Lord Marlesford (Con)

My Lords, I find these amendments very curious. The whole principle of the private rented sector is that it is a capitalist operation; it is an operation which has costs and revenue. The revenue comes from rent. Obviously, rents must be very carefully determined. As to whether it is one month or two, that seems to me of little account. Basically, what tenants need to know is that rents are likely to increase by some measure which is generally agreed. In the private rented sector, this is normally the retail prices index—the RPI, as opposed to the CPI. If there is not a return on the investment, the investment will not continue to exist. Nobody can afford to let properties if there is no return on the property. The question, of course, is: what should the return be? There are two very important factors to think of. The first is the gross return, the gross rent, as a percentage of the market value of the property, and the question of what percentage it should be. I have produced a table which shows the different levels of rent for different values of property, but, of course, that is not the only factor, because one has to remember that the rent charged is gross before the cost of maintenance, and maintenance is hugely important. The solution to having a good private rented sector is proper maintenance and, indeed, improvement through modernisation maintenance. It may be that you put in a more economic burner to heat the house—they vary a lot, and later ones are much more efficient, but that is an expenditure. You have to get a balance there. I suggest that very often, about a third of the rent, on average, will go on the maintenance—keeping up to date—and administration of properties. If we said, for example, that a 3% return on capital was a reasonable level for the rent to be set at, that might end up at a net 2%, which is probably about what equities yield at the moment. We must see that. Then comes a very important point, which we shall no doubt be discussing later: the affordability of rents for tenants. The Government’s guidance has for a long time been that rents should not be more than 30% of household income. Therefore, that calculation should be made. If somebody is renting a property, they should bear in mind that that is the Government’s advice as to the amount that they can afford to pay, other things being equal. Equally, the landlord letting the property will also have to take into account whether or not the prospective tenant can afford their property. Again, it is essential that if you set a rent, you know the household income, to see whether it reaches the affordability stakes. These are important and complicated matters, but they are crucial to the private rented sector. My worry about the Bill is that half the time the Government do not seem to understand the private rented sector. It is a business enterprise like many other business enterprises. It is not particularly virtuous or unvirtuous, but I wish I could feel that the Government, in fiddling around with it all, were trying to make it work in a practical manner for investors and those receiving the benefit of the investment; that is, the product. There is no real difference between a house that you rent and a product that you buy in a shop. It is part of how the system operates, how civilisation operates. The Government are very muddled in their thinking on this. I would have liked to have got rid of the Gove Bill, which also was ill considered and ill conceived, lacking in understanding of the real world.