing housing crisis is that more and more people are locked out of home ownership and are forced to live in the private rented sector. I have no objection to that per se. In most of Europe, the private rented sector is the norm, but tenants over there do not suffer at the hands of cowboy letting agents, which is the big difference.

In the UK, the private rented sector is now bigger than the social sector. Last year, the private rented sector overtook the social sector for the first time in nearly half a century. Five million people, however, are on local authority waiting lists, and young people are now forced to wait well into their 30s before they can buy their own home, if they can ever afford to do so.

The Government should be building more homes and better supporting tenants and families. The gap between supply and demand is ever increasing. The private rented sector clearly has an important role to play in meeting housing needs, but to do so it must be a market that works for tenants and landlords, with no room for rogue letting agents and rip-off fees.

There are now 3.6 million households in the private rented sector, and a third of those families have children. Private renting is not just for young professionals. The Resolution Foundation predicts that by 2025, if the economy remains weak, 27% of low to middle-income families will be living in private rented accommodation. That is why I urge the Government to act now to impose regulations, because the problem is not going away; it is growing.

What are the issues of private renting? Many of those looking to find a home in the private rented sector, or who already live in the private rented sector, have to use a letting agent. The evidence shows that too many tenants are being ripped off by opportunist letting agents who fail to protect tenants’ money and who charge exorbitant fees that are completely opaque.

A report by Citizens Advice found that 73% of tenants are dissatisfied with the service provided by their letting agent, with a significant number having difficulty contacting their agent and suffering serious delays in getting repairs. There are cases of agencies, even large and well established businesses, running into difficulties because they have no client money protection, with the money of both landlords and tenants being lost. Shockingly, that has not prevented the owners of companies that have gone bust from resuming their activities at a later date.

Ryan Lee, a 24-year-old Cheltenham letting agent, has today been sentenced after pleading guilty to taking £13,500 from 13 customers. Husband and wife Chris and Lucy Mallows were among Lee’s victims. They handed him £900, which they believed would go into a secure deposit scheme. They also discovered that money they had given to Lee to pay their first month’s rent had not reached their landlady. At the time, Lucy and Chris were setting up their own oven-cleaning business, and they could not afford to lose the cash. When they first realised they had been conned and went to the letting agent’s office to investigate, they found the shop stripped of computers and in complete darkness. Lee spent 10 months on the run overseas before being caught. Responding to the case another local agent said:

“There have been incidents recently, all local and reported in the press, of three letting agents disappearing with thousands of pounds of clients’ money.”

Unfortunately that is not only a Cheltenham issue but a national issue.

Individuals who are trying to invest for their future represent the biggest increase in landlords in recent years. That novice group are easy pickings for rogue letting agents. Novice landlords have expressed the pressure that letting agents put on them to raise rents. Shelter finds that one in four landlords has raised their rents because a letting agent had told them to do so. Letting agents put pressure on landlords to issue very short contracts, which benefit only the letting agent as they can charge more fees for re-letting the property.

Letting agents are preventing tenants from directly contacting their landlords. There are no safeguards to protect tenants, landlords or reputable agents. All I request is that the Government create a level playing field in which tenants are treated fairly and landlords have fair competition. Currently, good landlords are being exploited and good letting agents are being undercut by rogues, which cannot be allowed to continue.

More than 4,000 managing and letting agents are estimated to be entirely unregulated. At present, it is still possible to set up a letting or management agency with no qualifications whatsoever. There is no need to conform to requirements of conduct or to provide mandatory safeguards for the consumer. There are no obligations on letting agents, unlike estate agents, to register with a redress scheme enabling awards to be made against agents for quantifiable financial loss to clients. Letting agents, unlike estate agents, operate outside of any legislation. As the Royal Institution of Chartered Surveyors puts it, letting agents operate in the property market’s “Wild West.”

A local agent commented in the Bristol Post:

“It’s all well and good to seek out an agent who belongs to a voluntary licensing scheme, but the average man in the street would reasonably expect consumer protection from any operator in our industry.”

He is right. People do not start their property search by looking for which letting agents have the most kitemarks; they search online for a property in a certain area that is within their budget. Once a desirable property is found, it is difficult to walk away, and I am certain the letting agent’s track record is not even considered.

Voluntary schemes have obvious drawbacks. The good agents comply with such schemes, and the cowboys ignore them. In 2002, the previous Government established the national approved letting scheme as an independent voluntary regulatory body. Industry-led bodies such as the Association of Residential Letting Agents and the Royal Institution of Chartered Surveyors have done good work in encouraging a responsible regulatory approach. Although the principles are laudable, however, at no time have the majority of letting agents in England been members of such schemes. Self-regulation has not delivered and we now need something stronger.

Photo of Steve Reed Steve Reed Labour, Croydon North

Does my hon. Friend agree that it was wrong of the Conservatives on London councils to scupper plans for a pan-London registration scheme for landlords and agents so that tenants could have had assurance that they met minimum standards?

Photo of Sarah Champion Sarah Champion Labour, Rotherham

My hon. Friend makes a good point, and I completely agree.

Across the industry, there is a problem with rip-off and opaque fees charged by letting and management agencies. A national survey of letting agents found that 94% impose additional charges on tenants on top of the tenancy bond, rent or rent in advance. The citizens advice bureau in Dorset reported a client who was considering renting a three-bedroom property. He was shocked to find hidden in the tenancy agreement a requirement for him to pay £94 every six months for “search fees.”

The national survey also found huge variations in the size of such charges. Charges for checking references ranged from £10 to £275, and charges for renewing a tenancy ranged from £12 to £220. In some cases, additional charges for a tenancy amounted to more than £600, which is a vast amount of additional money for anyone to find. The fact the fees vary so much shows that those charging the premium are clearly making a huge profit.

Photo of Lucy Powell Lucy Powell Labour, Manchester Central

Does my hon. Friend agree that letting agents’ charges to landlords are also absolutely extortionate? It is not just tenants who face charges; many landlords, when tenancies are renewed, must pay 10% a year in ongoing charges. I get many complaints in my constituency, as I am sure she does, from landlords who feel that the market needs regulation.

Photo of Sarah Champion Sarah Champion Labour, Rotherham

My hon. Friend makes a good point. It is both tenants and landlords who suffer from unscrupulous letting agents, and we must do more to protect them. This cannot continue.

Up-front fees present a significant barrier to low-income people looking to rent, in some cases with serious consequences. The charity Crisis contacted me about Danny, a 34-year-old man who became homeless after a family break-up. Danny was given a list of letting agents who were happy to take housing benefit tenants.

He called them daily for several weeks, looking for a property. He was eventually offered a flat and told that he could move in after six weeks.

Danny secured a crisis loan to help him pay rent in advance. The agent asked him for a £250 administration fee, refusing to confirm in writing what the fee was for or to provide a signed tenancy agreement. The agent then told Danny that others were interested in the property and asked for an additional £800 holding fee to keep the flat off the market. He knew Danny’s situation but refused to reduce the fees. Although he tried to scrape together the money, Danny could not take up the tenancy. Having forgone his place in a winter shelter, he slept rough before going to Crisis. He is now living in a hostel and looking to move into private rented accommodation again. I would love to say that Danny’s story is unique, but it is not.

Photo of Gregory Campbell Gregory Campbell Shadow Minister (International Development)

I congratulate the hon. Lady on securing this debate. She is telling a harrowing story about the individual whom she named. Does she agree that regulation must include transparency and clarity about any additional charges, so that potential tenants and landlords can be absolutely clear what they are being charged and why?

Photo of Sarah Champion Sarah Champion Labour, Rotherham

I completely agree, and I thank the hon. Gentleman for that intervention. What I am asking for most is a shopping list of fees, so that people can go in with their eyes wide open. What I am finding is that people—whether tenants or landlords—enter a tenancy agreement, and then additional fees are sprung on them, which is unacceptable.

According to Which?, some tenants are being charged up to £90 to renew an existing tenancy: that is, to stay in a property for which they have already undergone checks and been paying rent. Equally insultingly, some letting agents charge £120 to check out of a property; let us hope that the hotels do not catch on to that scam.

I recently encountered a case in Rotherham in which a vulnerable couple with dependent children paid a month’s rent in advance and a £100 administration charge to the letting agent. They were not given receipts. The couple were informed that the property was available and were given a date to move in. However, the house was in a state of disrepair. There were structural problems and exposed wiring and damp, and it was not suitable to live in without work.

The couple did not waive their rights to a seven-day cooling off period, and decided not to move into the property. They telephoned and wrote to the letting agent to cancel the agreement within the designated time limit, but the letting agency made it difficult for the clients to get back their deposit and administration fee. It took considerable time for the letting agent to agree to refund the advanced rental payment. No mention was made of refunding the administration fee.

A report by the independent Resolution Foundation found three key areas of concern regarding fees and charges levied by unscrupulous letting agencies. First, there is a substantial disparity in the fees charged by different agents for similar services, but no apparent difference in the quality of the service received. Secondly, moving into the private rented sector generally entails significant up-front costs due to fees and charges. Thirdly, charges are too often hidden in the small print and people are exploited by unfair fees that they were unaware they would face.

All those issues were highlighted in an investigation by the Office of Fair Trading whose findings were released two weeks ago. The OFT found that although the lettings market is a significant part of the UK economy, it generates an extraordinarily high level of complaints. The investigation found that the main areas of concern for tenants were surprising and high charges, confusion about holding deposits, misleading advertising, repairs not being carried out and the non-refund of security deposits. The OFT also found that landlords’ concerns focused, among other things, on agents not doing what was agreed in the contract and not passing on collected rents to landlords.

As a result of its investigation, the OFT has called for better up-front information, including clear tariffs of fees and charges at the start of the process and certainly before any contract is signed, and a redress mechanism so that landlords and tenants can sort out problems when they occur. The OFT has also called on the Government to require agents to sign up to a code of practice or join a redress scheme, and it questions whether the level of consumer protection provided by law is right for the sector.

With such a weight of evidence, why is it that despite the reports from Citizens Advice, the Resolution Foundation, Which? and now the Office of Fair Trading, despite the calls for action and support for change from millions of tenants and landlords and despite calls for change from the industry itself, including the Association of Residential Letting Agents, the Labour party and the Royal Institution of Chartered Surveyors, the Government have so far not been moved to act? They voted against the Labour Opposition motion last month calling for action on the private rented sector, including on letting agents. The Government did not accept Baroness Hayter’s amendment in the Lords to include letting agents in redress schemes, which would have been a small step towards greater protections for tenants and landlords, and one of the first actions of the then Housing Minister, Grant Shapps, was to scrap the last Labour Government’s proposals to regulate letting agents.

I hope that this Minister for Housing, Mr Prisk, despite having voted against Labour’s proposals last month, will now consider changing course. Action to regulate letting agents would benefit tenants and landlords, providing protection for their money and appropriate redress mechanisms. It would also benefit the industry as a whole, protecting the reputations of responsible agents, and the economy: a report by the Royal Institution of Chartered Surveyors found that regulation of the industry could generate more than £20 million in benefits per year to the UK economy. Given that millions of families throughout the country are living through the biggest squeeze on living standards in a generation, action on fees would ease the pressure for tenants.

Will the Government act now to protect tenants and landlords by regulating letting and management agents? It is not a party political request; regulation is supported by the industry itself. Will the Government act now to end letting agents’ confusing, inconsistent and opaque fees and charges by ensuring transparency and comparability?

Will they undertake to review the fees that letting and management agents can charge? Labour has repeatedly called on the Government to act now to change the private rented sector so that it works for all. There is no better place to start than with the lettings industry.

Photo of Damian Collins Damian Collins Conservative, Folkestone and Hythe 2:47 pm, 27th February 2013

It is a pleasure to serve under your chairmanship, Mrs Brooke. I congratulate Sarah Champion on securing this debate and on her speech. She raised an incredibly important point. For me, one of the interesting things about this debate is why our private market is failing when there are many different agents who charge different fees and many properties available. One might expect that people would shop around in that situation and go to better landlords and agents that charge lower fees, but that does not seem to be happening. My speech will focus on why I think the market is failing and what we can do about it.

The point is well made about the disparity in fees, what they are for and why they are charged. I got someone in my office to conduct a mystery shopper exercise in Folkestone, in my constituency, and was interested in the results. I will not pretend that every agent was asked, but I was amazed by the range of fees charged by different agents.

To give an example, an inquiry was made regarding a standard joint tenancy for two adults in work in a flat in Folkestone. The rent for such a flat might typically be between £500 and £600 a month. One agent, when asked, said that their fee structure included a £220 administration fee, a £50 if there was a guarantor and a £120 additional charge on contract completion, totalling £390. There was then a month’s deposit up front, which is standard for most properties, plus £100. Someone paying all the fees could easily pay nearly £500 in charges apart from the deposit, or more than £1,000 just to move in. That is before they have walked through the door. Many people would find it impossible to raise the kind of money to move into such a property, and there are moving costs on top, so someone could easily be paying more than £1,500 just to move into a property. Someone on a low income would not be able to raise such money.

In that example, the fees for the property were quoted by a company called Evolution Property Lettings, which operates in Ashford and Folkestone. I was interested to see whether its fees were typical: it was charging £390 in fees, plus an additional £100 on the deposit, so £490. Another agent, Fell Reynolds in Folkestone, was charging £60 per person in fees—no other administration charges or renewal fees—and only a month’s deposit, without the additional £100.

Someone would save several hundred pounds in fees simply by using a different agent. I am sure such companies have reasons for their fee structure. Jenny, one of my constituents who is thinking of renting a property through Evolution Property Lettings, asked it why it charges those fees, what they are for and why they are different from other agents’ charges, because there is clearly a massive disparity in fees charged for a similar amount of work.

The challenge is why people do not have the information or the confidence to ask around. Does more guidance need to be given to people to suggest what fee structure different agents charge, that they should shop around and ask, that they should go to a reputable agent and that they should challenge agents on the fees that they charge? We should certainly be suggesting that as elected politicians and local authorities should do the same; with citizens advice bureaux, therefore, we are all people who can give advice and, I hope, shame some organisations into being more transparent about their fees and, where possible, into reducing them.

The culture of fees being charged—as I said, the fact that it might cost someone £1,000 to move into a property—blocks up the private rented sector, and that leads to such market failure. The hon. Lady gave an example of tenants who live in a property in a poor state of repair, and I am sure that Members of Parliament throughout the country could all give plenty of other examples from our constituency casework. People live in run-down properties—perhaps containing a category 1 or 2 hazard, as defined by the Housing Act 2004, which would give the local authority the power to intervene—but why do they not move?

One of the reasons why people do not move out of such properties is that they cannot afford to. The managing agents know that, and they will therefore happily sit there and do little to intervene. By the time the local authority inspects the property and requests that the agent or landlord carries out work, many months will have passed. The landlord might then propose to carry out the work but not do it, and so it would not be atypical for more than a year to go by before any definitive action is taken. We have to look at how to clamp down on that element.

How can we make people do the work that they are supposed to do? How can we empower tenants to exercise their rights? There are two elements to that. First, we should all be concerned that most of the worst cases are paid for by the taxpayer, because most of the people pay their rent out of housing benefit, even though they rent in the private sector. Why are we paying housing benefit through poor letting agents to slum landlords? Why do we allow things to continue for a long period before anything is done?

I sympathise greatly with the case made by the hon. Lady, but we may diverge because I think that registers might not be enough. Registers have to be enforced; people have to inspect the properties. The problem that we face is that the inspection work has not been done. Local authorities have the power to inspect properties to force change, but why is that not being done?

When the subject was debated in the main Chamber last month, it was pointed out that it is sometimes difficult to identify who the landlord is to get them to take action. The one thing that we control, however, is the money supply. If we can turn off the money, we would find that the landlords will act pretty quickly, because most landlords want high occupancy in their properties. If they were told that they will not get their money for a month or two and that the work only costs up to £1,000 or so, they would pretty quickly carry out the work. If the agent did not receive the rent on behalf of the landlord, we can be pretty sure that the landlord would soon want to know what was going on. The best way to police rogue letting agents might be to make landlords more challenging about the way that their money is spent in the fees they pay.

I am asking Minister whether, in the reforms proposed, we are looking to empower tenants to take control of the housing benefit paid out in their name. Should we consider what additional protection we can give to a tenant who tells a landlord or letting agent, “You are not maintaining this property correctly. It is a hazard to me and my health. I believe you are in breach of our contract. Therefore, I am going to withhold the rent I pay to you—the housing benefit you would receive through me”? I believe that many people would be fearful of taking that course of action—fearful of eviction or legal action taken against them—so should we consider how to empower and protect tenants in that situation, so they can withhold their rent or housing benefit?

Photo of Lucy Powell Lucy Powell Labour, Manchester Central

The hon. Gentleman makes an excellent point about housing benefit recipients and their relationship with landlords. Does he agree that, under universal credit, with the money going to the tenant rather than directly to the landlord, the onus on the tenant to take action against unscrupulous landlords will be even more challenging than in the current climate? Therefore, will he support Opposition amendments to universal credit, so that we keep the system of paying rent direct to the landlord?

Photo of Damian Collins Damian Collins Conservative, Folkestone and Hythe

I understand the hon. Lady’s point. The mechanism of making direct payments to landlords could be seen as an incentive to landlords to meet their obligations, because it is massively in their interest to have direct payment of housing benefit: they have sitting tenants; there is massive demand for property; and they are given a guaranteed income, which effectively comes from the Government, one way or another, rather than from a tenant. I can understand how that works in the existing system. With the reforms, however, we can tell tenants, “You will receive the benefit. You can make that decision, but perhaps you need more understanding of your rights and what protection in law you have.”

I do not want to use this opportunity to make up Government policy on the hoof, not that I am in a position to do so anyway, but I have a suggestion. If extra protection is needed, should there be a rent order or something that a local authority can issue to say, “We do not believe that any more rent should be paid on this property by the tenant until the work is completed”? It could also state, “We believe that the tenant in this case is protected in law and cannot be evicted. No legal action can be taken against them until the work is completed. We will inspect it.”

Given that we are paying out of our taxes for failure in the private rented sector and that we are paying slum landlords through housing benefits, how can we use the mechanism of the money that we control to encourage them to invest in their properties more promptly? If they do not, they might otherwise risk losing the benefits. If housing benefit was not paid out, I would prefer tenants to able to use the money instead for a deposit on a new property that they might wish to rent and to pay for some moving costs. They would then be empowered in the market, so that they could pick up and go elsewhere. At the moment, they are restricted from doing that; they cannot afford to move out of their rented property because of the charges.

My question to the Minister is, how can we work with the proposed housing benefit and universal credit Government reforms to empower tenants, so that the private rented sector works as a proper market and so that tenants are in a position genuinely to pick up and move and go somewhere else—to a different property or agent—if they feel that they are being ripped off or being made to live in slum conditions that are not tolerated and that are in breach of the 2004 Act? That could be a more empowering mechanism for the tenant, and much easier to deliver, rather than having an army of local authority inspectors running around after and chasing up letting agents and landlords.

With the best will in the world, that regime was enabled by the Housing Act introduced by the previous Government, but it has not solved the problems, because the scale of enforcement is so great. However, if we can empower tenants to take action and protect them as they take that action, by taking their business elsewhere, that could be a ready solution to the problem. That is the thought that I suggest. We control the money supply, so perhaps we can use that to stand up for tenants in dire straits, in poor housing and on low incomes. We can protect their interests by standing up for them against the landlords who exploit them.

Before I finish, I apologise to the House. I should have referred to my entry in the Register of Members’ Financial Interests before I made my speech. I hope that you will accept my apology, Mrs Brooke, and my reference to the register at this point.

Photo of Paul Blomfield Paul Blomfield Labour, Sheffield Central 2:58 pm, 27th February 2013

I congratulate my hon. Friend Sarah Champion on securing the debate and making such a comprehensive and convincing case for regulation. I am also pleased to follow Damian Collins, because there seems to be a cross-party consensus on the need for action and the depth of the problem, although we might not be at quite the same point in some of our conclusions.

My hon. Friend made an important point about the growing importance of the private rented sector in a housing market in crisis. She said that 3.6 million households are in the private rented sector, and by the end of the decade about 20% of households will be in that sector.

Crisis, the charity for single homeless people, has said that for many households, including those on low incomes, the private rented sector is not fit for purpose—a devastating criticism. It highlights the conduct of letting agents as a major issue among a range of problems. They charge extortionate fees—typically for reference checks on tenants, contract preparation, deposit handling and tenancy renewal—that are often disproportionate and lack clarity because they may not be charged until after the tenant has signed the contract or paid a deposit, a practice known as “drip pricing”.

Holding deposits are often required from tenants who have decided to rent a property, but it is not always clear in what circumstances and how much of the deposit will not be refunded if the tenant decides not to proceed with the tenancy. In some cases, letting agents have taken holding deposits from two or more tenants for the same property.

Crisis raises a number of other points, which make clear the depth of malpractice by letting agents. That does not apply to all letting agents, but to a significant enough number for Citizens Advice research to come up with the conclusion that 73% of tenants were dissatisfied with the service they were providing. That is a devastating figure.

My city centre constituency has many houses in multiple occupation and faces many of those problems. I am sure that many hon. Members will make points about different sectors of the community that face difficulties; I want to highlight students because I have about 32,000 of them living in my constituency.

Student accommodation has a certain image, perhaps embedded in our memories from the classic images of Neil, Rick, Vyvyan and Mike in “The Young Ones”. However, in reality, students want and deserve a decent standard of accommodation. Some students in Sheffield are fortunate if they have accommodation provided by our two universities. Students voted the Sheffield university accommodation the best in the United Kingdom—

Photo of Paul Blomfield Paul Blomfield Labour, Sheffield Central

Sheffield beats Manchester in many ways—[Interruption.]Not at football at the moment, but I dream on.

Most students spend some time in the private rented sector, particularly after their first year. Good quality accommodation is available in the private sector, but there are numerous cases of quality not being good enough. The student advice centre at Sheffield Hallam university student union has raised several issues of concern that students are reporting.

First, students are encouraged to sign up for tenancies early and are misled by letting agents into believing that there is a shortage of accommodation and that it is a landlords’ market, when it is not. They are encouraged to sign up for tenancies in October or November in the year prior to the start of the tenancy, which for first-year students is just after they have started their course. They are asked to make choices nine months or so before occupying the accommodation, which leads to a range of issues with disrepair because letting agents, on behalf of landlords, make promises of improvement work to secure the tenancy, but then simply do not carry out the work or, if repairs are done, they may not be done by the time the new tenants move in.

Letting agents encourage students to sign up to tenancies early because students worry about not being able to find somewhere else to live, and that often forces them into joint tenancies with people who may be first-week friends and between whom there is no lasting bond. That can cause real difficulties when people try to get out of contracts but are unable to do so. Some students sign up too early to take account of how their course is going. They may not proceed with the course, or they may transfer to another university or take a year out, but they are still locked into their contract if they sign it within a few weeks to going to university.

Some letting agents and landlords take advantage of students’ transient tenancies. They are usually in a property for only a year and action for remedy may take a long time, so there is often no incentive for students to take action if they will be moving out within a relatively short period. Letting agents and landlords are aware of that and often do only minimal repairs because they think they can get away with it.

Only last Thursday, a group of four women students from Sheffield Hallam university came to see me to share their experience. They had faced a catalogue of problems last July when they collected the keys for their new home, which was unfit to move into. Among a range of issues, the house was filthy and full of rubbish, mattresses had blood and faeces stains, there was no carbon monoxide detector, taps and toilet seats did not fit correctly, blinds were broken and the extractor fan was broken.

When challenged, the letting agent simply said that there had been a busy change-over period with 400 students moving out on 30 June and 400 moving in on 1 July. However, the agent knew that that would be the case; it is like the staff of the refreshment kiosk at Bramall lane complaining that they cannot serve customers at half time because everyone comes in a 15-minute period. Letting agents know when the student change-over will happen, and there is no need for them to organise contracts in that way.

Most contracts for university-provided accommodation are for 42 weeks. Agents know that most students do not want 52-week contracts. The only benefit of a 52-week contract is that landlords get the rent, and that is the wrong driver. There is no reason why tenancy start dates cannot be staggered to allow for inspections and appropriate cleaning and repairs. The house that the young women were expected to move into was uninhabitable for two weeks until they forced basic action to be taken. Not unreasonably, they asked for their rent to be waived for that period, but they were told no, because they had signed their contract and had chosen not to live there.

The problems did not stop there. Sensibly, as young women they wanted individual locks on their room doors, which showed the marks of having had fitted locks previously, but they were told that under the contract they were not allowed to fit locks themselves and that the letting agent would arrange that at a charge of £80 a door. Such scams are unacceptable.

The student advice centre told me about wider problems with tenancy agreements from letting agents. They often do not contain the necessary legal information such as the landlord’s name and address so the students may not know who their landlord is. When they ask the agent, they are often told that they are not allowed to know.

Some agreements contain unfair terms that would not be enforceable in a court of law—for example, that tenants may not have friends or family staying at the property. There is a significant problem with letting agents on behalf of landlords failing to give students 24 hours’ notice that they will be doing repairs or showing prospective tenants round, and they may let themselves in with keys, sometimes without knocking.

The best letting agencies share the aspiration to stamp out bad practice, and the Association of Residential Letting Agents, the largest representative body, has called for statutory regulation. That is the nub of the problem. The absence of legislation governing letting agents is extraordinary.

Agents may voluntarily join a regulation scheme, but it is estimated that only 60% do so. Those who choose to join a scheme are likely to be the better and more responsible agents, but there is little that can be done to restrict the actions of the unscrupulous. It is an extraordinary omission that letting agents are not covered by the same requirement to be part of an approved redress scheme as estate agents under the Estate Agents Act 1979. Professional bodies for letting agents provide complaints procedures, but those agents who are not members are often the ones for whom tenants most need the procedures.

The problem is getting worse. The property ombudsman saw a 26% increase in complaints about letting agents between 2010 and 2011—a 26% increase in one year. There is a real need for a process by which all complaints and concerns can be addressed. An amendment to bring letting agents within the scope of the 1979 Act was tabled to the Enterprise and Regulatory Reform Bill in the House of Lords, and it would have been a positive step if the Government had accepted it.

The point we are all reaching is that greater regulation is needed. There is a consensus across the UK. Scotland has already banned the charging of fees by letting agents. In its upcoming housing Bill, the Welsh Assembly is seeking to require them to register and become accredited. As my hon. Friend the Member for Rotherham said, the OFT and Which? have called for action to be taken to tackle bad letting practice. Regulation would benefit tenants, landlords and decent letting agents.

Several hon. Members:

rose—

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

Order. May I just remind people that the winding-up speeches will begin at 3.40 pm?

Photo of John Pugh John Pugh Liberal Democrat, Southport 3:11 pm, 27th February 2013

It is a pleasure to serve under your chairmanship, Mrs Brooke. I congratulate Sarah Champion on introducing this topic. She has kept the pressure on, and she put her points in a very lucid way.

We all acknowledge that there is a problem. For a variety of reasons, there is an increasing number of new landlords in the private rented market. Some people go in for buy to let. Two of my daughters, who are married, are coincidentally temporary landlords by virtue of not being able to sell their houses—one in Wales and one in London—and they could not let them without using a letting agent. There is also increasing demand for rented property as people fail to stump up the deposit and the finance to purchase their first home.

That all leads to an increasing reliance on letting agents, and there is no dispute that that is a problem. In terms of service, a great deal is left to be desired by the letting process and by the way in which repairs are conducted and deposits are handled. People have illustrated quite forcefully that there is not the same transparency in the system as we would expect from a reputable business.

That is reflected in the high level of complaints we get. At the top end of those complaints are issues of downright theft and sharp practice. We are looking at an unregulated market, and everybody—the OFT, Shelter, charities concerned with homelessness and the political parties—acknowledges that. The Liberal Democrat conference passed a motion emphasising its concern.

The Government acknowledge the problem. In a recent debate on the subject in the main Chamber, the Under-Secretary of State for Communities and Local Government, my right hon. Friend Mr Foster, made it clear that they would keep the regulation of letting agents under review. When he was in opposition, the Housing Minister spoke favourably of such a proposal.

We all agree, therefore, on the problem. There tends to be a difference of opinion, however, when we come to the solution. One solution staring us in the face is simply caveat emptor: basically, let us have a smarter set of customers. However, that is clearly an inadequate solution and an inadequate hope. Many players in the market—landlords and tenants—are novices. They are making critical decisions, they are short of cash and they are often going through the trauma of moving home, which, as we all know, is one of the major traumas in life.

The second solution, which is favoured by some, is voluntary registration. That leaves out what the hon. Lady called the cowboys. Of course, they are not immediately identifiable: they do not all have stetsons and holsters so that people can pick them out straight away. Even if they did, voluntary regulation has been tried, and it has not been found to be a sufficient solution, because complaints have not gone down. It was a laudable move, and we have to support it, but it is obviously not sufficient to deal with the problem.

Then we come to the thorny issue of whether we need more regulation, legislation or compulsory registration of letting agencies. The Government are right to be sceptical about over-regulation, but it is not obvious what such a proposal would result in. It is not obvious that the burden will in any way be increased for good letting agents, who already pay for voluntary schemes of one kind or another and accept the administrative cost of that. Any scheme we embrace will also presumably be self-funding and therefore not a call on the Government’s sorely stretched coffers. It is not clear in any case why regulation is inappropriate. How would we answer the question: why should estate agents be regulated, but not letting agents? There is no really good answer. Furthermore, if we have a better regulated market, we will deliver some sort of social good. Despite the fact that there is a threshold to be crossed, and despite the fact that this environment is not utterly lawless—there are sensible pieces of ordinary civil law legislation that apply to it—there does seem to be a case for effective market intervention, which would presumably start with some sort of compulsory regulation of letting agents.

The decisive issue is this. We all accept that the issue is in the balance: it is not one on which people have dogmatic or doctrinaire ideas, or which they resist out of an ideological preference. Equally, the issue will not go away, and the problems are on the increase. In introducing regulation, the Government will not reduce the supply of property. The more likely market effect is that they will drive landlords, who one assumes will be just as numerous as ever, to use the services of reputable agents, not agents who are unworthy of effective registration.

Of course, regulation is supported by the Royal Institution of Chartered Surveyors and players in the industry. It is not evident that good markets are unregulated markets. It is also not evident that regulation in this case will necessarily be onerous. I accept the point made by Damian Collins that regulation is not necessarily sufficient. Whether or not we have regulation, the elephant in the room is enforcement. We need to draw attention to the fact that most local authorities have quite a lot to do managing their existing budget and delivering the formal commitments the public expect them to deliver, without venturing into a territory where the public may not notice whether they are delivering. Such things would be an easy hit for those who want to reduce council expenditure, and most local authority chief executives are, unfortunately, in that position.

Although regulation is not a sufficient move, therefore, it is the right move; it is a step in the right direction, and I applaud the hon. Lady for having pushed us a little further in that direction.

Several hon. Members:

rose—

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

Order. Four Members are standing, so I am calling for self-regulation.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport) 3:18 pm, 27th February 2013

I am pleased to have the opportunity to speak in the debate. I congratulate my hon. Friend Sarah Champion on securing the chance to raise issues that affect increasing numbers of our constituents living in rented accommodation and on setting out the arguments so thoroughly and eloquently.

Like many hon. Members present, I was confronted with something of a dilemma over whether to speak in this debate or the debate in the main Chamber on the bedroom tax. Unfortunately, that highlights the fact that those who are not in a position to own their own home face increasingly serious problems, which this Government seem unwilling to address, because they have failed to build more affordable housing and left tenants and landlords to fend for themselves in an unregulated lettings market. Unfortunately, the Government are willing to make the situation even worse through their unfair and unworkable changes to housing benefit. With more than 6,000 households in Nottingham affected by the bedroom tax, more and more families on low incomes will be forced out of their council or housing association homes and into the private rented sector.

As we have heard, 8.5 million people—16.5% of households in England—live in the private rented sector, and two thirds of those households have children. The numbers are rising. Many of those people do not want to rent privately. Every week, I meet people in Nottingham who would love to buy their own home, but who cannot get a foot on the property ladder, and there are more than 10,000 people in Nottingham waiting for a council home. But the Government are not building enough of those desperately needed affordable homes. If we accept that many households, especially those on low incomes, are going to need the private rented sector, we must ensure that the sector is fit for purpose and that it offers renters the security they need.

Photo of Steve Reed Steve Reed Labour, Croydon North

Does my hon. Friend agree that it is unacceptable that in Croydon, where there are nearly 8,000 people on the housing waiting list, last year only 420 new social homes were built in the entire borough?

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

My hon. Friend is right, and that is why it is so disappointing that the Government are so far behind their targets for affordable rented housing.

As we have heard, there is no legislation covering letting agent practices. It is still possible to set up as a letting agent with no qualifications. There are no requirements as to conduct or for the safeguarding of consumers as there are for estate agents, and no obligation to register with a redress scheme. Letting agents simply operate outside any legislation. Agents can voluntarily join a regulation scheme, but it is estimated that fewer than 60% do so. There is no shortage of evidence that supports the need for action. As my hon. Friends have said, an investigation by the Office of Fair Trading found that the lettings market generates a high level of complaints, and the main areas of concern for tenants set out in its report published earlier this month included surprising and high charges, confusion about holding deposits, misleading advertising, repairs not being carried out on the property and non-refund of security deposits. Crisis, the charity for homeless single people, reported similar areas of concern. The property ombudsman reported a 26% increase in enquiries or complaints about letting agents between 2010 and 2011 and, as we have heard, Citizens Advice found that 73% of tenants whom it surveyed were dissatisfied with the service.

Experience from my constituency, consistent with those findings, highlights the need for action by the Government to regulate the private rented sector and, specifically, letting agents. Like my hon. Friend Paul Blomfield I represent a constituency with many students. Some neighbourhoods, particularly Dunkirk, Lenton, Radford, the Park, Wollaton Park and Lenton Abbey, which are close to the campuses of the university of Nottingham, have high concentrations of private rented sector accommodation and especially homes in multiple occupation. Some years ago residents established the Nottingham Action Group on HMOs, because they shared a concern about the way their neighbourhood was being affected by the changing use of local housing. The group has vast experience of the impact of the private rented sector in the city. When I asked for views on letting agents I was told that the most common complaint is agents failing to sort out repairs or carry out regular maintenance. Of course that does not affect only the tenants of the property in question; it often affects neighbours and the wider community, either directly or indirectly, because the local environment becomes run down, the street looks uncared for and further problems flow from that.

However, NAG also had regular reports of other problems, such as agents sending prospective tenants round to view a property without making an appointment, or simply telling them to call round on the off chance. When the current tenants complain they are told to put up with it because the sooner the property is let the sooner people will stop dropping round unexpectedly. There are also reports of agents failing to give prospective tenants sufficient time to look at the property, and pressuring them to sign tenancy agreements and property inventories on the spot. It has been found that agents do not return deposits readily. There is evidence of agents who do not know, or wilfully disregard, legislation. One recent example of that in Nottingham was an agent who has now been fined twice for letting HMOs that required a licence but did not have one. NAG also raised concerns about agents hiring contractors to put up “to let” boards without overseeing the work. Boards have been fastened to fences belonging to neighbours’ properties, and to trees. Thanks to the persistence of NAG, working alongside Nottingham city council, and with the support of landlords and tenants, there are now local controls on the use of letting boards. However, some agents are still acting inappropriately and using every means that they can to circumvent the controls.

The university of Nottingham student union echoed similar themes when it submitted evidence to the Select Committee on Communities and Local Government inquiry into the private rented sector. It said:

“We believe that there need to be mechanisms in place to encourage landlords and letting agents to continually improve the standard of their housing stock. Having worked alongside UNIPOL”— a voluntary accreditation scheme—

“for many years, we have seen the benefit of accreditation schemes. However, we have concerns that voluntary codes will never catch those landlords who continue to provide low quality housing. We believe that additional licensing in addition to properly supported and valued accreditations schemes would result in improved standards”.

On the regulation of landlords and letting agents the student union was equally clear:

“We believe that registration would improve management of properties by landlords and letting agents. To be registered would indicate that a landlord or letting agent were ‘fit and proper’ to manage properties…working to minimum management standards, and exclude those few landlords whose informal practices leave their tenants in a vulnerable situation”.

I recently heard from Ben, a student in Lenton, who provided a detailed account of the problems he and his housemates had faced. He says:

“Neither us nor our neighbours who are also with the same letting agency received an inventory until quite recently, despite the fact that we were pestering the agency since September. We send e-mails to the landlord and property manager often with complaints and he responds by saying he or one of his agents will come and inspect the property and sort the problems. When and if they come they say things will be sorted and leave and the problems persist with nothing being done. Often they don’t come at all. Our concerns are ignored and disregarded and there seems to be no simple and easy way in which we can launch a complaint and get our issues resolved.”

The Government need to act now to protect tenants like Ben and their neighbours, landlords and the reputations of responsible agents. They need to put an end to confusing and inconsistent fees and charges, so that people understand what they are paying for at the outset and can compare different agents. They should introduce measures to promote longer-term tenancies and predictable rents and should introduce a national register of landlords and give local councils the powers they need to raise standards and tackle rogue landlords. The need for action is clear. It is time for the Government to get on with it.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Cabinet Office) 3:27 pm, 27th February 2013

It is a pleasure to serve under your chairmanship, Mrs Brooke. I congratulate my hon. Friend Sarah Champion on securing this important debate. I shall not attempt to repeat any discussion of the many important issues raised so far, particularly about the experiences of tenants in the private rented sector. I just want briefly to focus on that sector in Newcastle.

Since I was elected, housing has been the No. 1 issue, week after week, that constituents have brought to me. They tell heart-rending tales—I will not recount them here. It is clear to me that a secure roof over one’s head is incredibly important not only for the security of family life, but for mental well-being, for being in a fit state to go out to try to get a job and for the quality of life to which we should all have a basic right. That is why I have launched a campaign in Newcastle to improve the availability of affordable housing, focusing on bringing empty private sector homes back into use and encouraging the building of new affordable housing.

It is clear, however, that new affordable housing cannot be built fast enough and that the private rented sector is increasingly important. I should like the Minister to say that he recognises that the private rented and social housing sectors are directed at different markets. Frequently, in response to questions on the bedroom tax, the Conservative party seems to say that, because certain measures may exist in the private rented sector, similar ones are acceptable in the social housing sector. There seems to be no recognition of the fact that there is a key difference, because many of our more vulnerable constituents live in the social housing sector.

It is important that there should be a strong private rented sector. In Newcastle, the average rent in the private rented sector is £120 a week, whereas it is £67 for council housing. That is beyond the reach of many of my constituents. In the last 12 months that data are available from Shelter, 1,055 landlords started the process of removing tenants in Newcastle. In the same period, only about 350 new homes were started, so the importance of a properly regulated and working market in the private rented sector is clear to me as the local MP. That is why I support the measures that we are proposing to regulate private rented sector letting agencies. In addition, it is clear that good letting agents, of which there are many, often support that as well. They do not want to be tarred with the same brush as those whose behaviour, as we have heard today, is invidious and heartless.

Government Members have spoken about the private rented sector as a market, and I was very interested in some of the points that they made supporting the fact that we are seeing market failure. It is therefore incredibly difficult to understand why the Government, recognising that there is market failure in the private rented sector, do not feel that intervention is appropriate. These clear market failures have an impact on many areas of our society. For example, in Newcastle, where we have high deprivation and poverty, unexpected charges can push families in the private sector into debt and into a spiral of credit and loan sharks, with little possibility of escape.

I look forward to hearing from the Minister why he is opposed to improving the sector. We need a strong private rented sector, with tenants who have strong rights and with letting agencies that behave properly and in a regulated fashion.

Photo of David Lammy David Lammy Labour, Tottenham 3:32 pm, 27th February 2013

This is a very important debate, and I want to remind the Minister of the context in which we have it. We can all think back to a period in British history when the vast majority of people were in private accommodation. We had tenements and Rachman-like landlords, and Charles Dickens, for example, was able to illustrate coherently and fantastically just how grim it was for many people, particularly in the capital city. Since then, we have had the welfare state, slum clearance and the Addison Act of 1919. There was a wonderful balance, with subsidised, affordable housing, and where people could afford to buy their own home, as my father did in 1956 for £6,000. People could get easy credit at the bank and could get on to the housing ladder, or they could seek to get private accommodation.

The Minister should be deeply concerned that we have returned, in Britain today, to a context in which the vast majority of people are in private rented accommodation. We are going backwards as a country, not forwards. We are not building sufficient houses. He will know that because of the decision to generate a right-to-buy scheme, while not building housing to replace the right to buy, we have now lost our social housing, and that is leading to a dire state in London. We have come to a new market in which, frankly, many—this does not apply to all—cowboys are operating. They have seen a gap in the market and vulnerable people, and they have rushed in with a whole set of practices that have been well illustrated in this debate.

It is now time for the Minister to deal with a situation in which complaints against the sector have risen by 123% since 2008, and where we recognise that there is conning and fraud by these cowboys. People are losing deposits and extortionate fees are charged that are hard to understand. We need a statutory code and legislation in this area. We need to consolidate fees in one structure and publish clearly what those fees are. We need a compulsory public membership scheme, so that we know who our landlords are and what their practices are. There is market failure in this area. This is something that traditional Conservatives should be concerned about dealing with.

Photo of John Healey John Healey Labour, Wentworth and Dearne 3:35 pm, 27th February 2013

I came here to support my hon. Friend Sarah Champion rather than to speak, which given the time, is probably just as well, but I am prompted to make three points. First, there is a problem and it is growing. Secondly, there is a solution and wide support. Thirdly, there is really no excuse for the Minister not to act.

First, the problem is clear. This is a field with no legal requirements or legal restraints for people setting up and running a letting agent or a managing agency. There is no legal requirement to belong to a trade association or to conform to standards of conduct; nor is there a legal requirement to offer some sort of redress scheme or safeguards for consumers. The stories of problems with up-front, unjustified, unfair fees are growing, as are the problems with misleading ads, and with repairs not being done or visits not even being made. My hon. Friend Paul Blomfield mentioned the Citizens Advice research and the scale of dissatisfaction with letting agents. Which? has done a similar survey, showing that letting agents, out of 50 different consumer markets, came second bottom for dissatisfaction—below train companies and even insurance providers. Of course, the private rented sector, for the first time in half a century, is larger than that of public and social housing. Some 8.5 million people are renting privately, and 1 million families with kids are in private rented accommodation. This is a growing problem.

Secondly, on the solution, a regulatory framework is in place for estate agents; as suggested by John Pugh, why not have it for letting agents and managing agents as well? Following the Rugg review in 2009, proposals are on the stocks, with wide support. The formal consultation that the previous Government held and published in February 2010 confirmed that the majority of respondents were behind a legal, mandatory framework of regulation for letting agents. The chair of the Residential Landlords Association told the Select Committee on Communities and Local Government in evidence this month:

“Landlords are just as likely to suffer from a criminal or fraudulent agent as a tenant is… All the legitimate agents are supporting legislation. We feel that that would be a good thing.”

There is cross-party support in this debate for action. Even the Office of Fair Trading has made recommendations, as my hon. Friend the Member for Rotherham has said, and it must be borne in mind that, with its restricted remit confining it principally to competition issues, it is normally constrained from offering a wide-ranging and full set of recommendations, but it has done so in this case.

Thirdly and finally, I say to the Minister that there is no excuse now for not acting. The need is clear; the support is there; and the proposals have been independently recommended by the Rugg review. Public consultation has been formally conducted on those proposals. The legislative vehicle—the Enterprise and Regulatory Reform Bill—is in the other place at the moment. A coherent change to the legislation has been proposed and debated in Committee. The debate on Report, when amendments are normally made in the other place, is about to take place. Five years ago, the Minister, when moving a clause to a Bill in this House, said:

“The new clause would bring residential lettings within the established legal framework.”––[Official Report, Consumers, Estate Agents and Redress Public Bill Committee, 24 April 2007; c. 192.]

He wanted to do that five years ago, and as Housing Minister, he now has the privilege and the position to do so. I hope that he will take that opportunity and confirm to us today in this debate that that is exactly what he intends to do.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing) 3:39 pm, 27th February 2013

It is a pleasure to speak under your chairmanship, Mrs Brooke. I congratulate my hon. Friend Sarah Champion on the excellent case that she put forward. It was a bravura performance, making a powerful case for change. She started by referring to the private rented sector and the fact that that is growing rapidly. Various contributions in the debate have made the point that it has now overtaken the social sector in size at a time when home ownership has fallen for the first time since the 1950s. The very powerful report by the Joseph Rowntree Foundation talks about generation rent—a whole generation of young professionals who are now locked out of home ownership and end up in the private rented sector.

We heard very powerful contributions from my right hon. Friend Mr Lammy and my hon. Friends the Members for Nottingham South (Lilian Greenwood) and for Sheffield Central (Paul Blomfield). They pointed to experience from their own constituencies of the problems that people face in the private rented sector. Undoubtedly, the sector will have an important role to play in the future, but absolutely not on the current terms. There are problems of security. Letting agents encourage churn, which leads to insecurity in the sector. There are problems of affordability. There are problems of quality: 37% of homes do not meet the decent homes standard. There are too many rogue landlords and too many rogue letting agents.

More generally, we need to transform the private rented sector into a sector that works for both tenants and landlords and in which there is no place for the disreputable, who undercut the reputable. Letting agents do perform an important role, because in a sector in which most landlords are small landlords, they depend on letting agents, but my hon. Friend the Member for Rotherham was right, in her forensic exposition, to refer to the overwhelming body of evidence that suggests that the current situation is absolutely unacceptable and must change.

According to the CAB report, 73% of those who dealt with letting agents were expressing dissatisfaction. According to the Which? report, this market is second from bottom of 50 consumer markets. There is also the OFT report. My right hon. Friend John Healey was absolutely right about this. It goes beyond what it would normally say to be critical of the sector and is calling for change, as are many others, from Shelter to the Resolution Foundation. Why is that the case?

In this very powerful debate, we have heard testament from a series of right hon. and hon. Members, including my hon. Friend Lucy Powell. There is the problem of fees and lack of transparency. Often, exorbitant fees are charged. They vary wildly, and frequently there are exorbitant up-front fees. Damian Collins is to be congratulated on his mystery shop exposing that in his own constituency. There is the problem of no client money protection. As a consequence, all too often, both landlords and tenants lose out. There is also the problem of repairs often not being carried out.

It is extraordinary that someone can set themselves up as a letting agent with no qualifications whatever. They have no need to conform to requirements or to provide mandatory safeguards for consumers. It is a ludicrous anomaly that estate agents are regulated, but not letting agents. An excellent phrase was used by the

Royal Institution of Chartered Surveyors. It pointed to the fact that 4,000 letting agents act entirely outside any form of regulation or self-regulation in what it calls the “Wild West”.

In government, my right hon. Friend the Member for Wentworth and Dearne—I am proud to follow in his footsteps—took the initiative over the Rugg report to say then that this was a scandal that had to end. Sadly, when the current Government came to power, the then Housing Minister, who tends to get out the clove of garlic in one hand and the cross in the other at the very mention of regulation, dismissed what Rugg had recommended and what, in the consultative process, had been overwhelmingly supported. He called it red tape; we call it protection for tenants and landlords alike.

Photo of Mark Prisk Mark Prisk The Minister for Housing

I am interested to hear that. It has been mentioned that I put down a probing amendment on the question. If it was so important, why did the Labour Government not put the redress measure into law, which it would have been able to do, in Committee on the basis of the amendment that I presented?

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

We moved decisively down the path for comprehensive regulation—

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

We moved decisively down the path for comprehensive regulation of the sector under the last Government.

Photo of John Healey John Healey Labour, Wentworth and Dearne

It is of course hard for me to answer for our colleague who would have been in position as Housing Minister or the Minister responsible at the time, but does my hon. Friend Jack Dromey agree that it might have been that the case that was put at the time from the Opposition Front Bench was not persuasive enough? It certainly is now.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

My right hon. Friend makes a very good point. What the Labour Government did was to establish the Rugg review. The Rugg review made comprehensive proposals, including in respect of regulation of letting agents. We moved decisively down that path.

The hon. Gentleman who is now the Housing Minister, unless he has undergone a damascene conversion and believes the opposite of what he said five years ago in opposition, will no doubt say when he responds, “Yes, this Government now intend to act,” because thus far there has been a lamentable failure to act, despite the chorus of voices calling for change. I am talking about tenants and landlords. The Labour party put forward a very powerful policy proposal, supported by the Association of Residential Letting Agents, the National Landlords Association, the Residential Landlords Association, the British Property Federation, the Royal Institution of Chartered Surveyors and many other players in the housing field, including registered social landlords, many of which now have private rented portfolios. They all back the proposals that we put forward, calling for change.

I pay tribute to the right hon. and hon. Members who have taken part in today’s debate, including John Pugh, for the way in which they have spoken up. It is just like we saw in the Opposition day debate last month: there is a growing cross-party consensus that says, “This has to end.” In relation to how it ends, the hon. Gentleman was right when he said that the idea of a voluntary arrangement will not wash.

I pay tribute to Ian Potter and the work of ARLA. For two decades, it has campaigned for regulation, but in the meantime it has also tried to raise standards in the sector. However, that is on a voluntary basis—the rogues do not sign up. That organisation sometimes takes action against its own members who have acted disreputably, but it has arrived, out of bitter experience, at the clear conclusion that a voluntary scheme will never work; regulation is essential. The case put forward by the Royal Institution of Chartered Surveyors of the potential benefit to the economy of £20 million further reinforces the case for change.

The case is overwhelming. No more evidence is required. An all-party consensus is emerging. The Government have said that they have an open mind on this issue. An open mind, however, is no longer good enough. I ask Mr Prisk, who is now the Minister for Housing, to have the courage of his convictions five years ago and to tell the House today that this Government will at last move to regulate letting agents.

Photo of Mark Prisk Mark Prisk The Minister for Housing 3:47 pm, 27th February 2013

May I start by congratulating Sarah Champion? I think that this is the first time that she and I have been in a debate together; she is a new Member of the House. Not only was she able to secure an important debate, but she set out her argument. We will not always agree on the outcomes, but I think that we do agree on the challenge that faces this particular market. There is a strong element of market failure, as I have discussed in debate with Jack Dromey, who speaks for the Opposition on this matter.

This has been a useful debate, because there is a substantial question and substantial interest from a much wider group. Of course, the number of complaints may have risen because the market is substantially larger than it was, but it would be foolish to assume that that is the only reason and that is certainly not an assumption that I make or any other member of the Government makes, although I did particularly enjoy the idea that the only reason why the Labour Government did not do anything was that the Opposition spokesman did not make a strong enough argument. That is an entertaining argument. It does not quite wash. Nevertheless, I understand and I have a lot of time for John Healey, which may be very damaging from the point of view of his own personal political future, but there we go.

Before I turn to the specific issues, I would like to set out briefly the context of the Government’s overall approach to the private rented sector, because people naturally have wanted to look beyond just the question of agents. People have talked about the question of supply, the interaction with the housing benefit elements and so on, but let me just look at the private rented sector particularly. As I said in the debate that we had only last month, we are very committed as a Government to ensuring that this is a bigger sector, but also a better sector—one that provides tenants with a genuinely good choice of decent, reasonably priced accommodation. We stand first and foremost on the basis that many—not all—of the problems that we have discussed today, including the difficulties that individual families and tenants have, are a consequence of years of under-supply.

Mr Lammy gave us an interesting historical perspective, but I do not necessarily wish to go back to Dickens; we will stick with the past 25 years. What we have seen in the past 25 years—something on which we have agreed over many years—is that demand has substantially outstripped supply. As a result, the supply available to tenants, and the quality and standards of accommodation, have simply failed to keep up. That has inevitably led to a worsening of the way in which some letting agents operate.

Expanding the supply of rented homes lies at the heart of our strategy. That is why we have taken the radical step of establishing a debt guarantee scheme of up to £10 billion to encourage institutional investment in the sector.

Photo of Mark Prisk Mark Prisk The Minister for Housing

The hon. Gentleman has not spoken in the debate. Others have and they want a response. If he will bear with me, I will give way in a moment.

We have also put in place a £200 million build-to-rent fund to kick-start innovative quality projects.

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

The Minister makes the case that there needs to be an increase in supply in the private rented sector. In my constituency in Hyndburn, we have nearly 3,000 empty properties, nearly all in the private rented sector. There is a complete over-supply, yet letting agents run rampant. His argument does not succeed in my constituency and in many constituencies like mine, where over-supply is not the answer.

Photo of Mark Prisk Mark Prisk The Minister for Housing

We have a long-standing issue with long-term empty homes, of which there are 278,000. I am pleased to say that we saw a drop of 22,000 in the past full year, which is encouraging. We have put specific funds into our programme to bring those empty homes back into use. With respect, if I may say, it is a programme that we had to put in place, because it was not there when we came into office. The hon. Gentleman is right to highlight empty homes, but we are taking steps to change that.

Boosting supply is not only about financial support. We need to be careful to avoid excessive regulation that can deter the investment in supply that we all agree we need. If supply is stifled and if we go back to the bad old days of rent controls, we would actually see a stifling of investment and a shrinking of supply. The net result would be that tenants would have fewer properties to choose from and higher rents as well.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

I am surprised at the Minister’s assertion. I spoke earlier today at the British Property Federation’s conference, where the Minister will be speaking shortly.

The unmistakable message from the federation, which represents institutional investors, is that it believes that the time has come for effective regulation of the sector, particularly regulation of letting agents. It does not believe for one moment that that will put future investment decisions at risk.

Photo of Mark Prisk Mark Prisk The Minister for Housing

I recognise the role for effective regulation; I will come on to that. However, the idea of rent controls, which one of the hon. Gentleman’s colleagues is proposing in a ten-minute rule Bill, is nonsense. Does he agree with it? Would he care to comment?

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

We are consulting right now on how we move to longer-term tenancies linked to more affordable and predictable rents. We are not convinced by the argument for rent controls, but all those who wish to make contributions can do so. It is to be regretted that the Government have set their face against that, which 1.1 million families badly need in the private rented sector, so that they can plan where they send their kids to school and plan how they manage their household budgets.

Photo of Mark Prisk Mark Prisk The Minister for Housing

People will be encouraged if that is confirmation that the Labour party, were it to be elected in some strange manner in a couple of years’ time, will have rent controls. We will see how that develops, but perhaps I should persist, because other hon. Members have raised questions.

Targeted, effective regulation that is carefully thought through, of a statutory nature or otherwise, has a role to play. That is why we have made a particular effort to crack down on rogue landlords, for example, in the case of beds in sheds, which is a dreadful scourge. Frankly, too little has been done in the past. It is an area where people are genuinely exploited and where we want to use the law. That, in a sense, comes to the second question.

Various people have asserted in this debate that letting agents are completely unregulated, but that is not true. That is a myth, which it is important to dispel. We should not be telling tenants that they have no controls and that there is nothing there to protect them and no one to turn to to help them challenge someone who is behaving badly. Whatever our political perspective might be, there is a genuine interest in getting the message right.

Letting agents are subject to regulation. It is important to flag that up. Paul Blomfield highlighted a specific issue around students and the fact that they were being told incorrect things about market conditions. The Consumer Protection from Unfair Trading Regulations 2008 offer protection against someone who is deliberately misleading and pulling the wool over people’s eyes, enabling individual tenants the opportunity to challenge them.

Also, the Unfair Terms in Consumer Contracts Regulations 1999 protect tenants from unfair conditions. Several hon. Members mentioned the way in which tenants can find themselves facing unfair restrictions on the way in which they can use a property. We have seen—several hon. Members have mentioned this—that trading standards bodies can and will prosecute letting agents. I mentioned a case in West Bromwich in a previous debate and we have heard about a case in Rotherham. In Oxford, a letting agent had to pay £300,000 in fines and costs for consumer protection-related and money-laundering offences after failing to return tenants’ deposits—which several hon. Members have mentioned—letting properties without the authority of their owners, and not passing on rent. So action can be taken. There was a similar case in Plymouth, where the letting agent was jailed for two years for spending client money on foreign holidays—again, that was mentioned by one hon. Member—and propping up his business. That individual may yet face further action to seize his assets. So, serious sanctions are in place, which our constituents can now use. It is important to flag that up.

Photo of John Healey John Healey Labour, Wentworth and Dearne

That is a statement of fact, not an argument against proper regulation. The overwhelming evidence mentioned by everybody in the debate is that what is in place at the moment is not successful, not sufficient and not satisfactory to protect tenants and landlords. A statement of fact about the general consumer protection that is in place is not sufficient.

Photo of Mark Prisk Mark Prisk The Minister for Housing

It is important to recognise that we need a number of elements to deal with the different problems that have been raised. We need to make sure that we use existing consumer protection legislation now and that enforcement is put in place effectively. I want trading standards bodies to take action not just in the serious cases, such as those that I have flagged up, but in the less serious cases. We have a problem with enforcement. The right hon. Gentleman is right. We cannot mandate trading standards bodies to act in individual cases, but I am determined to encourage those national bodies to ensure that they tackle these issues right across the marketplace. It is not good enough at the moment. We want to make it stronger.

As the hon. Member for Rotherham said, many letting agents who provide services do so quite well and within the law. Several hon. Members have highlighted the Which? report, which showed that one in five tenants are dissatisfied with their agent. That is still too high, but I think that if it is one in five, people will realise that the vast majority—four out of five—seem satisfied with the service that they get. The Which? report is a pretty independent and extensive survey in that context. However, there remain too many agents whose service is poor and unacceptable. Several hon. Members, including the hon. Member for Birmingham, Erdington, mentioned the fact that this is the second lowest of consumer markets.

Our view has been that regulation should not be the first option. Although we recognise that there might be a case for it, the challenge is to make sure that existing law works properly. There is a temptation among all of us as politicians to believe that passing new legislation will deal with people who currently ignore existing regulation. I am sceptical that the changes we make, of a statutory nature or otherwise, will actually catch the rogues that Members of all parties have highlighted. That is the challenge. I am open to consideration. We are looking carefully at what the Office of Fair Trading has said. There are some strong and positive elements there. However, if we are to do this properly—if we are to catch the rogue agents and landlords who perfectly happily flout every other law—we need to make sure that if we change the rules and change the law, we do so in a way that will deal with the individuals in question.