§ 2.45 p.m.
§ Lord Vaizey rose to call attention to the problems of housing with particular reference to the difficulties created by current legislation affecting the relationship of landlord and tenant, and to the importance of helping people to acquire ownership of their homes, including houses at present in the ownership of local authorities; and to move for Papers.
The noble Lord said: My Lords, I beg leave to move the Motion standing in my name on the Order Paper. My noble friend has taken the words out of my mouth: I was going to say that it was 10½ minutes by my calculations. I particularly look forward to the maiden speech of the noble Lord, Lord Coleraine, this afternoon and also to the speeches of my noble friend Lord Bellwin. the Minister, and Lady Birk, the Opposition spokesman.
May I begin by saying that, so far as I can discover, the British are among the best housed people in Europe, which is a rather surprising statistic. Most of the housing stock is in fairly good "nick"; about 4 per cent. of it is seriously substandard; and about 1035 20 per cent., including the 4 per cent., is below standard. Or, to put it in another and perhaps more optimistic way, about 80 per cent., or about four-fifths of the housing stock, is above standard. Opinion polls show a surprisingly large proportion of the population pleased with their homes: 37 per cent. are recorded as being very satisfied, 45 per cent. as satisfied, only 6 per cent. are dissatisfied, and 2.7 per cent. very dissatisfied. There is, of course, much room for improvement, but one does not need, I would submit, to be too gloomy in the light of these figures, both about the facts and about people's opinions of the facts.
Much of the satisfaction that people express with housing obviously arises from the facts of home ownership. My Lords, 55 per cent. of the people who have housing tenure now own their own houses; and all parties in this House agree that the proportion should rise above 55 per cent. A house represents for most people, apart from their pension rights, their biggest single capital asset; and the British people have £300 billion invested in their houses, which they own themselves. The mortgage debt is only £50 billion, so they have a net holding of £250 billion. Tim Congdon, who works for Messels, the stockbrokers, has shown how the typical person enters the housing market at or about the time of marriage, trades up and then, after a period, begins to trade down, and in this way realises his or her capital. The savings that the couple make through housing are a principal source of consumption finance in later life.
This method of saving, through housing, is helped by the exemption up to £25,000 of mortgage interest from tax, and by other devices. Of course, the real value of owner-occupied houses varies with the state of the market. At the present time, the average house is worth about three times personal income; but it has reached, quite frequently in the past, four times personal income, and it will probably rise in the next few years. So if people want a tip from Messels, it is probably a good idea at the moment to get into the housing market because the prices are likely to rise over the near future.
In the light of these facts, I want to present the following argument. It is that so far as possible public policy should be directed towards encouraging people to own their own houses; to enable them to do what they want to do—namely, to become homeowners. The advantage of this is, above all, that it gives them a capital asset and all the freedom that possession of a capital asset gives them. It enables them to choose in a very fundamental way the way they want to live. In this, I differ from the argument which has just been provided by the notable housing charity Shelter. They argue that mortgage interest tax relief should be phased out, and, although I see the strength of the argument that all subsidies in this field should be brought to an end wherever possible, in this particular case I disagree with them.
I support the case for home-ownership, because it is the commonest form of housing tenure and it is the common aim of all parties, and of most families, to wish to own their own homes. But there are two categories of housing tenure which are not benefiting from home-ownership. First, there are council tenants. 1036 There are 6½ million council tenants. Some 30 per cent. of the number of dwellings are in the council sector. On this matter the policy of the people on this side of the House is clear. It is to dispose of the greater part of the council estates by selling the houses to the tenants. As Mr. Heath's research assistants argued in an interesting article in The Times, this is desirable both on the grounds that it gives assets to people and because it gives them a vested interest in improving and running their own houses and blocks of flats. The incidence of vandalism on some council estates is relatively high not because of the type of people but because stopping vandalism is the task of the council and not of the tenants. The cost of the maintenance and administration by the council is bound to be high and almost bound in many cases to be inefficient.
The question arises—this is one of the things that I should like to put to my noble friend—as to whether or not the rate of disposals of council property is fast enough. Although already 300,000 houses have been disposed of so far and another half million are being processed, one wonders whether this rate could be accelerated. I believe, as, I think, do many of my noble friends, that the time is coming when all council tenants in ordinary council property—not those with sheltered housing—will have their weekly rent turned into a weekly mortgage, as was suggested by Mr. Heath's assistants in The Times. I, myself, hope that we may see between 2 million and 3 million disposals of council property over the next four years. That would dissolve the council estate fiefdoms and the inevitable petty bureaucrat superstructures that seem to go with them.
For the last part of my speech, I want to refer to the one remaining form of tenure, having already spoken about home ownership and council tenants: the ever-diminishing band of private landlords. Not everybody wants or needs to own their own place—people in highly mobile jobs do not want to, Peers and MPs do not necessarily want to own their own London flats if they live in the country. If the housing market worked properly much of the housing shortage would, I submit, end; but almost 70 years of rent control has meant that this rental market has been divided into two; the expensive and often furnished end and the crumbling working-class end. It proves that if you want to make a market inefficient, it does become inefficient.
The Government have tried to remedy this situation by the 1980 Housing Act. In that Act, the Government ended the system of controlled tenancies under which rent was pegged at 1956 levels. These tenancies have now been brought into the fair rent system. The Government reduced the period between the fair rent reviews from three years to two years in order to give more protection against inflation. The Housing Act extended the rights of temporarily absent owner-occupiers, servicemen and the owners of retirement homes to regain possession of their homes from tenants by the procedure of assured tenancies.
The snag with the 1980 Act is that it is widely thought—I do not know whether it is thought rightly or wrongly—that if the Labour Party came back into office they would inevitably tighten up rent controls again. I would submit that a great responsibility 1037 therefore falls upon the Alliance—and I am pleased to see that no fewer than three SDP Members are to take part in this debate this afternoon—which is, after all, the alternative Opposition and (who knows?) may become the Official Opposition after the next election. One hopes-1 shall listen with interest to what the noble Lord, Lord Roberthall, has to say—that they will adopt a sensible policy towards the rented sector. That would help the benefits of the 1980 Act to be fully felt.
The 1980 Act is good as far as it goes but perhaps the time is coming when we need to ask a much more radical question, a question that, in a different context, my noble friend Lady Trumpington asked in the context of the Shops Act: Do we need these Acts at all? Admittedly, they give a great deal of work to the lawyers—never a group under-protected by either House of Parliament. But lawyers will always find work to do while there is legislation. Admittedly, the Rent Acts diminished the supply of rented housing, since, if you keep prices down, the supply dwindles. They make landlords bad landlords because they think that they cannot get a proper return on their capital and therefore they want to get rid of the tenants that they have. That produces—and the evidence is overwhelming—dissatisfied tenants.
The question of repealing the Rent Acts is now, I suggest, becoming practical politics. In Germany, for instance, since the end of the last war, over 2 million privately rented houses and flats have been constructed without any of the paraphernalia of the Rent Acts. Of course, people will inquire: What about the poor and the disadvantaged? Housing subsidies have little to do with the elimination of poverty. Housing subsidies are distributed, like rain, randomly on the just and the unjust, on those who badly need subsidy and on those who do not. The proper remedy for poverty is an efficiently working system of social security and assistance, above all, of cash allowances in which payment of housing costs is one important part, but only a part, and in which people are given cash to spend as they please. And a capital asset which comes from home ownership that can be mortgaged is itself a protection against indigence in later life.
In short, home ownership has become a fundamental asset of the modern British way of living. In my submission, the number of home owners should be increased, and the sale of council houses is already beginning to increase the number. But an efficient housing market needs a free rented market sector and I regard that as of great importance. The question of the alleviation of poverty must he sharply distinguished from housing policy. The way to help the poor is to give them more cash. The way to improve housing is to free the housing market. My Lords, I beg to move for Papers.
§ 2.59 p.m.
§ Baroness Birk
My Lords, I should like to thank the noble Lord, Lord Vaizey, for raising this very important question in this short debate today. I think he did play us all around a bit in some aspects of what he said, but he touched on some important points. How we must look at this is in the context of the major housing crisis in which we find ourselves 1038 today. There is no time in this short debate for sheets of housing statistics, which are another way of expressing numerically the human misery, family breakdown and basic deprivation due to a bad housing system. To give some indication of the gravity of the problem, I merely mention that the combined public and private housing starts last year were 153,000 compared with 265,000 in 1978—that is, 100,000 fewer; and I would not even say that at that earlier date the number was high enough. If we also look at the state of improvements to existing houses, these are an extremely important factor both in providing homes and in catching dilapidated property before it falls into dismal decay and is really fit only for demolition. The number of properties that were improved with the aid of grants last year was 20 per cent. down on the previous year, and as a society we really cannot afford this.
But the Government's own White Paper shows a dramatic planned reduction in public expenditure on housing, and this, as we well know, is reflected in the reduced allocations to local authorities. We now have homelessness higher than ever recorded, and this is according to the official figures. I am not talking about those very often in excess where the housing waiting lists are very difficult to fathom. We have a situation where people are put into bed and breakfast accommodation. It is almost an Alice-in-Wonderland situation. It is highly expensive; it is socially wrong; and it is completely unsuitable for families. Yet these are the lengths to which many local authorities have to go.
The effect of the Government's financial and monetary policy has been the biggest-ever slump in the construction industry. Due to the high unemployment that we unfortunately now suffer in this country, nearly one in eight of the 3 million unemployed are in the building industry.
When the present Government were elected three years ago, they placed great emphasis on reviving the private sector, and the noble Lord, Lord Vaizey, referred to this. Unfortunately that has not worked out. To hold or reverse the decline in rented property, shorthold and assured tenancies were introduced in the 1980 Housing Act. The noble Lord said that Act was good as far as it went. 1 would say it was bad as far as it went, and it went too far. But what happened to these new introductions which were to deal with the decline in the rented sector? We have seen up to now only four assured tenancies and 5,128 shortholds in England. Of those, only 377 were in London, and the private rental market has been declining at the rate of 60,000 a year nationally and of something like 16,000 a year in London. Of course it has been declining, as I think we are all aware, almost since the beginning of this century. It had declined before the more recent Rent Acts and it has gone on declining through shortholds, and I fear it will go on declining.
The Minister will no doubt say when he comes to reply that the landlords are not taking up shortholds because the last Labour Government said they would repeal them. During the passage of that Act, I remember making it quite clear myself from these Benches that we would not repeal shortholds if the basic safeguards we were asking for were incor- 1039 porated. In fact when we voted on these amendments we got support from all sides of the House, but unfortunately the safeguards were not included and so shortholds became unacceptable.
However, it is quite untrue to place all the blame on a future promise—or threat, however one likes to look at it—to repeal this provision, because, if landlords found it would serve them for the moment—and they are shortholds, after all, and not longholdsthey would enter into them and use them. It is also interesting that everyone who was consulted, including the landlord bodies, were not very impressed by the Government's view about it. Despite what the noble Lord, Lord Vaizey, has said, I would argue that the decline of the private rented market is not due to security of the tenant but to economic factors. As a distinguished economist himself, I am sure he is well aware of this.
The return a landlord can receive from the average letting is quite incompatible with the investment which has to be put into property for renting. He does much better by selling the property and investing elsewhere. Why does he do better in this way? Because the bulk of those who rent cannot afford an economic rent. Here we are not talking about the comparatively small amount of expensive property for letting—incidentally, the service charges involved in these have now resulted in more and more people selling the flats they had rented and also getting out of the rented market themselves as tenants—and not as controlled tenants either. Whereas generous subsidies are available through mortgage tax relief to people buying and there are also subsidies for council housing, though the level of those subsidies has been halved between 1979–80 and 1981–82, there are no general subsidies available to private landlords. So, unless the charge is in excess of the means of most tenants and also in excess of what is necessary to service a mortgage, it just is not "on" for the landlord or the tenant.
If I may say so, it is all very well for the noble Lord, Lord Vaizey, to say he is quite against subsidies and wants to see a revival of a flourishing private rented market, but he does not really explain how that is to be brought about when one is faced with the historic fact of the decline of the market and the economic facts of what the Government are doing at the present time. There are problems with legislation, as the noble Lord has mentioned in his Motion, but the problems are the loopholes in the Rent Acts which have been exploited by unscrupulous landlords.
During the passage of the Housing Act, we moved amendments on this very difficult problem, and the noble Lord, Lord Bellwin, who was the Minister in charge of the Bill at the time, did say in reply to an amendment that I moved in order to try to get rid of the loopholes:As regards the loopholes in the Rent Acts—and noble Lords opposite know more about them than I do—we accept that there are, of course, problems. What I have said in answer to the amendment is that I just do not believe that this is the way to deal with the problems, for the reasons that I have given. That does not mean to say that I do not think that there should be attempts to find solutions to them."—(Official Report, 22/7/80; col. 231.)Further on, he said this at col. 232: 1040I would only say—and I am not sure what other amendments there may be as regards filling the loopholes in the Rent Acts—that this is an area on which at present, within the Bill, we cannot go any further. Time does not allow it. But no one is turning away from the problems. It will be for another time—not necessarily a long time in the future—when we have got through what we are doing at present when we shall probably want to sit down and talk about the matter.Up to now—and this is June 1982—none of us has sat down and talked about the matter, and these loopholes still go on and cause a great deal of hardship to many people, including students and others.
When we turn to home ownership, the noble Lord, Lord Vaizey, said that there was a public policy to encourage people to own their own property. I entirely agree and, with the Labour Party, I believe that home ownership should be encouraged. But we do not believe it is right for councils to give ownership advantage to people at the expense of the poor, the homeless and the badly housed. I would remind your Lordships that the House of Commons Environment Committee in its second report clearly demonstrated the effect of compulsory council house sales, which had seriously reduced the number of lettings becoming available for those who have no option but to rent.
That is what we are concerned about. It is not dogma about owning houses; it is a question of the plight of those people who have no option but to rent. What they did in this Act about sales of council houses meant that the Government were once again destroying local autonomy in housing, as, unfortunately, they have done in so many other local authority areas. We saw this in the Local Government Finance (No. 2) Bill, which we have just finished.
Finally, what is needed is very much more public expenditure going into housing, which will not only give homes—and very badly needed homes—to more people, but will also revive the building industry and thus enable many of those who are now unemployed to obtain work.
§ 3.11 p.m.
The Lord Bishop of Norwich
My Lords, as the noble Lord, Lord Sainsbury, is not speaking, it falls to me to say a word or two. But, first, I and my fellow Prelates must declare a personal and private interest in this matter, because, when one becomes a bishop, after 10 years one man's bishop's palace becomes another man's tied cottage, when one moves towards retirement. So we have an interest in this whole matter, because we belong to that band of clergy of the Church of England who live in tied cottages. In the Church today, we are working very hard to find ways and means of helping our clergy, at the end of long and honourable years' ministry, to find modest accommodation for themselves. Therefore, this subject is one in which we have a personal interest.
The noble Lord, Lord Vaizey, reminded us that a house is the biggest single capital asset of any married couple and, therefore, this is a matter of major importance to the Church as well as to the state. I would plead for flexibility in this matter from successive Governments. I think of my own family and two of our daughters. One is married to a curate and she lives on the 14th floor of a block of corporation flats in a great northern city. I shall not mention the 1041 city, because, as the rats keep coming up the refuse chute from the 7th to the 8th floor, and they are on the 14th floor, there are anxieties about the future and, in a sense, helplessness, which people in accommodation of that kind feel. That can be dramatically pictured in many different ways by people who would love to find a way of having a little more control over the roof above their heads.
With flexibility, I hope that Governments, with their power and position, can allow young people to be exciting in their opportunities of housing. Another daughter and her husband, with another couple who are good at building, bought an old derelict manor house in Suffolk. For two and a half years they lived in a derelict bus in the grounds of the derelict manor, but they have now got out of the derelict bus and into the no longer derelict manor. So they are there in a glorious house which they have virtually built themselves. I ask for flexibility and for encouragement to young couples to show initiative in forms of housing.
Having heard the noble Lord, Lord Vaizey, and the noble Baroness, Lady Birk, who are well able to face each other across the Table, I shall not enter into anything concerning party politics, seeking, as always, to speak in the national interest. I say that, because your Lordships may not have noticed that we have had a certain little local difficulty in Norwich, in relation to the sale of council houses. As my brother the right reverend Prelate from Southwark knows all about corporation and council houses, I am leaving the general issue of council houses in his safe hands, rather than in my own.
I would say only that, in talking to one of my own Christian ordinands, who is moving towards non-stipendiary ministry and who works in local housing, he made this point. He said that it gives a feeling of responsibility and a much easier means of family continuity in the family home if it can be owned and occupied, and this is more desirable than rented property. One cannot emphasise too strongly the importance of belonging—and that in country districts, as well as in town districts.
I notice that the selling of council houses is above party politics, because since 1952 it has been possible; it is simply that the 1980 Housing Act—whatever view we have of that Act, and I leave it to others to say what view they have—makes it possible to buy more. We have noticed an interesting point from the point of view of the Church. I do not believe that we should consider that if you are a Christian family, you therefore become a more prosperous family in this world's goods. But it is true to state that, statistically, fewer of our Church families are in prison as a result of grievous bodily harm cases, of extreme company fraud cases or of other things which break up home life. Therefore, statistically, our Church families seem a little better off.
I say that only because I believe that flexibility through the Housing Act 1980 is a good thing, as a measure of council houses bought on council estates saves those who have purchased, by thrift and hard work, or by being better paid, from having a tendency or a temptation to move out into what are, perhaps, more salubrious areas. In fact, they like to stay where they belong and near their local church. There- 1042 fore, where there is a sale of tenancies on council estates you get more of a mix, which is socially helpful in that situation.
I want to say one word, coming from the open countryside and the wide skies of Norfolk, about rural housing which can so easily be forgotten. The country's rural population is on the increase and a rise of 9½ per cent. has been recorded in the census between 1971 and 1979. At the same time, there is an alarming drop in rural building, whether private or council. Therefore, I put in a plea to Government to take particular care over the matter of rural housing today. In some areas, key villages tend to be designated, where everything is going for those villages—the school, the pub, the shop and the Church. This is a good idea in one way, but it can cause distress in the smaller villages. I believe that if Government could find their way to increase the allocation of money to council house building in rural areas, this would lead to a better quality of life there.
It is true that many of our agricultural workers live in tied cottages and that, under the legislation, they are able to stay in those cottages until other people need to follow them, and then there are ways in which provision is made for them. But I simply ask that we should not forget the need for tural housing, because the centres of cities and of urban areas can sometimes win the ear of Government, local government or pressure groups more easily than those who are less organised, who are more scattered and who live in the areas of rural Herefordshire or Norfolk, as the case may be. I ask that they be considered. I now gladly give way to the maiden speech of the noble Lord, Lord Coleraine, which we are looking forward to hearing.
§ 3.20 p.m.
§ Lord Coleraine
My Lords, my interest in the subject matter of this debate is that I have a legal practice and that I am very much aware at second hand of the many frustrations felt by private landlords and private tenants in flats and converted houses in the inner areas of London.
I must apologise to my noble friend that I was not here for the start of his speech this afternoon, owing to traffic jams and the various problems which they cause. But I was here to hear what he said about the private sector. Although I shall not entirely agree with all he says, I do concur when he says that the ultimate beneficiaries of so much of this legislation are the lawyers. From the trend of my speech, your Lordships will see that I also believe that the Rent Act legislation results in a great deal of wasted expenditure on builders, managing agents, accountants and all kinds of other people who get involved in between the landlord and the tenant.
I hope that I am not being in the least controversial when I say that in my opinion the complex structure of statute which has arisen in this century has not, on balance, proved man enough to meet the varied needs of landlords and tenants, and that again and again measures intended to alleviate problems have persistently tended to create new ones. In my intervention from these Benches this afternoon I shall try to touch on some of the symptoms of the bad effects of too much legislation by reference to the tendency of legislation which interferes with market forces 1043 and frustrates human initiatives to be ultimately counter-productive, rather than by reference to any innate intractability of the landlord-tenant problem in an aggressive, disturbed society—which is also a factor.
I want to speak mainly about some unfortunate side effects of the Rent Acts and similar legislation. I would identify two main limbs of Rent Act legislation. The first is the control of rents at levels below the levels which would be reached in an unfettered market. The second is security of tenure which restricts the freedom of a landlord to recover possession of his property at the date agreed with his tenant in the tenancy document or lease.
In each case the freedom of a party to contract to bind himself to honour obligations is interfered with. We know that this is a factor in much of our law. I would suggest that whereas the rent control itself is in principle thoroughly undesirable, being simply a subsidy for some citizens, provided in a rather random fashion by other citizens, security of tenure is of a different nature altogether. I am sorry that time does not permit me to develop my argument. However, my opinion is that the justification for security of tenure as a general principle—although I fully support shorthold tenure—is that the power which can be wielded by a landlord, by the threat of depriving a tenant of his home, is so great as to make this a proper field for Government concern: the protection of the weak against the strong.
The particular consequence of years of rent control which concerns me today is, on the one hand, the drying up of the stock of private housing to let and, on the other side of the coin, the extent to which flats which were formerly let on tenancies and short leases, whether in mansion blocks or converted houses, have been, and are still being, sold on long leases at low rents, so as to escape the main provisions of the Rent Acts altogether. This generally means: sold at the highest achievable premium and for the lowest rent.
I refer to the low rents often paid under long leases, because a rent of £25 a year over the term of a 99-year lease may seem a good bargain to a flat purchaser. But it may seem less good value in five or 10 years' time when the last lease in the mansion block concerned has been sold, the landlord is a £100 company, perhaps incorporated abroad, and there is no rent to be paid worth withholding against the landlord's complete lack of interest in managing the building or carrying out repairs. Or perhaps the landlord will be prepared to do some repair work, but only if the estimate which its associated managing agent has obtained from its good friend the builder is accepted and paid for in advance. Or, in another case, it may be that the landlord's interest in a block has passed, during the late 1960s or the early 1970s, through the hands of property speculators who have each sold a few flats as and when a statutory tenant died, or a short lease came to an end and the tenant decided to take some compensation and go. Later in the 1970s a landlord may have been liquidated, and there may have been more changes of landlord since then, with no consistent management over the period—and perhaps the provisions for repairs in one lease differing from those in 1044 other leases and the building having become by now near enough unmanageable.
It is common where blocks of flats are sold on long leases for the landlord to retain responsibility for repairs and management of the block, at least until the block has been sold—and possibly indefinitely thereafter—the leases providing for the sharing of expenses among the lessees. My experience is that in just too many cases this system has really broken down and has no chance of working. One has only to consider the case of a mansion block half sold on long leases and half let to statutory tenants or protected tenants. What landlord will willingly keep the block in repair when he can effectively only recover his full costs of doing so from the long lessees? For a number of reasons, including high fuel costs and wages, the cost of providing services has escalated over the past decade and the standard of services provided has deteriorated.
Parliament, it is true, has legislated in the field of repairs and management in the light of the problems I have outlined above and of abuses on the part of some landlords who found their service charge accounts a new source of profit. In 1972, lessees acquired the right to receive a summary of expenditure certified by the landlord's accountant. The Housing Act 1974 gave the right, in a somewhat unsatisfactory manner, for lessees to challenge the charges for shoddy or overpriced work. This has been replaced by Schedule 19 to the Housing Act 1980. But there are two big problems. First, there is the need for lessees to have some effective way of compelling their landlords to carry out the repairs for which they are liable and, secondly—I put them very much in that order of importance—the need to ensure that the repairs, when carried out, are properly charged for and that all due and necessary accounting practices are followed. Most recent legislation has concentrated on tackling the accountability problem, including the extensive provisions of the 19th Schedule to the Housing Act 1980. The effect of this, in some cases, is to make landlords less prepared to carry out repairs than before, when they come to consider the paper work to be done before repairs can be carried out: the estimates to be obtained, the timetables to be observed, the notices to be given, the observations to be called for and considered—and so on.
Lessees cannot step in and carry out repairs for which their landlord is responsible. The remedy of specific performance is expensive and slow and often amounts only to an order to a stone to give forth blood. The local environmental health officer's services are often available. And if the landlord does ultimately carry out the repairs, it is seldom an easy matter for the lessees to prove that the repairs which cost £8,000 when carried out would have cost £1,000 a year or two earlier, before the rot had spread, and that only the landlord's unreasonable delay inflated the ultimate cost of what was done.
The law as to service charges and the enforcement of landlords' repairing covenants is, in my opinion, a very ripe field for further consideration to lead to law reform. I should like to make one suggestion: that consideration should be given to the provision of a means, perhaps by legislation, of providing for the court appointment of a receiver, by which lessees are 1045 themselves enabled to carry out repairs and provide services where landlords have failed to do so.
The Rent Acts have greatly contributed to the breaking up and selling on long leases of flats which in the past would have been available to rent on short leases or periodic tenancies. But it is true that other factors have contributed to what is now the fashion of owning your own long lease of your flat as the preferred alternative to being just a tenant. Benevolent Government, apparently setting out to create a dwellinghouse-owning rather then a property-owning democracy, have performed fiscal contortions and distortions: Gains tax relief on principal dwelling-houses and mortgage interest relief on qualifying expenditure on principal dwelling-houses are two reliefs which manipulate people, in my opinion. It may be an heretical comment to make, but I would say that a man with £20,000 in his pocket living in a rented house may be in a position to be a great deal more use to himself, to his family and to all of us than the same man with the same £20,000 tied up in bricks and mortar. However, we have to live with the fashion for long leases, and the only other point I would make on the subject is, that we should consider the case for long lessees to be given powers by statute to buy out their landlord's interest in appropriate cases where the repairing and service provisions and the like provisions of their leases have manifestly broken down.
Going back to the distortions imposed by the Rent Acts, which lie behind so many of the problems and abuses that we see, I would like to make the point that, disregarding the political fringes, it has seemed to me that in recent years there has been a greater readiness to recognise defects in a system by all parties and a greater preparedness to abandon strictly adversarial attitudes and postures. In landlord and tenant legislations, as much as in any other field of controversy, more damage is done by parties legislating their own particular hard lines when they achieve power than can be imagined. I believe there is tendency to recognise this fact now more than there was before; I do hope so. I conclude by hoping that the problems of landlord and tenant in the Rent Act field can be tackled consensually—in particular by acceptance of the fact that market rents throughout the housing sphere are a desirable end for which to work—but that in what is not the best of all possible worlds, security of tenure must as a general rule be respected by Governments for the foreseeable future.
§ 3.32 p.m.
§ Lord Robbins
My Lords, it always is a great pleasure to follow a maiden speech. On this occasion, it is a peculiar pleasure for me to follow this speech because I served under the noble Lord's father during the apex of his fame at the time of the Second World War. In that capacity, I grew to respect and to love him. Our friendship persisted until his recent death. I would infer from the quality of the speech which the noble Lord, Lord Coleraine, has just delivered that something of the forcefulness, something of the technical insight and something of the acute moral discrimination has penetrated to his son. I assure the noble Lord that we look forward to hearing him many times in future in this House.
1046 I want to thank the noble Lord, Lord Vaizey, for drawing our attention to the whole sphere of issues which his Motion implies. I agree wholeheartedly with the positive part of the noble Lord's speech and his eulogy of the social benefits of house ownership. I propose to concentrate, however, on the latter part of the noble Lord's speech—not by way of disagreement but by way of providing a very simple historical and theoretical analysis of rents and rents regulation.
Rent control and regulation have been tried at different times and in different places this century. Broadly speaking, I would say that there is more agreement among members of my profession of different schools of thought than on a good many other issues. No less personalities than Professor Myrdal and Professor Hayek think poorly of the results of attempts at rent control and rent regulation. At the same time, one must realise that this is a subject which arouses deep emotions one way or another amongst the general public. The electorate is very sensitive on matters of this kind and I therefore hold that it is incumbent upon us who are not dependent upon the electorate to be quite candid about the truth of these matters as we see them.
Rent control is essentially the fixing of maximum rents below the level which would prevail in a free market. Thus it affords an incentive to an excess of demand and a disincentive to spontaneous response of supply. This has occurred whenever and wherever it has been introduced. The excessive demand shows itself pretty quickly. The disincentive to supply takes longer to become acute; after all, the stock of houses is there and although some owners may at once be disinclined to offer the services of their property, the effects on maintenance—not to be under-estimatedand the effects on new additions to the stock are bound to show themselves in the long term.
Crude rent control as it prevailed in this country from 1915 until 1965 resulted in the most astonishing anomalies. According to the date of the original contract, rents might differ in the same street. As my colleague Professor Paish pointed out in a famous article, there was no inherent guarantee in that system that the poorest tenant would own the cheapest house or that the poorest landlord would own the dearest one. But, for some time at any rate, the introduction of the regulation of fair rents introduced in 1965 did little to rectify the general tendency to shortage.
The criteria of fairness were defined as a reference to what the market rent would be if supply and demand in an area were roughly in balance. So you would have the paradox that regulation would be superfluous if that condition prevailed, while, if it did not, the one means of getting rid of the imbalance—namely, a higher rent, with the effect of choking off demand and increasing supply—would be absent. The normal tendencies to shortage would persist.
I am quite willing to agree that some attempt was made to remedy these tendencies in the 1980 Act, but I agree with Lord Vaizey that the question will still arise whether the whole body of statute law relating to the rent contract will need reconsideration, and eventually, according to my hope, be swept away. A housing shortage of the kind induced by control or regulation has as its main effect discrimination between those who have and those who have not the occupancy 1047 of houses. Those who have have a bonus which they would not enjoy were the price determined by the market. Those who have not have a negative bonus, in the sense that there are fewer houses to let than otherwise would be the case. The trouble does not stop here. The inhabitants of controlled or regulated houses, being assured of their tenancy, have a disincentive to move from the house inhabited to the areas where there is no such guarantee. And in a period of rapid economic change, such as ours has been in the greater part of my lifetime, the operation of this uncertainty has a restrictive effect on mobility, which surely is the reverse of what the contemporary situation demands.