Cost of Living: Private rented sector

[Dr Rupa Huq in the Chair]

I beg to move,

That this House has considered the cost of living and the private rented sector.

It is a pleasure to serve under your chairmanship, Dr Huq.

I am pleased to have secured this debate on an aspect of the cost of living crisis that does not get the attention it deserves: the huge financial challenges facing private renters. Much focus is rightly placed on the Tory mortgage bombshell that is causing misery for millions of homeowners, but we should not forget that this crisis also affects renters, who are seeing increased mortgage costs passed down to them as a result, or landlords selling up and leaving them at the mercy of a market in which rents are soaring. It is the latest blow to renters, whose home lives are already characterised by insecurity and extortionate costs. For many of the approximately 11.6 million people privately renting in this country, the situation is becoming increasingly untenable. Average rents in the UK are almost 10% higher than they were in 2020, and rents on new tenancies recorded by Zoopla have increased by 22% since March 2021.

National statistics do not tell the whole story, as they mask staggering increases in certain areas. For example, average monthly rents for lets in my home borough of Trafford were £1,093 per month in January 2023—a 12% increase on the year before. Rent as a share of income is at its highest level in over a decade, at 28% of average earnings, rising to 40% in London. That is among the highest in the OECD, and around three times higher than in Germany and France. Evidence from Shelter shows that a third of private tenants are now spending over half of their monthly income on rent.

The steep increases are a result of local housing allowance rates being frozen since 2020. In the past year, the number of private rented homes that are affordable on LHA dropped by some 55%. When less than one in five private rents in England is viable for those on LHA, and virtually everyone accepts that there is not enough social housing, what do we expect low-income renters to do? Grim figures released by the Office for National Statistics last week revealed that one in seven renters have reported running out of food and being unable to afford more. According to Shelter, almost 2.4 million renters are behind on their rent or consistently struggle to pay it. It is clear that renters have been experiencing the cost of living crisis for some time and are reaching breaking point.

Let me illustrate the situation by sharing some stories from my constituency of Stretford and Urmston. A single mum recently contacted my office in desperate need of help. She has two children, one of whom is disabled, with multiple health issues that mean she is now awaiting the fourth surgery of her young life. My constituent told me:

“The cost of living crisis makes it impossible to stay where I am.”

My hon. Friend is making an excellent speech. Does he acknowledge that we have more houses now per head than we did in the 1950s? It is not just a crisis of the number of units but, as he has just said, it is the tenure of those units that is vitally important. If we do not get that mix right, the crisis will not be solved.

My hon. Friend is right and, like him, I look forward to a Labour Government ensuring that social rent is returned to the second highest form of tenure. We retain a significant shortage of homes overall. We are nowhere near where we should be, compared with the European average. He is correct, and I agree, that we are in desperate need of a significant increase in social homes, up and down this country.

Conservatives seem to have given up on building, as demonstrated by their capitulation on housing targets, which will leave house building at its lowest since the second world war. Only last week, we learned that, under this Government, we are in a situation where, despite the UK being short of approximately 4 million homes, the Department that is meant to build those homes is handing back £1.9 billion to the Treasury after failing to find housing projects to spend it on. I am pretty sure that, had the Minister sought advice or support from Members in this room and beyond, that money could have been well spent.

Thankfully, Labour has not given up on house building. Reforming planning rules, reintroducing house building targets, building on parts of the green belt that are in fact far from green, and, as I have just discussed with my hon. Friend the Member for Brighton, Kemptown (Lloyd Russell-Moyle), restoring social housing to the second largest form of tenure will be key drivers in our mission to achieve the fastest growth in the G7.

I congratulate the shadow Minister, my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), on all his work to raise this issue and to promote house building but, as he knows, I would go further still. Our 76-year-old planning system needs to be scrapped so that we can shift away from a discretionary system at the mercy of nimbyism towards one that is rules-based, underpinned by a flexible zoning code and determined nationally for local implementation. Only then will we be sure that we can build the number of homes, and the types and tenures of property, that we require.

Does my hon. Friend welcome the Labour party’s proposal to empower local councils to set up development bodies, which would not only be reactive in the planning policy debate, but would be proactive, in the sense that they could buy up land at the current land-value cost rather than inflated future costs, and develop it themselves or with partners?

My hon. Friend makes an important point. I welcome the Labour party’s commitment not only to end the hope value that exists in the sale of land at present but, as he says, to introduce the vehicles that empower local authorities to build. As a formal local authority leader, I know how challenging it is, particularly without a housing revenue account, to build those homes, and therefore to influence the place-shaping of communities. It is imperative that local authorities can do that to ensure that we get the homes that our local neighbourhoods require.

I congratulate the hon. Gentleman on securing this important debate. I am a London MP, representing a constituency in south-west London. On average, renters in London are spending almost 50% of their pre-tax income on rent, and the housing supply in the private rental sector has dropped dramatically. The impact is that our key workers—our nurses and teachers—cannot afford to live in the capital, and young families are being driven out, which is demonstrated in falling school rolls. However, London Councils says that local authorities could be building 143,000 new social homes; they are ready to do that, but they just need the funding. Does the hon. Gentleman agree that the Government need urgently to come forward with that cash so we can boost the supply of social housing in our capital?

I agree with the points made by the hon. Lady. I commend the work of the local authorities that are leading the way in building social and affordable homes in an incredibly difficult climate. It is not an easy thing to do with the way the grant regime is set up, but I know how fixated council leaders are on tackling the housing crisis, particularly in places such as London and my constituency in Greater Manchester, where prices are driving key workers and low-income workers out of the local area, which causes all sorts of issues with labour shortages and the provision of skills that we desperately need.

I support planning reform, but it will not be easy. Difficult choices must be made to end the gross inequities of our housing market. In the current system, we are set to spend more on housing benefit than on building affordable homes, and renting is no longer a step in the journey towards owning a home, but an expensive, insecure quagmire, dragging down a generation of younger people. The cost of living crisis is affecting us all, but especially private renters. They are generally, younger, poorer, more vulnerable people, trapped in the vicious circle of a broken rental market. It is no wonder that Sky News found last week that low-income private renters are suffering the most in the current financial climate, and the need for action to tackle this social catastrophe is now acute. Labour has shown that it gets this. I hope that when the Minister responds to the debate, she will show that she understands it too.

Members should bob up and down if they wish to speak, so we can calculate how long everyone gets.

It is a pleasure to speak under your chairmanship, Dr Huq.

I had not intended to participate in this debate, but having listened to what the hon. Member for Stretford and Urmston (Andrew Western) said in introducing his debate, I wondered where the issue of supply comes into this equation. The crisis in the rented housing sector is largely one of a lack of supply. When I had the privilege of being a junior housing Minister in the 1980s, we transformed the supply of rented housing by introducing the Housing Act 1988, which freed up tenancies and introduced shorthold tenancies. It enabled those with surplus accommodation to let it out through agreements under which they realised that, if they wanted to recover possession, they could do so at a time of their choosing and by agreement with the tenants. As a result of the 1988 Act, the supply of private rented housing in this country soared, and the sector was completely transformed for the better.

Does the hon. Member recognise that 50% of former council houses that have been sold off are now just rented out, rather than providing stable homes? The reforms that he talks about have led to an increase in private rents above and beyond the inflation in the housing market, less home ownership, less stability in the housing market and more insecurity. They have partly caused the crisis that we are in now.

Obviously, I do not accept that analysis, and I certainly do not accept the hon. Gentleman’s proposition that, just because somebody lets out a property that used to be a council property, that somehow means it is a meaningless value to the person renting it. If a former council tenant buys a house and ultimately chooses to let it out, that property is available in the private rented sector. On supply, a lot of people in that sort of situation are now withdrawing their properties from the rental market, thereby reducing the supply and forcing up pressure on costs and rents.

Does the hon. Gentleman agree with the chief executive of the National Residential Landlords Association that it is a myth that landlords are leaving the market, that in fact the private rented sector is growing, despite further regulation, and that there is no evidence that the private rented sector is being vacated? Some people are leaving, but more people are joining.

I do not accept that, because I have looked in vain at the impact assessment that accompanies the Renters (Reform) Bill—I looked at the latest iteration a couple of weeks back—and the Regulatory Policy Committee condemned that impact assessment as totally inadequate in dealing with the consequences of the reforms for the supply of housing from the private rented sector. The Government’s own impact assessment does not answer the question as to the quantity and quality of private rented accommodation that would be available were those reforms to be implemented. One can only assume that the Government either do not know the answer to that question or do not wish to disclose it.

As somebody who believes in the market, my instinct is that, if we put pressure on potential suppliers of a product through regulation, the likely consequence is that the potential suppliers will withdraw some of that product from the marketplace. That is exactly what is happening at the moment. One of the figures used by the hon. Member for Stretford and Urmston in introducing the debate was the large increase in section 21 evictions. My understanding—admittedly, it is only anecdotal—is that that is because private landlords now feel that they are going to be squeezed by both a nominally Conservative Government and the prospect of a real socialist Government, both of whom are basically anti-private landlord and are determined to reduce the supply of rented accomodation available in the private sector.

The Renters (Reform) Bill has only been printed and had its First Reading—it has yet to receive a Second Reading, which is a complaint from the Opposition—but I hope the Government withdraw that legislation, because the mere fact that it has been printed in the form of a Bill is driving a large number of people away from renting out their private homes and causing them to bring property back under their control, with a view to selling it. A lot of the property that is available for sale at the moment is property that was formerly rented.

May I take the hon. Gentleman back to his analysis—I will be polite and say “analysis”—of section 21 evictions? If there is fear of a Labour Government, can he explain why so many Members of Parliament are having to move out of their London accommodation? Landlords are putting up prices by so much, and when an MP says to the landlord, “Let’s negotiate,” they are immediately served with a section 21 eviction notice. If landlords are doing that to Members of Parliament, surely they can do it to anybody else. That why the legislation needs to be scrapped.