Almost 20% of all local authorities in the UK have some sort of discretionary licensing scheme in place, and in London, 21 councils (almost 66%) operate selective or additional licensing schemes. The purpose of property licensing is to ensure that rental properties meet certain standards and are safe and habitable for tenants.
Yet, there is opposition towards licensing from some landlords and letting agents who see it simply as a burden and an additional cost. In fact, the costs of property licensing schemes vary greatly depending on the type of scheme and the local authority that implements it, but the fees normally range from a few hundred pounds to over a thousand pounds per property. For example, in the London Borough of Newham, landlords must pay a fee of £1,100 for a five-year HMO licence and £1,050 for a five-year selective licence. In contrast, the fees for additional and selective licences in Manchester are £590 and £650 respectively.
There is also a growing frustration among agents and landlords towards property licensing schemes that lack effective enforcement, which they argue unfairly targets responsible landlords. According to a special report by the National Residential Landlords Association (NRLA), there is a post code lottery of local authority enforcement, with some authorities running extremely aggressive regimes, whilst others are lax. If licensing schemes are poorly enforced they do little to tackle underlying issues and are simply a tax on good landlords. These landlords comply with safety and legal requirements and are therefore burdened by additional costs and bureaucratic processes. Rogue landlords, in contrast, don’t worry about meeting rules and are left alone, free to prosper. It’s for this reason that the NRLA argues that licensing schemes need to be accompanied by effective enforcement measures,to both target rogue landlords and incentivise good ones, rather than imposing blanket fees on all landlords regardless of their track record. Such a situation also carries reputational impact as a proliferation of rogue actors gives the wider sector a bad name, leading to pressure on both local and central government to write yet more legislation impacting the sector.
So what does the data say? Whilst operating schemes without enforcing regulations is undoubtedly a challenge, those schemes that are effectively run have been proved to dramatically improve standards of accommodation, and remove rogue actors from the sector. At a time when tragedy has thrown a harsh light on the impact of substandard accommodation, these insights suggest a stronger need for licensing than ever before.
Inspections and Hazards Found
The number of inspections and hazards found varies across local authorities and property types. However, data from some local authorities provides an insight into the scale of the problem. For example, in Liverpool, over 11,000 properties have been inspected under the city’s selective licensing scheme, and over 95% of those properties have been found to have at least one hazard. The most common hazards identified were excess cold and dampness.
Another example of a successful licensing scheme is the selective scheme in Great Yarmouth, Norfolk that has supported the council to identify unethical and rogue landlords in the last four years. The scheme will be in place until January 2024, or longer if extended and it’s now been reported that the scheme has already “delivered significant outcomes and improvements for the residents of the area” and it is recommended to be introduced in other areas of the town.
So what made this scheme so successful? During the first round of inspections, over 4,362 issues were identified, with almost three-quarters of inspected properties (73pc) having at least one high-priority concern. Lack of carbon monoxide detectors, dampness and mould and poorly working windows were the top three hazards identified during this round of inspections. In the second inspection round, high-risk issues had halved, and there had been a 42pc drop in medium concerns. Damp and mould, poorly working windows and insufficient electricity installation were among the three most common issues logged in the second round of inspections.
Nor are these the only examples. An impartial study by the University of York found that mandatory licensing had led to improvements in HMO properties, including better fire safety measures, improved living conditions, and better management practices. Similarly, a study by the London School of Economics found that selective licensing had led to improvements in the quality of housing in designated areas.
Lack of resources hinders success in other councils
Whilst licensing has proven successful in carrying out checks and identifying rogue landlords in some councils, in others there is a severe lack of resources hindering councils to fully enforce the schemes. For example, in Brent the PRS makes up over 45% of the total housing stock, meaning there around 50,000 PRS properties are covered by the scope of the scheme, however, there is not nearly enough staff to ensure compliance. Lack of resources to effectively enforce schemes is an issue in many councils and as a result Propertymark is urging the government to provide more funding for local authority enforcement to ensure the success seen in other councils, such as Great Yarmouth can be replicated in all local councils.
Data suggests that property licensing is highly effective in upholding standards
Property licensing has been a contentious issue in the UK with landlords and letting agents often opposing it as a means for councils to generate revenue. However, data shows that property licensing is highly effective in upholding standards and improving the quality of rental properties.
A recent report by the Ministry of Housing, Communities and Local Government (MHCLG) revealed that over a million properties in England alone failed to meet the decent homes standard in 2019. Poor living conditions can have severe impacts on the health and wellbeing of tenants, leading to increased hospital admissions and longer recovery times. In fact, according to a report by the BRE Trust, poor housing conditions are estimated to cost the NHS around £1.4 billion each year. These costs are associated with treating illnesses and injuries caused by poor housing, such as respiratory problems, cardiovascular disease, and falls.
Property licensing schemes help to address these issues, putting the cost for poor housing back onto landlords, rather than the NHS. In doing so they also protect the reputation of the wider sector, which is all too often impacted by the behaviour of the minority.
When properly enforced, the data clearly supports their effectiveness in upholding standards and improving the quality of rental properties. By guaranteeing standards they can improve living standards, tenant safety and significantly reduce healthcare costs associated with poor housing conditions. These licensing schemes are far more successful at catching out rogue landlords, protecting the reputation of the wider sector and making them a worthwhile investment for landlords, tenants and society.
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