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Butterfields Estate

Volume 608: debated on Wednesday 20 April 2016

Motion made, and Question proposed, That this House do now adjourn.—(Charlie Elphicke.)

Tonight, we are holding a debate about the future of the Butterfields estate in Walthamstow, but I want to tell the Minister about the properties and the residents who live in them. The story is not unique to Walthamstow; it is a story of what is happening in our housing market around the country due to a lack of properties, and speculative developers and letting and estate agents, who seek to maximise gains without any thought to the consequences of exploiting people in this uncompetitive market. I hope to persuade the Minister to help not only to change the future for the residents of the Butterfields estate, many of whom are in the Gallery this evening, but to tackle the underlying problems that enabled the situation to arise in the first place. I expect that he has not heard the story of Butterfields, so I intend to set that out and then ask a series of questions.

Last November, Butterfields E17 Ltd, a company formed just a few months before by Jasbir Singh Jhumat and Pardeep Singh Jhumat, bought the 63 flats on Shernhall Street and Butterfields in Walthamstow from a landlord who had owned the flats for almost 80 years. Hon. Members may have seen this part of my constituency on TV or in the newspapers—I am sure that for the Housing Minister “Location, Location, Location” is required zeitgeist viewing and that he pores over Time Out and the property hotspots in the Evening Standard—because it is at the edge of Walthamstow village.

The tenants were not told at the time that their homes had been sold by their previous long-term owner, the Glasspool Charity Trust, a charity whose charitable purpose is to prevent destitution—I will return to that irony later. No one told them their landlord had changed. They learned of this when some tenants started getting notices to quit in January 2016 from their new landlords, telling them they had just two more months to live in Walthamstow. Sixteen tenants have so far been served with notices to quit, and they are mainly people on fairly low incomes. Almost half of them have young children, and two have retired. Most of them have lived on the estate for a long time—up to 16 years, with an average stay of seven years.

This is a real community. It is not just those 16 households who are at risk; the owners have made it clear that they wish to sell on all the homes eventually. Like one in five households in this country, the only crime these people have committed is not being able to afford to get on the property ladder and so they are having to rent, meaning that they can be moved on at any time. Their good record on paying rent and taking care of these properties matters little to the new owners—businessmen with a slew of companies recorded at Companies House set up one after another and dissolved just as quickly, some with health and safety breaches recorded against them, too. The only concern of these companies has been to try to get the residents out as quickly as possible so that they can sell on these properties to make a profit in London’s overheated housing market: to capitalise on the gentrification buzz that puts Walthamstow at the top of so many housing lists.

To that end, these people have even sent the residents letters claiming they were no longer tenants because they had been served with an eviction notice, and suggesting they could face fines of thousands of pounds in the courts, as well as having their career prospects damaged if they fight the evictions. Despite the legislation on revenge evictions, these good tenants, mostly with assured shorthold tenancies, now have to fight for their very rights, including the right for their deposits to be protected—this company also failed to tell them about that when it bought the properties. No current legislation is stopping the juggernaut of these developers riding roughshod over these residents’ rights as they chase a quick profit. In March, the new landlord put six of the flats up for auction with Savills, without telling the occupying tenants or telling the people seeking to buy those properties that they had tenants in them. Three were sold, for £300,000 each, which we think is about £50,000 more than the price paid for them. I also want to come back to that point when talking about the charity that sold the estate.

This is not necessarily a bad news story for the Minister, because today I can reveal that Dolphin Living, part of the Dolphin Square Charitable Foundation, has formally stated that it is prepared to make an offer for the entire estate, helping to keep these hard-working residents in their homes and working for this city. Yet still the owners refuse to negotiate, hoping that by their tactics residents will go quietly and they can continue to flog off the flats to push up their profits. They have pound signs in their eyes, but good business sense has gone out the window. They are bullying, misleading and riding roughshod over the rights of these people. The question is: just how did they end up being able to buy all these properties? That is where NatWest comes into this story.

It was NatWest that financed the purchase of this estate. This is the same NatWest bank that we, as taxpayers, own 73% of. Yet it is financing the break-up of a community. Ironically, it is doing so during a Treasury consultation about the Bank of England’s role in regulating buy-to-let lending. This is at a time when UK productive corporate investment is low by historical and international comparison. NatWest bank owns a separate charge on each of the 63 flats, linked to its loan. No other funder has a charge on the flats. It is simply inconceivable that it did not know of the plans to evict the tenants, as how else would this loan be repaid? One would have hoped compliance would have flagged up the chequered history of the people who took out the loans.

NatWest policies explicitly state:

“Our firm commitment is to lend responsibly. It is not in our interest to enter into unsustainable commercial agreements, or to lend to organisations, or individuals, which could damage the bank’s reputation.”

I hope we can all agree on one thing across the House tonight: if making 63 families homeless is not bad for your reputation, what is? Yet NatWest tells me that its executive response team has not found any evidence that the bank did not act in accordance with its policy and procedures.

I am here not to discuss the pros and cons of the bail-out, but to say very plainly that we will pay the price twice for NatWest’s conduct. We will pay the cost of the bail-out and the cost of helping these families if they are made homeless. I hope that the Minister will agree to act and to raise this matter with NatWest directly. The Government have taken an active interest in the future of NatWest. They sought to sort out its leadership; now it is time for us to use our muscle with this institution to make it live its values in its lending policies.

That multi-million pound loan given to Butterfields E17 Ltd diverts resources away from meeting the serious costs of funding the needs of small businesses. That bank is also fuelling the speculation in higher housing costs, which is so detrimental to my local community, without funding any building work despite the challenge of building houses in this country. It is not too late for NatWest to act. NatWest is entitled under the terms of the charge to withhold consent from any sale and to prevent any other charge being put on the property. It can ask its clients why they did not seem to understand tenancy rights, which puts them at risk of lengthy court proceedings. It could ask why, when a serious organisation such as Dolphin Living wants to work with them, they do not negotiate or even pick up the phone. I know all this because I have spent the past month trying to do that deal for them.

If we cannot save this estate with the help of Dolphin, the fate of these residents is unlikely to be happy. Local rents have rocketed to close to double the amount that these tenants were originally paying and far above what most of them can afford. Claiming housing benefit even if they were willing to reduce their net income is no longer feasible in a London where the limits on housing benefit are below local market rents. Indeed, many of my residents in Walthamstow pay nearly 60% of their monthly income on rent—little wonder that personal debt continues to rise in Walthamstow. Most would have to move away, losing out financially with higher travel costs or having to give up work. Their children would no longer be able to stay in our local schools. A well-established community would be broken up to the detriment not just of those residents but of Walthamstow itself.

Some have suggested that the council could buy the estate—as though, under this Government, it has a spare £16 million going—or put the residents at the top of its already stretched housing waiting list. Although Waltham Forest Council has been trying to help the residents with housing advice, the honest truth is that we already have 2,500 residents in our community in temporary accommodation. The lack of properties in the private rented sector as gentrification rips through both prices and local provision makes it even harder to keep people in our community.

I ask the Minister to raise this issue with his colleagues in the Cabinet Office, because I do not believe that the charity that sold this estate in the first place should be absent from its obligations to these residents. As I said at the start of my remarks, this charity’s explicit remit is to prevent destitution and homelessness, yet that is precisely what its actions are likely to cause.

Charity rules require that a charity should consider the impact of the disposal of assets such as this. Given that the tenants of Butterfields would have been, and could still be, direct beneficiaries of this charity, the consequences of this deal should have been consulted on, yet that did not happen. It did not happen because the charity listened to Clarke Hillyer letting agents, which acted for both itself and Butterfields E17 Ltd, no doubt making a healthy profit for both without any sense that there was a conflict of interest. It encouraged the charity to sell the estate without any consultation with the residents.

We can accept that the charity wanted to raise funds for its charitable purpose, but to have sold these properties as a block in 2015 and seen them resold on at a higher price not six months later raises serious questions about the value of this deal to the charity. Indeed, we estimate that it is possible that it has lost around £3 million in pursuit of a quick windfall, which made it so blind to the interests of either the tenants or its supposed beneficiaries.

I have been told today that the Charity Commission is now investigating the matter, but that the charity did not need to seek permission for the sale to go ahead. Yet it is clear that when such a hypocritical deal takes place, where the charity looks for a £16 million windfall thereby putting its charitable purpose in a secondary position, it can only damage the confidence that all of us have in the concept of charitable status.

I have a series of questions for the Minister and a request that he makes a commitment to raise these matters explicitly with his colleagues and also with NatWest. Can he tell us what the conditions are of the bail-out to which banks must adhere, especially as they are lending in property markets, given that 60% of their books is mostly property? The Chancellor claimed that under his watch the banking system had been “reset”, that banks should “work for customers” and that the changes would mean that when mistakes were made it would be the banks, not the taxpayers, who would pick up the bill. If the Chancellor was serious about that, in this instance—with 63 families who will be made homeless and will therefore require help and support from the state—I presume that the Minister will recognise that this is a mistake and that there is a cost to not acting. What does he believe the consequences should be as a direct result of this decision?

Indeed, how will Ministers ensure in future that lenders such as NatWest, which is still owned by the taxpayer, will instead increase credit for the real economy and for productive purposes, not for the kind of speculation we have seen, which is skewing our housing market in London? The developers can do this because there is no protection for tenants from such shady landlords. Will the Minister not only change his mind on landlord licensing, which is having such an impact in Waltham Forest in helping to address the quality of our housing and in dealing with landlords such as these, who seem to think that health and safety is optional for a rental property, but reconsider powers in the Housing and Planning Bill to protect tenants such as those from the Butterfields estate who are facing no-fault evictions caused by the threat of fees?

It is clear that the landlord is seeking to use the threat of fees in the same way as it could have used the threat of eviction to try to pressurise the residents to void their rights. I hope that the Minister will recognise that it is time to protect those tenants who, through no fault of their own and in the London housing market, face possible eviction. Finally, will the Minister speak to his colleagues in the Cabinet Office about the regulation of this charity, Glasspool, and how we can ensure that charities do not act to undermine their purpose and that the Charity Commission is robust in its approach to such situations?

Gentrification has undoubtedly bought benefits to my community—new shops, new investment, even new people—but it also clearly has costs and consequences. Without action, those costs will be borne by those who can least afford it and we will all pay the price. Developers, charities and banks that are so blinded by pound signs that they cannot see the damage they are doing require strong Governments to speak for the public interest. I hope the Minister will not just watch the TV shows or read the property pages but act today and in future to help to ensure that communities such Walthamstow can be a top location for all concerned.

I congratulate the hon. Member for Walthamstow (Stella Creasy) on securing this debate about the future of the Butterfields estate. I also take the opportunity to extend my sympathies to the residents affected, as I recognise the difficult position in which they have been placed, which they must feel is quite precarious. I shall deal with some of the key issues the hon. Lady has outlined, as well as some of the wider general issues.

I appreciate the hon. Lady’s comments about Walthamstow and know the area fairly well—as she might know, I went to school just down the road. It is a fabulous part of the country and a great part of London. She made some political comments, and I appreciate that we sit on opposite sides of the House. She talks about the opportunity to ensure that there are homes for people and that we have housing supply coming through, but I would make the point that we have a good track record, having doubled the number of first-time buyers since 2010 and having seen house building increase by 25% just last year. I gently remind her that next time she raises housing supply she might want to bear in mind that the previous Labour Government—in fact, the current shadow Housing Minister—left the country with the lowest level of house building since 1923. We have had quite a lot of work to do to get from that paltry 88,000 a year back to 181,000 over the past year. I am proud of that work.

To move on to this specific case, the decision by Glasspool to sell the estate is, as she will appreciate, a private matter relating to the charity’s management of its assets. However, as she outlined, Dolphin Living, which I know and which is an excellent organisation, wants to negotiate with the new landlords to keep the residents of the Butterfields estate in their new homes at the correct rent. I am happy to do what I can to support driving forward that negotiation to get the parties to the table. I cannot imagine that the residents could be in better hands than if they had Dolphin Living as an organisation to work with. The fact that Dolphin Living wants to be involved is good news and I encourage all parties to get involved. If I can play a part in helping with that, I will happily do so.

The Government recognise that people want the security of a home that is stable and sustainable. The residents in this case will feel that poignantly. Most people strive to have their own home and we are determined to do all we can to deliver for them, both in terms of supply and, as the hon. Lady outlined, by making sure that people are protected. I will come on to that in a moment.

It is right that the local authority should do all it can to support and encourage the parties to work together. Despite the hon. Lady’s comments, she may want to go back and talk to her council about whether it will consider spending some of the £90 million that it has in reserves to be supportive and helpful. I am sure the council will want to help the residents in that situation.

We have embarked on the largest Government house building programme for 40 years. Over the past few years we delivered almost a million new homes, and we will deliver a million more by the end of this spending review, helping hundreds of thousands of people take the first step on the ladder to home ownership. We are also committed to building a bigger, better private rented sector, providing security and stability for both tenants and landlords. Increasing supply is the best way of improving quality, choice and, more importantly, affordability for tenants, but that will not be achieved without a significant boost to the investment coming into that sector. That is why we have put Government support behind it through our £1 billion Build to Rent fund, making sure that we are using our economic record to offer up to £10 billion of innovative housing guarantees. The affordable housing guarantee scheme has already provided more than £2 billion of investment.

On the existing legislation and how it is moving forward, the hon. Lady touched on the Housing and Planning Bill. Before shorthold tenancies were introduced by the Housing Act 1988, the private rental market was in decline. Regulated rents and lifetime tenancies meant that being a landlord was simply not commercially viable for many property owners. Since the changes in 1988, that sector has grown steadily, responded to the flexibility and created changes in the wider housing market. Private sector landlords play an important role in meeting the housing needs of many households. Of those who choose to live or have to live in the private rented sector, the vast majority will have an assured shorthold tenancy, which gives them certain rights under that Act. These include the right to live in the property as their home, and tenants can enforce their rights, for example, to get repairs done.

The legislation enables a landlord to regain possession of their property at any time after a fixed term comes to an end or at any time during a contractual or statutory periodic tenancy, provided it is at least six months since the start of the original tenancy. The landlord must give the tenant at least two months’ notice that they require possession. Without the certainty that landlords can do that when required, landlords and lenders would be reluctant to allow those properties to be let. We believe that more restrictive and excessive legislation, such as forcing longer tenancies or notice periods, would mean that fewer homes were available in the market to rent. That would not help landlords or tenants.

I agree with the hon. Lady’s comments about charities in the sector being very aware of their charitable purpose and their duty to their clients and beneficiaries.

I am pleased to hear the Minister say that he will help with the negotiation with Dolphin. That will take time. May I press him on no-fault evictions? One of the things that residents present here tonight are afraid of are letters telling them that they could generate thousands of pounds in court fees. I am sure that many of them would love to be able to save for their new home, but sadly they will not be able to get on the housing ladder, given the prices in Walthamstow. The thought that they might incur several hundred or even several thousand pounds of fees is a stick that the landlord is using to beat them with. Just as we dealt with revenge evictions, I encourage the Minister to think about no-fault evictions. These tenants are paying their rent and they are not at fault, but their rights are being undermined. Is there a way of dealing with that?

I will come to some of the provisions of the Housing and Planning Bill. I hope the hon. Lady will consider, possibly for the first time, supporting the Government’s work to provide more homes at an affordable rate for people in Walthamstow by delivering starter homes—homes for first-time buyers at a discount on the market price, which make house buying affordable again. Our increase in shared ownership also aims to do that. I hope she will get behind the Bill when it returns to the House in the next few weeks, before it gets Royal Assent, as we hope it will.

I will come to the wider issue of legislation in a second, but increasing the supply of private rented homes is only part of the picture, as the hon. Lady rightly says. The private rented sector is currently dominated by small landlords, with larger landlords owning 10 or more properties accounting for only 1% of the market. Many landlords provide a very good service, and by far the majority of tenants are happy with it, but I share the hon. Lady’s view that we want standards to rise across the board so that we drive out every last bad and rogue landlord, regardless of their position.

The Government therefore published the “How to rent” guide so that tenants know what they should expect from their landlords. The guide improves transparency, making more information available, and helping tenants to make informed decisions and to know their rights. That in itself can prevent more poor and substandard accommodation from being rented. Empowering tenants is key to our approach.

We have introduced legislation requiring all letting and management agents in England to belong to one of the three Government-approved redress schemes. We have also required them to publicise prominently in their offices and on their websites whether they are a member, for example, of a client money protection scheme and which redress scheme they are a member of, giving landlords and tenants a clear route to pursue complaints against agents and helping to drive up standards.

Just today, we have introduced an enabling power into the Housing and Planning Bill to make regulations to require letting agents and property management agents to belong to a client money protection scheme. That will protect the money of landlords and tenants if an agent goes into administration or from theft while the money is in the agent’s control.

We are determined to do all we can to protect people who rent privately against a tiny minority of rogue and criminal landlords who exploit their tenants by renting out unsafe or substandard accommodation, or who act unfairly. We have also made millions of pounds available to local authorities to identify and successfully prosecute rogue landlords.

We have introduced legislation to protect tenants against retaliatory eviction where they have legitimate complaints about the standard of their accommodation. We have placed restrictions on repossessions where a landlord has failed to comply with legal responsibilities on, for example, gas safety and the provision of information to tenants.

We are going further by introducing measures in the Housing and Planning Bill to tackle rogue landlords and property agents. That includes establishing a database of landlords and property agents who have been convicted of serious offences; introducing banning orders for the most prolific and serious offenders; issuing civil penalty notices of up to £30,000 for some breaches of housing legislation, and ring-fencing those resources for housing-compliance activity; extending rent repayment orders to cover situations where a tenant has been illegally evicted, or where the landlord has failed to rectify a serious health and safety hazard in the property or breached a banning order; and applying a more stringent “fit and proper person” test for landlords letting out licensed properties, such as houses in multiple occupation, to help ensure that those landlords have the appropriate skills to manage such properties and that they do not pose a risk to the health and safety of their tenants.

As with the penalties introduced through the Immigration Bill, those measures are meant to make sure that we target criminal landlords who ignore their existing legal obligations. The penalties will not have an impact on the vast majority of good landlords who comply with the law and who rent out good-quality and well-managed accommodation.

However, we need to do all we can, and the Government are going further than any Government before us to crack down on rogue and bad landlords. I am happy to continue to make the case to the hon. Lady that landlords who behave in a manner that is not fair or appropriate, and who do not provide the right services and accommodation to their tenants, should be driven out of the market.

I do appreciate what the Minister says about wanting to tackle rogue landlords. May I press him, then, to use his good offices to engage with NatWest because of the concerns about this landlord, its previous business history and its behaviour towards residents of the Butterfields estate? In particular, its use of the idea that residents will somehow incur thousands of pounds in fines is evidence that those involved are not fit and proper people. If they will not engage with Dolphin, at least their bank might. May I therefore press the Minister to say whether he will engage with NatWest—yes or no?

The hon. Lady has great experience of dealing in this House with issues relating to the financial markets. She will appreciate that there is a difference in legal terms between the landlord and property owner on the one hand and the bank that has a financial agreement with the landlord and property owner on the other. The hon. Lady has outlined the situation, but the reality is that NatWest will not have any legal ability, as it is not the property owner.

I am very happy, through my office, to contact NatWest to see whether we can get it to involve itself in making a point of looking at the situation with the landlord. We have to be very clear, however, that there is a difference between a bank’s financial agreement with the landlord, which is purely a financial agreement about lending money, and the landlord or property owner’s duty to their tenants. I hope that, ultimately, the charity will talk to Dolphin Living, to get the right result for the tenants.

Question put and agreed to.

House adjourned.