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Government announces review of selective landlord licensing

Posted on 2018-06-26

Over the last year, the Government has carried out a range of consultations and reviews of the Private Rented Sector (PRS).

There has been a call for evidence on the leasehold and property management system and more recently a review of Carbon Monoxide regulations. The latest focuses on the licensing of private rental properties.

The purpose of the review - which was announced on June 20 - is to determine how selective property licensing works in the PRS and if it is effective.

What is selective licensing?

Introduced in 2006, selective licensing occurs when landlords in a designated area are required by the local authority to apply for a licence for their rental property.

There are currently a range of selective licensing schemes in operation all over the country, from London locations such as Newham and Brent, to northern rental hotspots such as Leeds and Liverpool.

These schemes allow local authorities to make sure landlords in their area are 'fit and proper' as well as introducing certain measures for them to follow. There are also usually hefty fines for non-compliance. Each private landlord in the area will be required to pay a licensing fee per rental property, which is usually around £500.

Selective licensing schemes are designed to limit overcrowding or anti-social behaviour in areas with serious problems or a high concentration of privately rented properties. They are often controversial, supported by many local residents and opposed by many landlords who see them purely as a money-making opportunity for local authorities.

What is being reviewed?

The Ministry of Housing, Communities and Local Government will assemble a panel of independent commissioners who will be tasked with gathering evidence on selective licensing schemes from key stakeholders such as landlords, letting agents, tenants, local authorities and other housing professionals.

The review is set to determine whether the current selective licensing system - which typically sees schemes cover blanket areas - is working and how it is being implemented and used by councils.

It will explore whether the current schemes provide the intended safety for residents and whether they have achieved their overall aim of improving PRS standards.

Extension of HMO licensing

From October 2018, the Government is extending mandatory House in Multiple Occupation (HMO) licensing to cover any property that is let to five or more people from two or more separate households.

This means an estimated 160,000 additional rental properties will need to be licensed. However, any property which is already selective or additionally licenced will not be required to apply for an HMO licence until their existing licence expires.

You can read about these proposals in more detail here and find the Government’s recently released guidance for landlords and letting agents here.

Industry reaction

ARLA Propertymark, the trade body for letting agents, was one of the first organisations to react to the news. Chief executive, David Cox, said that licensing 'doesn't work and it never has done'.

"The Government’s aims are laudable; we’re all striving for the same end goal of improving the PRS for consumers, but these policies are impractical. Licencing means councils spend all their time administering schemes, rather than enforcing against rogue, criminal landlords – a fact which has been proven time and time again over the last decade," he said.

"[This review], coupled with the gradual removal of mortgage interest relief, new energy standards for landlords, and the ever-increasing fees for these schemes, means landlords are being hit from every side."

"At a time when the Government is concerned with rising rent costs, all its policies are just increasing costs for landlords, fostering a PRS where financial burdens due to ever-changing legislation will keep rising,” said Cox.

Meanwhile, the National Landlords Association's local policy officer Gavin Dick said that selective licensing schemes need to be 'implemented properly, fully resourced and enforced' to be effective. The Residential Landlords Association, however, said selective licensing is 'not the most effective way to improving housing standards'. 

What happens next?

When announcing the review, the Government said that the findings would be reported next spring. However, it has said an update on the progress of the review will be issued this autumn.

You can see the Government's full announcement, which also covers the extension of HMO licensing, here.

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