Selective licensing schemes are an unnecessary expense and should only be used as a last resort – Special Report

Up and down the country landlords are caught in the trap of having to pay for a selective licence.

These licenses aren’t cheap and for the money landlords spend, councils don’t appear to be inspecting properties.

In a series of special reports, Property118 looks at the issues surrounding selective licences starting with the expansion of schemes and the guidance from the government.

Licensing should be a last resort

The Department for Levelling Up, Housing and Communities (DLHUC) recently issued guidance around selective licensing. The guidance says: “Only where there is no practical and beneficial alternative to a designation should a selective licensing scheme be made.”

The guidance recommends implementing other methods to combat issues such as anti-social behaviour instead of selective licensing.

The guidance suggests to local authorities that areas suffering from poor housing conditions could have a programme of renewal to improve rented properties.

In areas with anti-social behaviour, the government proposes an education programme that could take place or a voluntary accreditation scheme for landlords.

The guidance says these methods could help to achieve the same objective as a selective licensing scheme.

When approached by Property118 for comment the Department of Levelling Up confirmed that selective licensing should not be used as a standalone tool.

A spokesperson said: “Selective licensing enables a local authority to address specific problems arising in particular areas. It is not a stand-alone tool and should only be used in conjunction with existing initiatives.”

It’s clear that selective licensing should only be a last resort, so why are councils implementing these schemes and shouldn’t they have at least tried the methods suggested by the government?

More licensing schemes being approved

Across the country, selective licensing schemes are being approved and expanded. Manchester has recently approved another licensing scheme which will require 700 more private rented sector homes to have a licence.

Fees for the licence cost around £800 and the council says it does not generate surplus funds from selective licensing schemes.

On their website, the council says income generated from licensing fees is used to pay for the consultation process, administration, management and running of the scheme.

While this may be true, the amount of money landlords pay, you would expect councils to at the very least inspect properties.

Zero inspections

In Nottingham, the first scheme of selective licensing ended on the 31^st July 2023 and a new second licensing scheme has just been approved which will come into effect in December.

Mick Roberts, one of Nottingham’s largest landlords helping benefit tenants told Property118 he has had zero inspections inside his properties.

He says: “I have had zero inspections.  Around four years eight months into the five-year scheme, they externally inspected a fence.”

Mr Roberts says it was only at the end of the five-year scheme that the council asked to inspect his properties.

He adds: “One month before the end of the scheme, they asked to inspect two of my properties. I’m sure this was just to get inspection numbers up.”

Landlords spending thousands of pounds

The current cost for a licence in Nottingham is £520 for the first payment (Part A) and the second payment (Part B) is £370. That’s £890 per house. Have more than one rental property and landlords are looking at a hefty outlay.

Some landlords are having to spend thousands of pounds and might never have their properties inspected in the five years that licenses run – so how do councils justify this?

When approached for comment, Liverpool City Council told Property118 that under its Selective Licensing scheme, which started in April 2022, 3,673 property inspections have been conducted.

This is made up of programmed inspections, reactive inspections, anti-social behaviour complaints and revisits.

A spokesperson from Liverpool City Council said: “Findings indicate 63% of properties that have received a programmed inspection have not been compliant with the licence conditions on the inspection and officers have found during inspection, 2,673 breaches of licence conditions and housing faults when visiting the properties.”

The spokesperson added: “The private sector team is working with landlords to ensure that they are abiding by the licence conditions and ensuring that the properties that are rented out are compliant with the conditions and safe for the occupiers to live in.”

Act as a tax on good landlords

Chris Norris, the policy director at the National Association of Residential Landlords, said it’s puzzling why some councils feel the need to establish selective licensing schemes.

He said: “With the government already committed to introducing a Property Portal which will allow local authorities to look up landlords’ details, it’s unclear why some local authorities feel the need to establish selective licensing schemes which act as a tax on good landlords.

“Past NRLA research shows clearly how there is little to no correlation between increased licensing and more effective enforcement of rules.”

He added: “Aside from the risk that regulatory work is duplicated by central and local government, these schemes feel like an unnecessary expense at a time when budgets are constrained.”

Use various other tools to tackle issues

When approached for comment Birmingham City Council told us that in line with government guidance, they use other various tools to tackle issues in the area.

A council spokesperson told Property118: “Our specialist Private Tenancy Team provides specialist advice on renting in the private rented sector: they intervene to prevent unlawful eviction and harassment and can pursue criminal prosecutions.

“There is a city-wide HMO Article 4 direction – Any residential house required planning permission to be turned into an HMO, and this approach prevents harmful concentrations of HMOs arising which negatively impact the character, balance, and amenity of local communities.”

The council added: “Under the Housing Act 2004, we can serve formal notices that require improvements to be carried out and if this is not done, the council can carry out works in default.”

Birmingham council is also planning to bring around 10,000 empty properties back into use which they say will help to alleviate the city’s housing crisis.

Valuable resource

Liverpool City Council told Property118 that selective licensing is a valuable resource.

A spokesperson said: “Evaluations of Liverpool’s first scheme, introduced to address poor housing and property conditions provided good evidence that selective licencing is a valuable resource for the council’s toolkit.

“During this period, over 34,000 compliance activities were undertaken with 65% of properties non-compliant. 3,375 cases of the most serious hazards (Category 1 and 2) were identified.  2,500 legal notices were issued, 169 formal cautions and 197 written warnings.

“With more than 300 successful landlord offence prosecutions and 87 civil penalties together with a resolution rate of 98% for all reported ASB complaints it is clear how this scheme helped improve housing for our most vulnerable residents in the private rental sector.”

The council says the launch of the second selective licensing scheme will help to target areas with poor housing.

A spokesperson said: “The launch of the second scheme in April 2022 saw a smooth start with systems up and running quickly and officers using learning from the first scheme to ensure teams were operational and mobilised speedily.

“This scheme targets poor housing and the worst property conditions including fire and electrical safety hazards and excess cold and damp.”

The Local Government Association (LGA) told Property118 that they support councils’ selective licensing powers.

A spokesperson said: “The power for councils to introduce selective licensing schemes has been around since 2004 and there are a number of examples across the country. The LGA is supportive of these powers.”

However, the LGA disagrees with the government being able to approve schemes.

It says: “Our main policy ask on selective licensing is that the requirement for Secretary of State approval for larger selective licensing schemes is removed.”

Schemes are an unnecessary expense

It seems that councils up and down the country are expanding their schemes, but at what cost?

In an already troubling time for landlords, this ‘unnecessary expense’ may do more harm than good for the sector.

Join us in the next series of Property118 selective licencing reports where we discover why council inspectors don’t need permission from the landlord or the tenant to inspect a rented property.

When approached by Property118 Nottingham Council declined to comment.

Share This Article