Auditor says Selective Licensing DOES push up rents and cause homelessness

A council’s Selective Licensing scheme has been slammed by an external auditor – just as the council unveils a consultation process to start a new scheme in August – with critics saying the scheme has led to tenants being made homeless but the council says it doesn’t have data on the issue.

The audit was ordered after the council’s 2019/20 accounts were published and a complaint was made about the Selective Licensing scheme by a local landlord.

However, the objection didn’t meet the statutory requirements needed for an investigation because the objector was no longer on the city’s electoral register – but they highlighted that they knew of other landlords who would object to the accounts for 2020/21.

This led to the external auditors Grant Thornton being asked to examine the complainant’s criticisms of Nottingham City Council’s Selective Licensing scheme.

Highlights several issues over the scheme by its critics

The auditor’s report highlights several issues over the scheme raised by its critics, including:

• The licence fees were largely passed on to tenants in the form of higher rent levels, rather than being borne by landlords
• The cost and administrative burden have led to some landlords ceasing operations in the city, reducing the supply of accommodation and further impacting rent levels
• The scheme has led to an increased incidence of homelessness.

In response, the auditor reports that:

• It is clear, and unsurprising, that many landlords did pass the licence fees on to tenants, as there was a rise in average rent levels in the city following the implementation of the scheme.
• We are aware that some landlords have indeed ceased operating for reasons connected with Selective Licensing, but this is against the background of a much bigger reported trend of the replacement of many traditional landlords with a smaller number of larger-scale corporate operators and there is clear evidence that the private rented sector in the city has grown during the lifetime of the scheme.
• Council officers are confident that there has been no significant impact on homelessness, based on the reasons being given by those presenting as homeless, which are many and varied, with no clear trend relating to Selective Licensing, although their conclusion is not fully supported because the data is arguably not specific enough about the reasons for homelessness.

The auditor points out that other issues, including rent increases, may also have led to tenants being made homeless.

The report goes on: “Given the importance which the council attached to reducing the incidence of homelessness, however, it is vital that it continues efforts to confirm conclusively that selective licensing is not having a significant impact [on homelessness].”

‘We need to be asking the homeless staff’

Leading Nottingham landlord Mick Roberts raised the objection that led to the auditors stepping in and he said: “We need to be asking the homeless staff what people are saying when they say they are being made homeless because the tenants never get asked – but nor do we landlords about why we are selling.

“The auditor’s report hits the target when it says that licensing fees do put rents up and the scheme has seen landlords leave the rental sector.

“That means tenants are being made homeless and the council not having the data on the issue doesn’t disguise the fact that Selective Licensing, which the council claims is to improve properties does, in fact, lead to tenants being made homeless.”

‘Putting rents up will make people homeless’

Phil Turtle, from Landlord Licensing & Defence, told Property118: “It is inescapable logic that putting rents up will make some people homeless and a landlord’s fear of what the council will do to them with excessive enforcement on top of the licensing costs means many landlords are choosing to sell up – and making even more tenants homeless.

“How can the council possibly make claims against this inescapable logic? It makes no sense.”

He added: “The only question is how much homelessness does it create?

“There needs to be a proper investigation into how much homelessness is caused by selective licensing – not just in Nottingham but also nationally.”

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