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Leasehold And Tenanted Properties

Volume 79: debated on Friday 24 May 1985

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1.30 pm

I welcome the opportunity to raise a matter which I consider to be of considerable national importance. It is both timely and a happy coincidence that this is a housing matter. I hope that my hon. Friend the Under-Secretary of State will not feel that he is overworked this afternoon, but at least the two debates to which he is replying follow each other.

This debate is prompted by my growing anxiety over many years about the deteriorating fabric of dwellings and the liability that we shall be storing up for occupiers and taxpayers if we fail to devote the resources and attention that are required. It is appropriate, therefore, for me to ask the House to consider the whole issue of the maintenance and repair of leasehold and tenanted properties. Although I recognise that the problems of disrepair are not isolated in the private sector but apply also in the public sector, in the latter case the Government have done a great deal to assist local authorities' abilities to maintain the fabric of those dwellings. Substantial new efforts are needed in the private sector where the problems are greatest.

I am especially concerned about the leasehold and privated tenanted sector where the neglect of mansion blocks, the squalor of tenement flats and the impoverished conditions of their occupants are most marked.

I am fortunate to represent a beautiful rural constituency. I recognise that some of the problems to which I refer are most prevalent in our cities, but the conditions of leasehold and tenanted properties are current throughout the country and many of the problems to which I refer will be found in agricultural dwellings and smaller blocks of leasehold properties in towns and provinces and not just in the major cities. This is a matter of great national interest.

The problem was clearly brought to the attention of the public through the 1981 English house condition survey which revealed that, of a national total of 18 million dwellings, more than 3 million were in serious disrepair, unfit for habitation or lacked basic amenities. The worst conditions are in the private sector, especially the private rented sector where one in six dwellings are unfit for habitation, amounting to 370,000 dwellings.

An unquantifiable number of leasehold dwellings have become rundown, but the evidence is there to see in our city mansion blocks where, over the years, the deteriorating fabric and structure of those dwellings has not been assisted by a combination of a lack of private resources and the anomalies and artificialities of our property law. These properties are often occupied by old people, those on low incomes and those least able to help themselves.

We know that the number of very elderly people will rise significantly during the remaining years of this century. The quality of their housing stock will, therefore, become a more costly and pressing problem. We cannot afford to wait for that responsibility to arise. We must tackle it over a period of years, and we must start now. We know also that the worst living conditions are suffered in the oldest properties. Of the 1 million dwellings that are categorised as unfit for habitation, 88 per cent. were built before 1919. The average cost of repairs per dwelling is more than £7,000 — a sum far in excess of owners' resources or their ability to raise through earnings and savings.

Few people in the very poorest housing stock can finance the necessary remedial work from savings. Even with grants or loans, a substantial sum must still be found. Curiously, a number of surveys, including the English house condition survey and the first report of the inquiry into British housing, chaired by the Duke of Edinburgh, have found that many owners are not alert to the need to carry out essential repairs and many make no complaint about living in the poorest housing conditions.

While some people become inured to the appalling housing conditions that they suffer, that should not be interpreted as meaning that the problem is more imagined than real, for many have no experience or hope of anything better, and for every resident who is content, there are a multitude who are not.

There is also the pressing and contentious issue of what to do about the increasingly dilapidated mansion blocks throughout the country, and particularly in London, where lessees and tenants have limited ability, even if they had the incentive, to maintain and repair the structure, common parts and fabric of these aging buildings.

Most mansion blocks were built at the turn of the century and are now badly in need of repair. Successive Rent Acts forced landlords away from letting and into selling long leases. Service charges used to be small, but the quadrupling of oil prices and the cost of repairs to lifts, roofs and common parts sent them soaring in the 1970s and they are now a considerable outgoing to most lessees and tenants, particularly in urban areas.

The problem is that neither lessees nor freeholders have the incentive to maintain these properties, partly because of our curious leasehold system, which gives the lessee an inadequate interest in the building as a whole, and because it has been easier and more profitable for many freeholders to exploit lessees, asset-strip what they can and sell before any legal obligation is placed on them.

Complaints about faceless offshore companies trading in the freeholds of blocks of flats with a complete disregard for the wishes or interests of lessees or tenants have abounded for years. Despite the welcome improvements in the rights and protection of residents in the Housing Act 1980, thousands of them are still vulnerable to the worst practices, and in the meantime prudent and necessary repair and maintenance work is left undone.

The consequences of that neglect will be a massive social and financial problem in the years ahead as increasing numbers of blocks become literally uninhabitable, even though the lessees may ostensibly own long leases on flats or tenants believe that they enjoy security of tenure.

However, the problems for lessees and tenants go beyond the structural conditions of the building. The Federation of Private Residents Associations in its submission to the Government committee that was set up to look into the management of blocks, complained about poor workmanship on repairs, inadequate accounting, lack of control over management fees, dishonesty, abuse of reserve funds, managing agents being elusive or in collusion with landlords and landlords disappearing or even thieving the reserve funds. The federation has called for tenants to be protected by setting up housing courts to hear disputes and by strengthening the powers of local council tenancy regulation officers. Its proposals deserve serious consideration by the Government.

Who is looking into these problems, which are not new but which have become more apparent in recent years with the coming together of the deterioration of properties built nearly a century ago, the steep rise in the cost of maintenance and the problems of people being unable to afford the high cost of reparation works?

I am pleased to say that the Government and a number of outside bodies have taken these problems seriously. Though more should be done, I pay tribute to the housing policies of the Government, which have been imaginative and radical. The Under-Secretary. who has been associated with the housing policies of the Administration for the last four years, has made an incisive, outstanding and sensitive contribution to the alleviation of the serious social problems to which I am calling attention.

From the Housing Act 1980, which extended new rights to tenants, to the Green Paper on a new approach to home improvements, from the partnership projects between the public and private sectors which the Government have encouraged to record expenditure on home improvement grants in the past six years, from the assistance readily provided to occupiers of defective housing to promotion and sponsorship of the voluntary housing movement, the Government have demonstrated that they care about people's housing conditions and are not prepared to sit back and ignore the plight of those who want to improve their lot.

I should like to draw attention to the inquiries on the Government committee on the management of mansion blocks—the Nugee committee—which comprises several eminent people who are responding to the Government's wish that there should be objective consideration of these problems and recommendations on how to tackle some of the worst practices in the private rented and private leasehold sectors.

I should like also to pay some respect to the forthcoming final report of the inquiry into British housing. The first report was a useful contribution to the discussion of these issues. I understand that the final report might be out in July. It is worthy of serious attention. I hope that Ministers will consider the recommendations of those important inquiries sympathetically and constructively. Failure to do so will have bitter social and political consequences. A substantial number of people live in such properties. They all have a vote, but, quite apart from that, we should take seriously their housing conditions and worries about maintenance costs.

Is a new English house condition survey being prepared? It is an important assessment of progress in, or the problems of, maintaining and improving the housing stock. Governments are sometimes too defensive and dismissive of the survey and I hope that the present Government will not be. A package of measures are necessary if we are to deal with the problems of leasehold and tenanted properties. The problems fall broadly into two categories—financial and legislative.

As for financial measures, we should consider Government expenditure on housing. Provision this year remains just over £3 billion, of which more than half is allocated for the housing investment programmes of local authorities. That is a significant budget, but I cannot avoid the implication of my remarks, which is that tackling these problems will require more resources or a diversion of planned resources. Doing that would have beneficial employment consequences.

I was unhappy about the changing of the rule about the amount of capital receipts which local authorities are allowed to spend on improvements and other matters. I am aware of the immediate economic constraints within which the Government must operate, but I hope that it will be possible to review the rule, because it has significant employment and housing implications.

Expenditure such as I have mentioned would be a good investment. Just as I said in last year's debate on the autumn statement, I regret the cut in this year's housing budget to pay for an increase of the same size in the social security programme. There is an almost exact transfer of resources from the capital side to the current side of the expenditure programme. That might alleviate immediate personal difficulty, but it will do nothing to add to the infrastructure and the quality of housing.

Home improvement grants are important. The Government have a creditable record on providing them, but they were right to review the system to provide greater continuity, simplicity and fairness in supply. This month's Green Paper on a new approach to home improvements offers means-tested automatic grants for unfit houses and discretionary loans for others in exchange for an equity in the property. It is a useful discussion document, and I agree with the proposal on mandatory grants.

However, as my hon. Friend knows, I have misgivings about equity loans, as they run counter to Conservative party policy of promoting whole personal ownership, would be costly and time-consuming to administer, and would not be popular with either householders or local authorities. They would be even less workable or in demand for leasehold or tenanted properties where the landlord has to consent to a percentage charge being taken on his interest.

The standard of improvement work also needs to be raised. The Director General of Fair Trading found in 1983 that there had been almost 27,000 complaints in one year about home improvement work. Local authorities should exercise tighter control over standards of work financed by them and should institute lists of recommended contractors.

There need to be changes in the Rent Acts. As far back as 1981, the Select Committee on the Environment concluded:
"policies designed to give landlords an incentive to improve their properties inside the existing legislative framework will only have a limited effect on the longer-term quality of the private rented stock. Only if rents rise substantially…is it likely that in the long term significant quantities of improved stock will be retained in this sector."
Two changes are called for. First, there should be an end to the phasing of registered rent increases. Rates of inflation are now much lower than in 1975, when phasing was introduced in the Housing Rents and Subsidies Act. Registered rents, based on a notional rent without regard to scarcity value, are still preferentially low and there is no longer a good case for continuing to phase increases.

While the security of tenure and registered rent regime for existing protected tenants should continue, future lettings should be free from those restrictions. The quantity of vacant property available and the high demand for private rentals are a terrible reflection on existing law. It is surely time to introduce legislation to end the Rent Acts regime for future tenancies while ensuring that that is not made retrospective to end existing tenancies, or used as a benchmark for hiking up fair rents.

There is a case for instituting freehold buy-outs for leaseholders. The best way to upgrade the structural repair of mansion blocks is to give the residents the incentive, interest and control to make it worth their while. If the Rent Acts are abandoned for future tenancies, there will be less reason for the present leasehold system, and people will either rent or own the properties in which they live.

As a first step, leaseholders should have a pre-emption right in law to enable them to have first refusal on the transfer of the freehold or head lease on the whole building. Such is the enormity of the problems to which I referred earlier that lessees should probably have the right to buy the freeholds of their mansion blocks, thereby assuming the control of and financial interest in improving the fabric of the building.

I know that the Government are reluctant to go that far, but the principle was breached with the leasehold enfranchisement legislation, and in other spheres the Government have recognised the benefits of housing co-operatives. Why not, then, respond more radically to the wishes and interests of the tens of thousands of people who want to assume full ownership of the properties in which they live, and thereby extend the life of those properties? It would mean the end for the many charlatans who have ripped off lessees for too long and have prejudicially affected tenants over the years while remaining anonymous and well-heeled themselves.

I hope that the Government will recognise on which side the political butter is spread and take action to stamp out the smart operators. It is a national problem that needs tackling by central Government. I hope that the measures that I have proposed will be taken on board by the Government and, in due course, will provide the basis on which there can be a genuine upgrading and a welcome improvement in the standard of our tenanted and leasehold properties.

1.49 pm

My hon. Friend the Member for Chichester (Mr. Nelson) has made a wide-ranging and reflective speech on housing. It is a compliment rather than a discourtesy if I say that in the 11 minutes left to me there is no way in which I can address myself to all the important issues that he raised.

Of course the Government are working on fresh initiatives on housing. My hon. Friend mentioned, in particular, the private rented sector. As I think he knows, we have carried out a review to see whether we can build on the initiatives that he referred to. We want to promote a healthier private rented sector and to see an improvement in the general state of repair of the privately rented stock. If the private rented sector is to make a proper contribution towards meeting housing needs, the landlords must be both willing and able to put more accommodation on the market and to keep what they have in a good state of repair.

I cannot say today what the outcome of our review is likely to be. The area is complex, and requires a lot of thought and consideration. However, the ideas developed by my hon. Friend will be fed into the decision-making process, and we shall pay close attention to his views. Next month, we hope to announce a fresh housing initiative to help those who live on the difficult-to-let estates — the local authority estates that are under-utilised and that have become almost impossible for some local authorities to cope with. We are certainly developing radical policies to tackle housing problems.

I shall deal briefly with the English house condition survey. My hon. Friend asked whether a new survey was being prepared, and what the Government's reaction to it would be. My hon. Friend the Minister for Housing and Construction announced on 9 May that a new survey would go ahead in 1986. The preparatory work is already in hand, and the new survey will use a larger sample than its predecessors. The Government are in no way dismissive of the findings of such surveys. They are a valuable guide to the state of the nation's assets. My hon. Friend mentioned the Green Paper on home improvement policy. The results of the 1981 survey provided the starting point for the initiatives in that document.

My hon. Friend also mentioned that he represented a beautiful rural seat. I represent the other side of the political coin—an urban constituency that no one in his right mind would consider beautiful. However, it has many mansion blocks. Indeed, as I am acquiring a lease in a mansion block in my constituency, my ears pricked up when he reminded me of some of the problems that I might face. He was right to say that the problems of repair and maintenance, especially for the older mansion blocks, are becoming very real. Some are just due to the sheer age of the blocks. Many of the traditional mansion blocks in inner London date from Edwardian times or even earlier. Blocks of that age are, by their very nature, expensive to run, and the maintenance of the structure and the renewal of essential services, such as central heating and lifts, can place an enormous burden on those who have to pay for the work.

My hon. Friend also mentioned the break-up of blocks of flats formally let to rack-renting tenants, and the sale of the individual flats on long leases, which became such a feature of the property market in the 1960s in London and elsewhere. That, in turn, has brought other problems in its wake. But there are also well-built and well-managed blocks of flats where problems have, happily, not arisen. There is no a priori reason why they should, but we must recognise that as time goes on, the block may become more expensive to run, there will be a need to renew essential services, and the leases — typically 99-year leases—will have less unexpired time to run.

There is a whole variety of arrangements for dealing with the management of the block. Sometimes the landlord retains responsibility. In some cases management companies have been formed with no direct interest in the property, and in other cases the residents have formed their own management company. Problems have tended to arise not because of the form of the management arrangements, but because of the way that the original leases were drawn up, so that it is not clear who is responsible for what; or because particular covenants are no longer enforceable; or because on assignment of the lease, the chain of obligations has been inadvertently broken.

My hon. Friend rightly mentioned some landlords who are unscrupulous in their attitude to residents, or to the reserve funds and who do not care about the upkeep of their properties. I have great sympathy with residents who find themselves in such circumstances, and I deplore the activities of such landlords. That brings me to the Nugee committee that my hon. Friend mentioned.

In 1982, the Royal Institution of Chartered Surveyors set up a working party under Mr. J. N. C. James to identify the nature and extent of problems for landlords and tenants in the management of blocks of flats and to make recommendations as to codes of good practice and other steps which might be adopted in the interests of both landlords and tenants. The working party included nominations from the British Property Federation, the Federation of Private Residents Associations, the Law Society and the Royal Institution of Chartered Surveyors, although the members sat in their own right.

The publication of that report in 1983 was a step forward, which we very much welcomed. Some of its wide-ranging series of recommendations included giving tenants greater powers to help them to identify the name and address of their landlords; the appointment and role of managing agents; deficiencies in leases and the use of standard and model clauses; service charges, including insurance; and the creation and protection of sinking and reserve funds. Some of these were matters for the parties involved— for example, the working up of an agreed code of practice for the management of blocks—but others would involve legislation.

Before the Government could decide whether it would be right to alter the statutory relationship of landlords and tenants we needed more evidence, which is why we set up the Nugee committee in 1984.

My hon. Friend has drawn attention to the work of the committee and it has commanded much attention elsewhere. The committee invited evidence from people who had experienced problems and over 3,000 replies were received covering the whole range of issues, including the repair and maintenance of common parts of blocks and the level of service charges. A number of local authorities, the Federation of Private Residents Associations and other bodies have also submitted detailed evidence, much of which was documented. A number of residents associations in my constituency have also written to the committee. As a result of the mass of evidence that the committee has received, we shall have a much clearer picture than ever before of the nature, scale and incidence of problems that exist in this sector. The Government are very much looking forward to receiving the report which will be available later in the year. I shall ensure that a copy of the report is sent to my hon. Friend when it is published. We shall consider very carefully any recommendations for change that it makes.

My hon. Friend also referred to the Duke of Edinburgh's committee which I understand is to report towards the end of July. Having looked at the initial report, which was published in January, I think that it will be a radical report suggesting wide-ranging changes and that it will make many criticisms of Governments of both parties. I am sure that it will be the forum for a wide-ranging debate on housing policy. The Department will pay very close attention to its recommendations.

My hon. Friend referred to proposals put forward for a housing court to hear disputes in housing matters. We have given careful consideration to the representations received about that matter. We believe that the wide and complex issues raised can best be carried forward in the context of the full and systematic review of civil justice which my noble and learned Friend the Lord Chancellor announced on 10 February.

I turn to improvement grants, which my hon. Friend mentioned towards the end of his remarks. I welcomed what he had to say about our policy on home improvements. I noted his reservations about the proposal for equity loans that are contained in the Green Paper. As it is a Green Paper, we are very much open to suggestions about ways in which it can be improved or altered. Equity loans are a way to improve property, while saving grants for those who are living in homes that are below the fitness standard. As the Green Paper points out, grants are an outright gift. Therefore it is proper that they should be restricted to circumstances where such a generous form of help is really needed to get bad property improved.

My hon. Friend referred to the review of the home improvement policy. I welcomed what he said about mandatory grants as an element in our housing policy.

Perhaps I could write to my hon. Friend about some of the problems that he mentioned — for example, the problems facing elderly residents in blocks of flats—either tenants or those with long leases — and the problems that have arisen over the repair of common parts of blocks of fiats. Perhaps I could also write to him about strata freeholds which have aroused interest in this country and might provide a way forward for dealing with some of the problems faced by those who hold long leases.

In conclusion, I hope that my hon. Friend's speech will receive a far wider audience than it has commanded this afternoon. He touched on nearly all the housing matters, into which my Department is looking, or on which it has legislated. He touched on some of the options that remain open to us in the remaining years of this Parliament, which we are actively examining. He dealt knowledgeably and sensitively with the problems of those in mansion blocks. When we receive the report of the Nugee committee, the Government hope to announce any initiative that may be needed to improve matters.

It has been a worthwhile debate, and I commend my hon. Friend for his perceptive speech, which one would have expected from an hon. Member who was for so long a parliamentary private secretary to the Minister for Housing and Construction.