Councils must not profit from selective licensing schemes claims Matthew Pennycook

The Housing Minister has confirmed councils should not profit from selective licensing fees, despite a council landing itself in hot water over mishandling of fees.

Matthew Pennycook has warned councils “not to use selective licensing fees to fund other local authority services,” emphasising that fees must be ringfenced for running the schemes alone.

However, a previous report by Property118, reveals Nottingham City Council spent millions of pounds on selective licensing and failed to ringfence the scheme.

Local authorities are not expected to profit from licensing

In a written question to the Ministry of Housing, Communities and Local Government, Shadow Housing Secretary Kevin Hollinrake asked: “Whether revenues from selective licensing charges on private rented sector landlords (a) are ringfenced and (b) can be applied to the general revenue account; and whether councils can charge above cost recovery.”

In response, Mr Pennycook confirmed councils should not profit from selective licensing fees.

He said: “Selective licensing fees paid by landlords to local authorities should only be used to cover the costs of running schemes.

“Local authorities are not expected to profit from licensing, nor should they use licensing revenues to fund other local authority services.”

Nottingham City Council failed to ringfence selective licensing fees for years

Despite Mr Pennycook’s warning, Nottingham City Council had failed to properly ringfence selective licensing fees for years, and only began doing so in 2024.

Previously, Property118 reported, the council published a report by accounting firm Ernst and Young (EY) who accused the council of “inappropriate financial activity”.

The damning report revealed selective licensing fees were only properly ringfenced in 2024.

The report revealed one of the main sources of licensing income for the council is selective licensing.

According to its annual expenditure report, the council spent a whopping £4.2 million on selective licensing between 2020/1 and another £2.8 million in 2021/22.

The council in a statement claimed the report: “It is important to be clear there is nothing specifically identified within the samples tested in the assessment that suggests any allocated funds have been misspent or funding has not been used for its overall intended purpose.

“The council has been open about the nature and seriousness of the assessment’s findings.”