Skip to main content

Fair Rent Increases And Investment

Volume 591: debated on Thursday 2 July 1998

The text on this page has been created from Hansard archive content, it may contain typographical errors.

3.24 p.m.

In view of the publication on 21st May of the Department of Environment, Transport and the Regions' consultation paper Limiting Fair Rent Increases, what estimate they have made of the impact of these proposals on future investment in the private rented residential sector.

My Lords, we see no reason why, once they are properly understood, our proposals for limiting fair rents should affect future investment in the private rented residential sector. As our consultation paper makes clear, the proposals do not apply to tenancies established since January 1989, for which landlords can charge market rents. The paper confirms that we have no plans to amend the legislative framework for those tenancies.

My Lords, I thank the Minister for that reply. Has she seen the research report of June 1998 of the British Property Federation? It shows that more than half the commercial property industry doubts the Government's statements that they have no intention to extend rent control beyond the fair rent sector. I quote from the report:

"Those who had experienced the 'bad times' of regulation in the past were more negative".
It is does not need me to remind the House that that was in the days of a Labour government. Is it not a fact that the only sources of substantial investment to enlarge the private rented sector are the investing property companies and financial institutions? The Government claim to wish to encourage that investment. Are the proposals on limiting fair rent increases at best not just a discouragement and at worst a positive disincentive to further investment by the private rented sector?

My Lords, the noble Baroness raised the issue of the British Property Federation report. It suggests that those institutions looking to invest in the private rented sector are much less concerned about our proposals than those not looking to invest. I am confident that those who have a closer interest in the future of the sector are sophisticated enough to recognise that our proposals do not apply to the deregulated tenancies. We have given assurances that we have no plans to make changes to the legislative framework in that sector of the market.

The noble Baroness's second question gives me an opportunity to say that I am happy to reaffirm that the Government have no plans to amend the legislative framework for assured shorthold tenancies under the Housing Act 1988.

My Lords, how long are the rent registrations intended to last? If re-registration is to be allowed after, say, two years, the increases of only 5 per cent. plus RPI will go up fairly rapidly on a cumulative basis in quite a short time.

My Lords, the proposed limit on the rent increase at the first re-registration after the legislation has come into force would be RPI plus 10 per cent. for two years. The landlord could not normally increase the rent for the tenancy for a further two years. After two years, if he wanted to increase the rent again, he or the tenant could apply to the rent officer for a new rent re- registration. The proposed limit for the rent increase at the second registration would be RPI plus 5 per cent. For each subsequent re-registration, the rent increase would be limited to RPI plus 5 per cent. The objective of the proposal is to allow fair rents to move closer to market rents, but at a slower pace than would have been the case had those limits not applied.

My Lords, in responding to the consultation paper and as there will be a review of the housing benefit, will the Minister be mindful of the real problem facing our young people, particularly those under 25, in finding accommodation in the private rented sector? Many believe that the changes that we have had in housing benefit for single room rents have had a dreadful effect on the ability of young people to find accommodation in the private rented sector.

My Lords, I am certain that these issues will be raised and fully considered during the comprehensive spending review.

My Lords, does the Minister agree that when we had a form of rent control in the past, it meant that the private rented sector dried up? As we have a fair rents policy, when does a fair rent become unfair, if the limit is exceeded?

My Lords, that is the purpose of the application for proper objective consideration of what would be a reasonable rent. I am sure that the noble Lord is aware that this Government's policy is committed to ensuring that housing is available for all who need it in the most appropriate way possible.

My Lords, does the Minister agree that certain decisions of the courts two or three years ago resulted in the pre-1987 tenancy rents going up at an extremely steep rate which caused great difficulty to people on fixed incomes, particularly the elderly? Does she agree also that there is a real need for limitations to be placed on fair rents in order to achieve the balance between a fair investment for landlords and a fair rent for tenants?

My Lords, does the Minister agree that it seems odd that a government consultation document should suggest that fair rents, fixed by highly respected and well qualified rent officers, are unfair because of the perceived effects on certain tenants on fixed incomes? Furthermore, is it true that that perceived unfairness has a good deal to do with the cost to the public purse in terms of assistance with rents through housing benefit?

My Lords, rent officers and committees will still determine a fair rent under Section 70 of the Rent Act 1977. Where the determined rent is within the ceiling imposed by the RPI formula, that will be the new registered rent. It is a complex issue and I stress to the noble Earl that we welcome all detailed observations forming part of the consultation.

My Lords, I am afraid that in recent days we have been in the habit of leaving only six minutes for the last Question. We should move on.