RPI

License to Bill?

residential property investor rpi
John Stewart
Written by John Stewart

Mention property licensing to most private landlords and you’ll hear at least an exasperated sigh or, more likely, a lengthy rant about council money-making schemes.

This month, the coastal town of Bournemouth rejected plans for Selective Licensing. Several other towns and cities have also announced licensing consultations, including Birmingham (closes 30th November) and Walsall (closes 8th January 2018)

RLA Policy Manager John Stewart says the government needs to sweep away the regulatory patchwork and banish ill-conceived and unpopular licensing schemes for good.

There are three types of licensing: mandatory licensing of HMOs, additional licensing of HMOs and selective licensing of all private rented properties.

At present mandatory licensing applies to HMOs of at least three storeys and five occupants comprising of two or more family units. Local councils have no discretion here – all such properties must be licensed to be legally let.

Additional licensing is widespread. This is where a local council decides to expand the regulation of HMOs to include smaller HMOs and some properties converted into flats. Most seek to license all HMOs in their area. However, some will set the limit at four sharers and others at five, simply removing the three-storey requirement of mandatory licensing.

Selective licensing covers all private rented properties in a set area. Designed to tackle particular issues in a small area, the decision by some councils to use selective licensing to cover whole boroughs has seen the government limit their powers.

Conditions

All licensing schemes come with a set of property conditions for landlords. These vary by area and range from the basic to bulked out, gold-plated volumes.

At the RLA we are seeing an increase in the number of councils seeking to introduce licensing, despite there being little independent evidence that it works.

Indeed, the government intends to extend the scope of mandatory licensing to bring all properties with five sharers in two or more households into scope, at the same time as bringing in a minimum room size for such HMOs. One of the biggest issues with licensing is that it does little to tackle the criminal elements operating in the PRS – those landlords who overcrowd

substandard properties and put tenants’ lives at risk, ignoring fire, gas safety, and repairing obligations.

It is the vast majority of compliant landlords who foot the bill, often passing the cost on to tenants, through increased rents. In fact, many councils embark on the licensing road with little information about their PRS.

Often, the size of the sector is unknown. Councils fail to make use of the data they already have, such as council tax records, and instead pay consultants to make estimates and run consultation exercises.

Paperwork

They also fail to understand the volume of paperwork licensing generates, the time to process applications and the overall cost of maintaining the bureaucracy, let alone enforcing it.

The council’s PRS focus then shifts to the issuing of licences and what little enforcement exists centres on whether a property has a licence, rather than its management and condition. It’s easier to prove a landlord doesn’t have a licence than bring forward a prosecution under HHSRS.

While high-profile councils such as Newham may trumpet the success of licensing, the truth is the same, or better, results would likely have been delivered through intelligent use of data, cross- agency co-operation and better enforcement of existing legislation.

The recent Conservative Party Conference failed to bring any respite for landlords facing a barrage of national and local regulation.

In addition to confirming the ban on fees paid by tenants and new, slightly more welcome, announcements on the regulation of agents and a specialist housing court, the government intends to force landlords to join a redress scheme, just as agents must now.

The alternative dispute resolution provided by redress schemes is no bad thing, allowing faster resolution and keeping both parties from lengthy and expensive court action.

However, on its own it will be seen as yet another burden on landlords – and a regis- tration scheme by the backdoor.

It’s also potentially expensive.

One redress scheme covering agents charges a £50 membership fee and an annual subscription of £195.

That’s £1,000 over the typical five year life of council licensing scheme – twice the average cost of a licence, if you’re a one property landlord.

No doubt, the scheme details will also become part of the prescribed information for tenants, added to deposit information, EPCs, gas safety certificates and how to rent guide, creating another s21 pitfall.

Standards

The redress proposal would be more palatable if it came with mitigating measures.

Licensing is the obvious candidate. Why not scrap selective and additional licensing altogether?

The large, higher risk HMOs are to be covered by an extended mandatory scheme anyway, while compulsory membership of a redress scheme would give tenants access to a faster, cheaper way to resolve disputes, driving up standards.
In fact, the government could take the opportunity to sweep away the regulatory patchwork that landlords have to operate in.

By creating a single rental standard and code of practice to underpin redress schemes, then tenants would know exactly what was expected from a PRS home, and landlords what they were expected to deliver, no matter where in the country they operate.

However, it seems more likely that councils will continue to adopt local licensing and central government its piecemeal approach to regulation of the PRS, by bolting on more and more requirements to an already confusing and over-burdened framework.

About the author

John Stewart

John Stewart

John is the Policy Manager for the RLA. He has over 20 years experience working in politics, as a successful election agent, MP’s assistant, local councillor and council leader, and is a former charity chief executive.

He oversees RLA policy work across all levels of government – central, devolved and local – working to ensure that landlords’ views are represented and officials, MPs, Assembly Members and local councillors have key information and evidence about the PRS before they take decisions.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.