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Increases Of Rent Under Controlled Tenancy Permitted Towards Cost Of Repairs

Volume 885: debated on Wednesday 5 February 1975

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I beg to move Amendment No. 7, in page 5, line 39, leave out from 'by' to end of subsection and insert:

'such sum as the rent officer considers reasonable having regard to the sum expended on repairs'.
This amendment was partially discussed in Committee, although we are putting a different face on it now.

Basically, we are dealing with approximately 5,000 substandard houses which still have controlled rents. The Bill contains provisions whereby fair rents cannot be established for these houses. Instead, the landlords are entitled to a return of only 12½ per cent. of the cost of any repairs that they do. The rents of most of these houses are very low. If a landlord wants to spend money on repairs, he will not be able to do so on the basis of the revenue from the rents of those houses. It seems to us that 12½ per cent. is unreasonable in view of the cost of borrowing money. If the landlord has to borrow money, he will not get an adequate return from his rents to finance the loan.

We do not suggest changing the figure to a higher percentage. Instead, we suggest that rent officers should be allowed to consider a reasonable return for the landlord who has to borrow money to pay for repairs. Each case will vary. Some repairs will be major; others will be minor. But, bearing in mind the cost of borrowing, 12½ per cent. is unreasonable and allows no flexibility.

I hope that the Minister will accept the principle, if not the exact wording, of the amendment.

I understand the reasoning behind the amendment.

The figure of 12½ per cent. is precedented in earlier housing legislation. I take the point that it is not easy to arrive at exactly the right percentage in a matter of this kind. We thought that in all the circumstances 12½ per cent. was probably about right.

As the hon. Gentleman said, we are dealing here with houses which are still subject to controlled tenancies and not to the fair rent provisions. Therefore, my principle objection to the amendment is that it brings the rent officer, who is concerned specifically with the fair rent provisions, into an area from which we have specifically excluded him for policy reasons and for other reasons which it is not appropriate for me to explain at the moment.

My second objection to the amendment is that it would introduce uncertainty about the effect that carrying out repairs would have on rents. Although the hon. Gentleman may think that by inserting a provision of this kind into the Bill the object would be achieved of encouraging landlords to spend more on repairs and to do them where in other circumstances they would not be willing to do them, there is an equal and perhaps greater danger that, with an element of uncertainty in the situation, a landlord would be less willing to carry out repairs than he would be under the clause as it is drafted.

7.0 p.m.

There would, of course, be certain anomalies also between one kind of tenant and another, with some tenants paying on a percentage basis and others through the rent assessment proceedings. But the basic arguments against the amendment are those I have mentioned. The first is that the rent officer would be introduced into an area where he has really no jurisdiction at the moment. The second is that the amendment would create uncertainty. On balance, the provision in the Bill is the better one, but I agree with the hon. Gentleman that it is important that we should encourage landlords in this kind of situation to carry out essential repairs to property and give them a certain financial incentive to do so.

I am surprised that the hon. Member for Glasgow, Cathcart (Mr. Taylor) has moved the amendment. Earlier, he wanted to curb the freedom of local authorities in the determination of rents. Now, paradoxically, he argues for more freedom to be given to rent officers to decide rent increases. It is a strange concept of democracy that would give less freedom to members of local authorities democratically elected, but give what would appear to be absolute power in this respect to non-elected officials, the rent officers.

The amendment states that rents could be increased by
"such sum as the rent officers considers reasonable having regard to the sum expended on repairs."
That would be giving the rent officer far too much latitude and, as my hon. Friend has said, it would be asking the rent officer to intrude into an area where he did not intrude before. It is more appropriate that this House should decide what is reasonable, and that is what the Government are attempting to do. One-eighth of the cost of repairs per annum seems to be a reasonable amount.

Earlier, the hon. Gentleman pleaded for the rights of private tenants. That made me even more surprised by the amendment, because it would mean that a rent officer could, in effect, raise the rents of private tenants by exorbitant amounts. The Government's standpoint is far more reasonable in setting a ceiling in both the private sector and the public sector, including a ceiling on the amount to which rents can be raised per annum as a result of repairs carried out by the landlord.

I am quite unimpressed by the arguments of the hon. Member for West Stirlingshire (Mr. Canavan), but the Minister of State has put practical objections to the amendment which are worth considering. I hope that between now and later stages of the Bill he will reconsider whether 12½ per cent. is really an appropriate figure.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.