Are selective licensing schemes to blame for soaring rents?

For anyone wondering what the impact of selective licensing schemes is on tenants and rent prices, then one landlord has news for you.

He claims that the selective licensing scheme introduced in Nottingham in 2018 is to blame for massive rent increases in the city.

And his opinion is backed up by new figures from the Office for National Statistics (ONS) which reveal that rents in Nottingham have rocketed by nearly £200 since the scheme began.

Nottingham City Council introduced its selective licensing scheme in 2018 and a further scheme has been introduced this month.

The council denies that rent rises since then are down to its licensing scheme but rising interest rates.

Rents increasing rapidly

Mick Roberts, one of Nottingham’s largest landlords to house benefit tenants, told Property118 that the ONS figures reveal a sudden surge in rental costs after selective licensing was introduced.

The council introduced the first back in August 2018, when rents in the city were £664. However, rents have been increasing rapidly since the scheme has been implemented.

The average monthly rent in Nottingham in October this year were £859 – that’s nearly a 30% increase from 2018.

Selective licensing is not to blame

Mr Roberts says the council cannot continue to deny the impact the scheme is having on housing supply.

He said: “If you ever wanted any evidence that selective licensing puts rents up, it’s here in black and white. How can the council deny this?”

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.

When approached for comment, Nottingham council did not dispute that rents in the city have gone up after licensing was introduced but, bizarrely, told us that selective licensing is not to blame and the reason is down to recent interest rate hikes.

A spokesperson said: “The increase in rents that are quoted from the ONS data 2018 to 2023 might have something to do with the huge spike in interest rates in the past couple of years, pushing up mortgage payments for thousands of landlords.”

In reply, to the council, Mr Roberts said licensing schemes are not beneficial to tenants or landlords.

“There are other external factors such as interest rates but in Nottingham, selective licensing kick-started this upward spiral of rent prices.

“Landlords and a majority of tenants have seen no gain from selective licensing.”

Driving out bad landlords

It’s not just Nottingham that has seen an increase in rent prices due to selective licensing.

Newcastle City Council introduced a selective licensing scheme in April 2020 covering five areas and a further two areas were introduced in October 2021.

According to the ONS data, rents in April 2020 in Newcastle were £800 per month and soared to £963 in October 2023, a 20% increase.

Prices for the selective licence are £650 a year but the council say these schemes punish bad landlords.

In a council meeting, Newcastle’s city council, head of public safety and regulation, Ed Foster said: “What we are doing is driving out the bad landlords. One agent has lost a portfolio of over 100 properties because of poor property management.

“It is that kind of action that should be what we are doing, and by rewarding good landlords we’re showing that we are pushing for improvement. What I think we’re doing is flushing out those landlords who are not managing properties.

“We want to make sure everybody has a decent home. The scale of the property conditions that we’re finding is a significant issue.”

Not an effective solution

However, the National Residential Landlords Association (NRLA) has argued that selective licensing schemes do not offer any effective solution to property management.

Chris Norris, the NRLA’s policy director told Property118: “Local authorities are often too enthusiastic to implement or expand discretionary licensing schemes without regard for their effectiveness or suitability.

“Whilst there are instances where a selective licensing scheme might be appropriate to deal with a concentration of poor standards or behaviour in a very limited area, it is usually far too blunt an instrument for large areas or entire boroughs.

“NRLA research has previously revealed there to be little to no correlation between the expansion of licensing and more effective enforcement or improved outcomes at a local authority level.”

He added: “Rather than committing to ever more discretionary licensing, or calling for more powers, we would like to see local authorities tackle issues related to poor standards and practices using the extensive powers already available to them and supporting responsible landlords to continue to provide quality housing.”

More harm than good

The debate continues to rage against selective licensing with councils disagreeing they cause high rents and blaming external factors such as interest rates.

However, up and down the country councils are expanding licensing schemes, but at what cost to landlords and tenants they are meant to be helping?

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