Selective Licensing: Managing the Private Rented Sector

Fresh from their December election victory the newly formed Government have announced a number of pledges in relation to housing, including improvements to building safety and protection of tenants.   In January the government announced a £4m fund to crackdown on criminal landlords to be shared amongst 100 Councils across England.  It was heavily criticised by Labour describing it as “puny” and a “drop in the ocean,” a sentiment echoed by the Residential Landlords Association (RLA) who say it is “nowhere near enough”  and who believe that the solution lies in providing more funding throughout the year, sufficient to upskill and increase numbers of trained Environmental Health Officers thus enabling councils to better prepare their investigative approaches towards criminal landlords.  

The RLA and Safeagent (who represent lettings and management agencies) are both critical of Local Authority run Landlord Licensing Schemes which are used by Local Council’s to impose better standards of management upon landlords in areas where rented properties are being managed inefficiently and are used to address antisocial behaviour and crime.   

The RLA’s notion of ‘better funded enforcement strategies’ is that they should be prioritised against criminal landlords and not used to tie up good landlords in licensing schemes, which they claim do “nothing to protect tenants.”     Through Freedom of Information searches carried out by Safeagent across the 32 London Boroughs and the City of London they estimate there are a 130,000 unlicensed rental properties in the capital.   In addition to this, it was claimed that a total of 24,000 licence applications had yet to be processed across the council’s surveyed.  Whilst this might sound like a large figure, it is unclear whether these applications were complete and valid, or awaiting further information from the landlord (or payment) before they can be processed, or even if a surge in applications has arisen in response to an early discount incentive for licensing.  In my experience all of these factors can contribute to a temporary backlog.  

Safeagent believe that another tier of regulation will remedy the issue by creating what they describe as a ‘simple streamlined licensing process.’   The RLA on the other hand argue that since 2010 there has been a 32% increase in the number of regulatory laws creating obligations on landlords and call for scrapping of licensing in favour of better use of existing enforcement powers.  So, who is right?  

The discretionary powers Local Authorities use to designate and enforce Licensing schemes were enabled sometime before 2010 in the 2004 Housing Act.    Local authorities were initially slow in using these powers, until the Government broadened the criteria for licensing to additionally include other factors such as rundown properties, high levels of migration, deprivation and crime.  By this time Local Authorities were beginning to seize the initiative and introduce licensing whilst the private rented sector continued to grow.  

Newham Council had already piloted a licensing scheme in the Little Ilford area during 2010 and went onto designate the rest of the borough for property licensing in 2013.     Other boroughs were soon to follow and as of now there are at least 55 schemes across the country, 35 of which operate in London.    

A Freedom of Information request made by the Guardian in 2018 to all Councils in England and Wales revealed that 53 local authorities had not taken a landlord prosecution in three years some in whose areas contained numerous rented properties in substantial disrepair.  Lack of resources was cited as a factor and it should be noted that whilst the RLA criticise housing regulation for being burdensome on landlords, there is little acknowledgement of the fact that it is equally burdensome upon local authorities.  In fact, one of the reasons that Newham chose to employ licensing powers was precisely because the existing enforcement legislation was found to be  complex, costly and time consuming making it difficult for local authorities to act quickly.  

When local authorities were acting against criminal landlords the Local Government Association found that very often the fines issued by Magistrates courts were too low.  In response to this the Government introduced more regulation (sorry RLA!) to enable fines to be increased, so that they are potentially unlimited.   Despite this, the level of fines issued in housing prosecutions were variable, often on the low side.   Since this was highlighted in the media, it now appears that courts are  recognising the need to take these offences more seriously by issuing higher fines.    

In April 2017, Local Authorities were given further powers  to issue Civil Financial Penalties of up to £30,000 against criminal landlords for certain housing offences including failing to licence a property, and breach of any licence or HMO management regulations.   A year later a Freedom of Information act request made by the RLA found that 90% of local authorities had failed to issue any fines.   

The Mayor of London’s Rogue Landlord Database keeps a public record of Criminal Landlords and the offences committed for a period of 12 months after conviction, and shows which London Borough acted.  The amount of Civil Financial Penalties recorded as being issued over the last 12 months across London totals a staggering £531,850.  From this figure £333,310 (62.7%) of the total amount of fines issued were for failing to licence a rented property.  

Local Authorities may have been slow to embrace these powers but it is becoming increasingly evident that application of a licensing designation for all Landlords allows Local Authorities to learn more about the make-up of their own private rented sectors, and a distinction can be made between good Landlords who deserve a light touch approach, and the rogue criminal element who don’t wish to licence or be found and upon whom Local Authorities are now working hard to regulate.

And yes, some more money would be nice!  

Paul Oatt is the Author of Selective Licensing: The Basis for a Collaborative Approach to Addressing Health Inequalities, available now from Routledge, Taylor & Francis.