Are selective licensing schemes to blame for soaring rents?

Are selective licensing schemes to blame for soaring rents?

9:52 AM, 11th December 2023, About 2 months ago 22

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For anyone wondering what the impact of selective licensing schemes is on tenants and rent prices, then one landlord has news for you.

He claims that the selective licensing scheme introduced in Nottingham in 2018 is to blame for massive rent increases in the city.

And his opinion is backed up by new figures from the Office for National Statistics (ONS) which reveal that rents in Nottingham have rocketed by nearly £200 since the scheme began.

Nottingham City Council introduced its selective licensing scheme in 2018 and a further scheme has been introduced this month.

The council denies that rent rises since then are down to its licensing scheme but rising interest rates.

Rents increasing rapidly

Mick Roberts, one of Nottingham’s largest landlords to house benefit tenants, told Property118 that the ONS figures reveal a sudden surge in rental costs after selective licensing was introduced.

The council introduced the first back in August 2018, when rents in the city were £664. However, rents have been increasing rapidly since the scheme has been implemented.

The average monthly rent in Nottingham in October this year were £859 – that’s nearly a 30% increase from 2018.

Selective licensing is not to blame

Mr Roberts says the council cannot continue to deny the impact the scheme is having on housing supply.

He said: “If you ever wanted any evidence that selective licensing puts rents up, it’s here in black and white. How can the council deny this?”

The current cost for a licence in Nottingham is £520 for the first payment (Part A) and the second payment (Part B) is £370. That’s £890 per house. Have more than one rental property and landlords are looking at a hefty outlay.

When approached for comment, Nottingham council did not dispute that rents in the city have gone up after licensing was introduced but, bizarrely, told us that selective licensing is not to blame and the reason is down to recent interest rate hikes.

A spokesperson said: “The increase in rents that are quoted from the ONS data 2018 to 2023 might have something to do with the huge spike in interest rates in the past couple of years, pushing up mortgage payments for thousands of landlords.”

In reply, to the council, Mr Roberts said licensing schemes are not beneficial to tenants or landlords.

“There are other external factors such as interest rates but in Nottingham, selective licensing kick-started this upward spiral of rent prices.

“Landlords and a majority of tenants have seen no gain from selective licensing.”

Driving out bad landlords

It’s not just Nottingham that has seen an increase in rent prices due to selective licensing.

Newcastle City Council introduced a selective licensing scheme in April 2020 covering five areas and a further two areas were introduced in October 2021.

According to the ONS data, rents in April 2020 in Newcastle were £800 per month and soared to £963 in October 2023, a 20% increase.

Prices for the selective licence are £650 a year but the council say these schemes punish bad landlords.

In a council meeting, Newcastle’s city council, head of public safety and regulation, Ed Foster said: “What we are doing is driving out the bad landlords. One agent has lost a portfolio of over 100 properties because of poor property management.

“It is that kind of action that should be what we are doing, and by rewarding good landlords we’re showing that we are pushing for improvement. What I think we’re doing is flushing out those landlords who are not managing properties.

“We want to make sure everybody has a decent home. The scale of the property conditions that we’re finding is a significant issue.”

Not an effective solution

However, the National Residential Landlords Association (NRLA) has argued that selective licensing schemes do not offer any effective solution to property management.

Chris Norris, the NRLA’s policy director told Property118: “Local authorities are often too enthusiastic to implement or expand discretionary licensing schemes without regard for their effectiveness or suitability.

“Whilst there are instances where a selective licensing scheme might be appropriate to deal with a concentration of poor standards or behaviour in a very limited area, it is usually far too blunt an instrument for large areas or entire boroughs.

“NRLA research has previously revealed there to be little to no correlation between the expansion of licensing and more effective enforcement or improved outcomes at a local authority level.”

He added: “Rather than committing to ever more discretionary licensing, or calling for more powers, we would like to see local authorities tackle issues related to poor standards and practices using the extensive powers already available to them and supporting responsible landlords to continue to provide quality housing.”

More harm than good

The debate continues to rage against selective licensing with councils disagreeing they cause high rents and blaming external factors such as interest rates.

However, up and down the country councils are expanding licensing schemes, but at what cost to landlords and tenants they are meant to be helping?


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Comments

Easy rider

9:26 AM, 11th December 2023, About 2 months ago

A blind would have been able to see that Selective Licensing would increase rents.

If you add £100s to the cost of supply, you increase the cost of the goods.

The saddest thing is that tenants get NOTHING in return for the extra rent. It’s just another tax to fund the council’s incompetence.

Grumpy Doug

10:03 AM, 11th December 2023, About 2 months ago

They ignore the additional costs over and above the licence fee. I got clobbered in 2018/19 with the mandatory HMO licensing changes. They really went to town on gold plating everything - all consumer units (some nearly brand new) all ripped out and replaced by the latest metal ones, fire and smoke alarms everywhere, fire doors and fire escape windows everywhere, understairs cupboards fireproofed (!!!!), and so on and so on. Some houses over £5k spent just to satisfy the box tickers from the council.
Suffice to say rents rose massively and have been going north ever since.
Funnily enough, I never had any tenants remarking how better their lives were, but plenty moaning about the rent rises! They were all told why and I told them to contact the council. Not sure any of them did though.

Reluctant Landlord

10:34 AM, 11th December 2023, About 2 months ago

licence fee yes, plus the other things that may come with it...
You know the council are doing this simply to increase revenue so you know there are more things coming down the pipeline as a result.
Nationally there is increased legislation round the corner, that means more time and cost...
Talk of rent freezes and further time to evict bad tenants?
You would be seriously MAD not to increase your rent to market rate every year - year on year when you can regardless if you have a mortgage or not.
The only thing a LL has to really weigh up is keeping the rent manageable for good tenants so you dont have to run the gauntlet of a new tenant find. Who knows what you get these days?
I'm finding that even working people can't provide home owning guarantors these days so you are limited. We all do the best checks we can, but know if it all goes pear shaped its going to cost to get any tenant out these days ...

Easy rider

10:48 AM, 11th December 2023, About 2 months ago

Just to add that SL isn’t the sole cause of rising rents.

Remember playing Buckaroo? Well, selective licensing is just another piece of equipment to add to the donkey (perhaps a cash cow would be better choice of animal).

We have added EPC, EICR, Section 24, CGT, interest rate rises and SDLT to the donkey's back already. Next we have the Renters (Reform) Bill and heaven only knows what the Labour government will choose to add.

The donkey must have had its springs reset. Or it is dead.

cashcow

11:05 AM, 11th December 2023, About 2 months ago

I just sent a letter to Harringay council and the local MP Catherine west, regarding the licensing costs.
Can I suggest you do the inspection first and charge the same as a EPC report ie £65 and save a whole lot of money and time.
I am currently selling my 3rd BTL property putting 4 very happy tenants back onto an extremely expensive thin supplied rental market. I intend to keep selling my BTL flats when the tenants decide to move out, even though its a bad time to sell as the market is flooded with landlords flats
Mortgages have trebled.( our rents Have gone up for the first time in 25 years for existing tenants)
Taxes have doubled with the revised section 24.(not for businesses who have incorporated which is so unfair) removal of the furnished 15% allowance, all adds to putting our income into the higher 40% bracket.
All the EPC expense and worries, the section 21 removal, council licences, threats of fines, courts that take a year to remove a non paying tenant,
Dealing with all this and more for no return is not worth it I am getting out which will be a massive shame for all existing and future tenants.
So you carry on taking money for nothing because there will be nothing left to take from except made to measure soulless corporate box room flats with no outside space.
Sorry to rant but hope you take it seriously.
If there is an official complaints department can you forward this email to them please.
kind regards
They replied " This will be raised with senior officers. "

Markella Mikkelsen

11:34 AM, 11th December 2023, About 2 months ago

How exactly are they "rewarding" good landlords?

Refund my fee??
Pat on the back??
Xmas card???

Ross Tulloch

12:06 PM, 11th December 2023, About 2 months ago

We sold 3 flats evicting 12 tenants because of arbitrary minimum room sizes imposed by the 2 London councils, and country wide rules, meaning one room going forward had to remain permanently empty. Luckily for new tenants in one, I saw later that the new owner had (illegally) still let it out and even divided the biggest room into 2... Illegal but good for tenants. Not something I would risk.

Crouchender

14:14 PM, 11th December 2023, About 2 months ago

Reply to the comment left by cashcow at 11/12/2023 - 11:05
I am also a Haringey LL but the local Labour MP wont support LLs. Haringey Council boasts at taking fines off LLs so they are not going to give up the cash stream. When Labour does get in expect a SL Nationwide by default. Lets face it only Labour councils on hell bent on killing off PRS because when S21 goes they will have no more hastle of having to house evicted tenants

Michael Booth

14:54 PM, 11th December 2023, About 2 months ago

Yes local council is intending to charge £500 per property for licensing, rents will go up accordingly it is has simple has that any complaints told Tennant to take it up with the council and mp.

Crouchender

15:13 PM, 11th December 2023, About 2 months ago

Reply to the comment left by Michael Booth at 11/12/2023 - 14:54
£500 is cheap, Islington council (Stamers/ Corbyns area) are charging £800/SL property.

Plus don't forget the adds ons after the council clip board inspector of cost for changes to your property as part of your SL conditions. They all need to be passed on to the tenant too!

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