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St Michael’s Gate, Peterborough

Volume 619: debated on Tuesday 10 January 2017

[Mark Pritchard in the Chair]

I beg to move,

That this House has considered housing benefit and tenancies at St Michael’s Gate, Peterborough.

It is a pleasure to serve under your chairmanship, Mr Pritchard—not for the first time, I think. I thank the Speaker for giving me the opportunity to share with the House this issue, which relates to housing benefit and in particular to a loophole that has given rise to a very unfortunate and regrettable situation in my constituency. The BBC’s “Look East” programme has covered the case, and my local newspaper, the Peterborough Telegraph, and its parent company, Johnston Press, have launched a campaign to highlight the loopholes in housing benefit regulations in respect of St Michael’s Gate and other areas.

We are talking about a pleasant residential area of 74 flats and houses in the Parnwell area of Peterborough, which I know well, not least because my parents live very close to it. The site’s owner—Stef & Philips, a residential estate agent based in North London—has decided to invoke section 21 of the Housing Act 1988 to obtain vacant possession, effectively evicting and ejecting the families who live there. Earlier today, an hon. Member said to me “Isn’t this rather a narrow, niche subject?” I beg to differ; I believe that it goes to the heart of what the Prime Minister meant when she spoke about people just managing.

These are decent people, doing their best on modest incomes, who for whatever reason have not been able to afford to buy a property so have rented. Many of them have assured shorthold tenancies of six or 12 months. Frankly, a calamity has befallen them. They have been thrown out of their homes, which some of them have lived in for many years. They include families, young people, older people and children. Their situation goes to the heart of what is moral and what is right, and it is important that I bring it to the Government’s attention.

I would be remiss not to thank Councillor Wayne Fitzgerald, the deputy leader of Peterborough City Council. Despite the fact that the council has received considerable negative publicity in this case, he was courageous enough to appear with me at a public meeting in October and face the wrath of residents and local people who, naturally, are very upset.

Stef & Philips has used a special company vehicle known as Paul Simon Magic Homes Investments Ltd in order effectively to evict these people. In simple terms, it has evicted long-standing tenants, who have paid their way, to house homeless people to whom Peterborough City Council has a statutory duty. We are in a crazy Alice in Wonderland world; we have created homeless people in order to house homeless people. You can understand why a lot of my constituents are very angry about that, Mr Pritchard.

Since 4 December, the vacant possession proceedings have been pursued. We are talking about 68 assured shorthold tenancies, two assured tenancies—the holders of which are fortunate enough to have legal protection, so they will not be evicted—and four vacant properties. The unscrupulous landlord is evicting private tenants in order to turn some of the properties into bedsits. It tried to increase the number of properties from 74 to 98, but that was refused by Peterborough City Council. Nevertheless, it has increased the number to 88 in order to get more housing benefit, paid for by the taxpayer, having inflated rents and charged a management fee by using a loophole in the housing benefit regulations.

Peterborough City Council has been placed in a very difficult position. It has had to discharge its statutory responsibility to homeless people with local links—I have checked that they have those links—who have hitherto been housed in local hotels, particularly the Travelodge. The council has had to do that under section 188 of the Housing Act 1996, as amended by the Homelessness Act 2002, and it has had to divert money for that purpose on a three-year contract with a two-year break clause, which will pull in the thick end of £3 million over those three years.

What Stef & Philips has done is legal, but frankly I believe that it is morally dubious and unethical and so is the company’s business model. Such companies masquerade as confederates of local authorities, seeking to ameliorate the problems of homelessness and provide social housing solutions; far from it, they are part of the problem. In fact, in the rather self-serving statement that it belatedly issued to local media on 21 November, the company made a virtue of the fact that it is upgrading these residential units. But of course it owns them, having purchased them, so it is not doing it out of the goodness of its heart for benign, charitable reasons; it is doing it to support its own investment in its particularly dubious business model.

As I say, the company has sought to subdivide the properties. It has created a situation in which, out of the families living in the 74 units, 17 have already presented as homeless, 12 have been placed in the position of declaring themselves formally homeless and nine have been accepted as homeless by Peterborough City Council. Those were the figures on 4 December; they may be different now.

The situation is not unique. Stef & Philips recently tried the same modus operandi in Luton. Thanks to “Look East”, which was able to look into the company’s activities, Luton Borough Council said that it was not interested. The council said that it was not willing to see the taxpayer’s pound gouged and the taxpayer fleeced, and it sent Stef & Philips away with a flea in its ear. Unfortunately, Stef & Philips re-let those units, which are in Milliners Court in Luton, to Barnet Council. So it is not as if Stef & Philips has stepped in to assist Peterborough City Council out of the goodness of its heart; it has seen a niche business model, unethical as it is, and has taken action accordingly.

At this stage, it is appropriate to step back and try to understand why we have been placed in this position. The Minister may wish to dwell on that in his reply; his officials may also want to look into the matter, and perhaps the Minister will write to me in due course if he is not able to answer my questions now. At some stage, St Michael’s Gate was owned by what we now call a registered social landlord—a housing association. It was effectively social housing, and it was a very nice, pleasant settled estate in Parnwell, but at some time—we do not know when—it passed from the public sector into the ownership of a company called Akelius and then to Stef & Philips, which pursued the actions that I have mentioned.

The reason why that is important is that it would have needed the sign-off—the sanction—of the housing regulator at the time, whether that was the Housing Corporation or the Homes and Communities Agency. We are not talking about a couple of bedsits or flats; we are talking about a significantly large housing estate. Why that change was allowed to happen is an important issue, and the Minister might want to ponder it.

There was also a failure of intelligence by Peterborough City Council, in that it allowed this set of very good quality social housing units to pass into private hands. I know for a fact that, quite rightly, the council is actively pursuing the option of establishing a joint venture housing company with the largest residential social landlord in the area, which is Cross Keys Homes, a stock transfer company of some 13 years’ standing in Peterborough.

The council has £13.6 million of right-to-buy capital receipts. Why was it not possible for it to use some of that money to purchase or lease the property at St Michael’s Gate, so as to discharge its homelessness obligations under the appropriate legislation? That did not happen, but it is only fair to observe also that the council, in response to the uproar caused by the St Michael’s Gate debacle, is now accessing Government money, as a result of bids to the homelessness prevention strategy and migration funding, to deal with homelessness specifically.

The other issue is the increase in homelessness. Despite what I think are sometimes the ill-judged comments of the city council, which blames the Government’s welfare reforms and specifically universal credit for the spike in homelessness, there is no evidence to suggest that those reforms are the reason why we have suddenly been overwhelmed by an upsurge in the numbers of homeless people in the Peterborough area. There are other reasons for that increase.

One is the large scale of immigration. Incidentally, that is an issue that the Leader of the Opposition, the right hon. Member for Islington North (Jeremy Corbyn), is discussing in my constituency, at Paston Farm Centre in Peterborough, as we speak. That large scale of immigration has had the effect of saturating the private rental market in Peterborough and it has caused some difficulty. Also, the introduction of a selective licensing scheme in the city has meant that many of the more dubious landlords have opted out of the private rented market, which has obviously put pressure on the number of properties that are available. Of course, we have also seen a national phenomenon, which is that people are finding it increasingly difficult to make ends meet, and therefore they do not pay their rent and are being evicted. All these things have come together, but neither the benefit cap nor universal credit have been an issue.

There has been a failure of intelligence and a failure of governance, and I regret that I was given erroneous information by the leader of the council, Councillor John Holdich. He is an honourable man, and I believe that he genuinely made an error, but he told me that if Peterborough had not signed this three-year contract then Luton would most assuredly have done so. As I say, that proved to be an erroneous statement, because Luton subsequently denied that it was true. Nevertheless, it is certainly the case that, given the modus operandi of Stef & Philips, the company would have touted round these properties to other local authorities that needed to discharge their homelessness duties, whether that was Stevenage, Harlow, Milton Keynes, etc.

There was a call-in of this case on 19 October last year. However, the councillors present at that call-in meeting were placed in a very difficult position, because this deal was a fait accompli. It had been made and the council had no option but to accept it, because if the council had pulled out of the scheme with Stef & Philips, it would not have been able to house its homeless people in the Travelodges, and the company would have touted the properties around and taken other people from outside Peterborough.

I will finish by asking the Minister to examine the loophole in the housing benefit regulations, because effectively it means that instead of 74 families having assured shorthold tenancies that generated an income of £659,000 a year, Stef & Philips—by treating each unit as a temporary overnight homelessness unit, with the £60 per week management fee, inflated rents and the local housing allowance subsidy level—is able to bring in £966,000 of taxpayers’ money a year. In short, the key issue is the disparity in the housing benefit levels that are paid between rented accommodation in the private sector and what is achievable when the accommodation is utilised by the local authority for temporary accommodation.

As I say, I ask the Minister to review those regulations and particularly the management fee, because this site is not a foyer for young people or a housing association property for people with special educational needs or mental health problems. To all intents and purposes, it is de facto mainstream normal housing, albeit that it is temporary and is now being used to accommodate homeless people.

I would also like the Minister to work with the Local Government Association to tackle the issue that is growing across our country of local authorities shuttling round the most vulnerable homeless people to different local authority areas, because they are unwilling or unable to house those people themselves. I know that Lord Porter of Spalding, who is the chairman of the LGA, takes this issue very seriously.

There is also a lack of accountability. It should not be the case that we have to pursue freedom of information requests to obtain information from Stef & Philips, which is in receipt of large amounts of public money, and local authorities need to work together to make sure that they develop and put in place protocols to prevent this situation from happening again.

Peterborough City Council is between a rock and a hard place. It is not solely at fault and in fairness—although I hate to say it—neither is Stef & Philips. I feel very bad about what has happened. I apologise to my constituents that I could not do more to help them and to a certain extent I feel that the system and I have let them down. The current situation is unfair and morally repugnant, and I hope that this debate and the Minister’s response to it will ensure that, to all intents and purposes, decent people are not treated like this again and this situation will not be repeated in the future.

It is a pleasure to serve under your chairmanship, Mr Pritchard, for what I believe is the first time.

I would like to start my response by praising my hon. Friend the Member for Peterborough (Mr Jackson) for raising this issue in Westminster Hall today. It is not the first time that he has raised it with me or with my Department; I believe he presented a petition to the House and I have just signed off our response to that petition. As all Members of the House will know, he is a highly diligent constituency MP, and it does him great credit that he has raised this particular issue today. I also join him in congratulating his local newspaper, the Peterborough Telegraph, on the interest that it has taken in this issue.

As my hon. Friend said, and as I understand it, nearly all the current tenants at St Michael’s Gate hold assured shorthold tenancies under the Housing Act 1988. That gives them the right to live in the property as their home and to get repairs done, and they cannot be made to leave within the first six months of the tenancy. However, the legislation also enables a landlord to regain possession at or beyond the end of that six-month term, with two months’ notice.

Before assured shorthold tenancies were introduced by the Housing Act 1988, the private rental market in this country was in decline. Regulated rents and lifetime tenancies meant that being a landlord was simply not commercially viable for many property owners. Since the law was changed in 1988, the private rented sector in this country has grown steadily, from just over 9% of the market at that time to 19% today. It now fulfils a major role in providing housing to people in Britain. The sector is not without its problems, but it is worth saying that both the quality of accommodation in the private rented sector and the satisfaction of the people living in that accommodation have increased over time.

There are certainly problems, with which my Department continues to grapple, but overall that story of deregulation has been a success and has allowed more people to access accommodation in the private rented sector. The difficulty here is that although we know people want the stability of a secure home, the Government’s view is that more restrictive legislation of the kind that would have prevented this company from doing what it did would mean fewer homes available to rent, which would not help tenants.

My hon. Friend posed the right question in his speech. What happened may well be legal, and we may well have to accept that if we want a thriving rental sector we must allow landlords to ask people to leave a tenancy, with notice. The question my hon. Friend posed is whether the behaviour of the company in this situation is moral or right. I very much share his concern, and I think that anyone listening to this debate or reading the transcript will ask that same question about what has happened, which has, as my hon. Friend said, a sort of Alice in Wonderland quality to it: a group of people essentially being told that they need to leave their homes, resulting in many of them being made homeless, to provide housing for the homeless. That seems to be a highly irrational way for a company and a city council to behave.

Accepting that if we want a thriving rental market in this country we must accept the ability of landlords to regain possession of their property, what can the Government do to try to make the situation—

Sitting suspended for Divisions in the House.

On resuming

Before I was so rudely interrupted, I was trying to address the concern my hon. Friend raised. If we accept that to have a thriving rental market in this country, we need to allow landlords to regain possession of their properties, what can we do to make the kind of situation that his constituents have experienced far less likely? The key answer is to increase the supply of housing. Many of the issues that he referred to—I will answer some of the detailed questions in a second—come back to the point that for probably 30 or 40 years, we in England have not been building enough homes, so the demand for housing far exceeds the supply.

Those constituents who had to approach the council and seek protection under homelessness legislation are an example of a wider problem. Historically, the main causes of statutory homelessness—when people go to their council and ask for help with rehousing—have tended to be relationship breakdown and those kinds of issues. The most common cause of statutory homelessness in this country now is the ending of a private rental sector tenancy. My hon. Friend describes a particularly strange and indefensible situation, because of the role that the company played in provoking it, but it is a fairly common one in a general sense. People lose a private rental sector tenancy and find themselves unable to find alternative accommodation in their area, and therefore have to present themselves to their local authority.

To try to alleviate that problem, the Government are doing two things. In addition to supporting the largest affordable housing programme by any Government since the 1970s, we are investing very large sums of public money in trying to help local authorities prevent homelessness and support those affected by it; we are investing £149 million in central Government programmes and giving £315 million over the course of this Parliament to local authorities.

The House is also playing a part, and we should put that on the record. The private Member’s Bill promoted by my hon. Friend the Member for Harrow East (Bob Blackman), which is currently before the House, does two critical things. First, it looks to widen the safety net. My hon. Friend the Member for Peterborough did not touch on this, but it is possible that some of his constituents find themselves outside the safety net; single people who are not vulnerable in any way are not currently covered. The private Member’s Bill would widen that safety net. It would also get councils to intervene much earlier to prevent people becoming homeless, rather than just dealing with the problem when it occurs.

The second main thing the Government are trying to do is increase the supply of housing. The fundamental solution to so many of the housing problems we face in this country is to build more homes—in this particular instance, more homes for rent—to offer people greater security than is often the case currently, without forcing landlords to offer that security. In the forthcoming housing White Paper, my hon. Friend will see a lot of measures on that. I will mention two briefly.

First, the Government are very keen on build to rent. In this country, most of our private rental sector properties are owned by individual landlords, many of whom are responsible for only one property. We are keen to see institutional investment in building new private rental sector homes. That brings not only a degree of professional management and a very welcome new supply, but the potential to offer longer assured shorthold tenancies, because we are not talking about individuals who may need to access their assets six, 12 or 18 months down the line, but major pension funds and the like who are interested in a long-term, secure return on their investment. That would address some of the concerns of his constituents. Secondly, the Department is also promoting a model tenancy agreement, which encourages landlords to offer longer tenancies and therefore greater protection to people.

I want to address three questions that my hon. Friend asked on behalf of his constituents. He told us that the properties in question had at some point been what we would call social housing; they had been owned by a registered provider. He asked why that housing had been allowed to pass into the private sector. I cannot answer that question for him today—my briefing was unclear about the history. My officials believe that, if it was owned by a housing association, that was some time in the past. He is right to say that if that was the case, the transfer would have to have been authorised by the housing regulator. I am very happy to see if we can find out, without disproportionate effort, when that occurred and what the rationale was for approving that decision. That is clearly something that his constituents would want to know the answer to. It is a highly relevant question.

My hon. Friend raised two other questions to which I think he deserves an answer. He talked about the management fee, and the distortion whereby somebody can earn more money renting out accommodation to local authorities looking to place homeless families than renting it out as normal, general-purpose, private rented accommodation. The management fee is not paid directly to the landlord—it is paid to the local authority—but my hon. Friend is right that, because many local authorities are so short of emergency accommodation to place homeless households in, the rates that landlords charge them are often of that kind. The long-term solution to that is to get more housing in our country, so that local authorities are in a much stronger position in the market when trying to secure accommodation and do not have to pay such high fees.

Given the way that the management fee, which is managed by the Department for Work and Pensions, works at the moment, it may reassure my hon. Friend somewhat to hear that the Government are replacing it, and will move to a grant to local authorities, which will be administered by my Department. The overall pot of funding for that grant will be £617 million. That will give local authorities much more flexibility in how the money can be used, and may prevent the appalling situation that he has reported today from recurring.

My hon. Friend’s final point is very difficult. It is an issue that many of my predecessors have had to grapple with: local authorities are placing families that they have accepted as statutorily homeless outside their area. Many hon. Members have raised that concern with me in the nearly six months that I have been Minister with responsibility for housing. Let me reassure him at least partially. Local authorities have to secure accommodation within their own borough as far as is reasonably practicable. We have changed the law so that councils have to take into account the impact that a change in location would have on a household, including possible disruption to things such as employment and schooling.

In some circumstances, accommodation in another borough may be more suitable for a household. I cannot say to my hon. Friend that that can never happen, but I can assure him that we have made it more difficult. Again—this is probably the right moment to draw my remarks to a close—the long-term solution to the problem of councils placing families in different boroughs is to end the housing crisis in this country. We must ensure that we build more homes and build up our housing supply, so that each local authority has the ability to place the families it accepts within the area in which they live. Clearly, in most cases, that is the right thing for those families, because most people have friends, families and personal relations, whom they risk losing if they are placed at a distance. I thank my hon. Friend for raising this very disturbing case.

Question put and agreed to.