Lord Carrington (CB)

My Lords, I declare my interests in the private rented sector, with residential lettings in Buckinghamshire and Lincolnshire. I have tabled Amendments 96, 98, 99, 103 and 104 to Clause 8, in which the Government seek to create a new right for renters to challenge their annual rent increases. I am most grateful for the support of the noble Lords, Lord Young of Cookham and Lord Howard of Rising, in this group. I believe there is a strong consensus across your Lordships’ Committee that stands alongside the Government in wishing to prevent unreasonable rent increases being used as a means of eviction through the backdoor. However, I also believe there is a strong consensus that the Government’s drafting of Clause 8 will not work. Indeed, I am deeply concerned that providing a universal right for all renters to challenge all rent increases, in all circumstances and without qualification, will undermine the supply of rental homes and overwhelm our courts. The Bill seeks to provide renters with mechanisms to ensure redress where their landlord behaves inappropriately, irresponsibly or exploitatively—yet I fear that the current drafting will undermine that intention in practice. At Second Reading we heard examples of poor behaviour by a small minority of landlords, but the response delivered by the Government will impact the whole private rental market, including the great majority of responsible landlords. The effect of Clause 8 will be to create a right for all 4.5 million of England’s private rental households to challenge their rent increases annually, via the Section 13 process, at no cost and at zero risk. Every single renter will have a right to take their landlord to the First-tier Tribunal if they perceive their rent increase to be “disproportionate” or unreasonably above market rates. The Government believe that tenants should apply to the tribunal only if they believe a rent increase is above market rents, but I am afraid that will not be the result of this legislation. The legal text of the Bill sets out that a rent increase could not come into force until after the tribunal rules, and explicitly prohibits the court from determining real market rent to be higher than the landlord’s proposal, even if that is a judge’s evidenced assessment. The result of this drafting is to create an artificial incentive for all 4.5 million renters to submit a challenge to their rent rise, however legitimate, because this would prevent the increase coming into force until the tribunal decides. There is no risk to the tenant in this and it provides a guaranteed delay in when the increase comes into force. Once this is widely understood, renters will exercise their right as a matter of course. This incentive risks overwhelming our First-tier Tribunal, burdening an already struggling court with hundreds of thousands of cases. This has already been referred to by the noble Baroness, Lady Wolf, who has come up with a sensible solution. The Government want renters in genuine need of redress to have access to the courts, but the queue for justice will be too long for this to prove possible. Moreover, the risk of this backlog in cases is causing serious concern among professional and responsible landlords in the sector. The prospect of extended delays to increasing rent would make it more difficult for investment institutions and build-to-rent developers to invest in new, high-quality rental homes, undermining the rental housing supply that we want to see. The reality of this backlog would be upward pressure on rents—the opposite of what the Government want to achieve. The Government themselves have acknowledged their desire to ensure that responsible landlords can increase their rents in line with the market annually, and the Government have rightly ruled out rent controls. However, the system proposed under this Bill will in practice undermine landlords’ ability to secure market rents annually. The Guardian newspaper recently revealed that a King’s Counsel has assessed the Bill to determine the likelihood of a legal challenge in the European Court of Human Rights. Subsequently, the newspaper City AM published an article outlining this legal opinion, which determined that the Government stand a greater than 50% chance of losing in the ECHR on this aspect of the Bill. I implore the Government to look into this further as a matter of urgency. My amendments would mitigate the very serious legal risk with the current proposals on rent challenges. It is all very well for the Minister to repeat, as she has in the past, that the Bill is compatible with the ECHR, but that judgment was made before our amendments were tabled and discussions ensued. As a matter of grave responsibility, the Government should consult again with their lawyers now that these issues have been raised. The amendments to Clause 8 in my name offer a common-sense solution that should reassure all parties. In my amendments, I propose that if a renter’s challenge is unsuccessful, rents should take effect from the date of the Section 13 notice rather than the tribunal’s determination date. I further propose that the court should be able to follow the evidence, empowering the tribunal to raise rents to what it deems to be market rates, even if this is potentially higher than what a landlord originally proposed. I believe that, taken together, the amendments would deliver a fair result—technical changes that would keep the right to challenge while reducing the artificial jeopardy-free incentive to take landlords to court. These reasonable amendments would also give institutional investors and build-to-rent landlords the confidence to invest in the high-quality new rental homes that our country needs. To address concerns raised by a number of noble Lords at Second Reading about unsuccessful challenges leaving renters with a large bill, my amendment is drafted to mandate landlords to spread any backdating over a 12-month period. The number of amendments proposed to Clause 8 speak to the widespread concern in this House about the risks of the Government’s current drafting. Whether colleagues support my amendments or those of my colleagues, I believe the Government’s position is unsustainable. A credible plan is needed to address the artificial incentive for every renter to challenge their rent. Otherwise, I fear for serious investment in new rental homes and the functioning of our courts system.