Local authorities are using selective licensing as a ‘cash cow’ – Special Report

Local authorities are using selective licensing as a ‘cash cow’ – Special Report

11:03 AM, 15th September 2023, About 10 months ago 8

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Lots of councils see selective licensing schemes as a way of improving housing stock in the private rented sector (PRS) and work hard at gaining government permission to set up and run these schemes.

But many of the same councils that claim to need a licensing scheme to boost standards in private rented homes are being regularly condemned by the Housing Ombudsman for ‘apathy and failures’ when it comes to their housing.

In our final series of special reports, we ask the question: How do councils get to expand a selective licensing scheme when their own housing gets slammed by the Housing Ombudsman?

Threatened landlords with taking control of their properties

Let’s start with Newham council which introduced selective licensing in June this year to deal with poor housing conditions and anti-social behaviour.

The council urged landlords to sign up for the new scheme otherwise they would face an unlimited fine and a rent repayment order of up to 12 months’ rent to the ‘council or their tenants’.

Newham council even threatened landlords with taking control of their properties if they did not sign up for the mandatory licensing scheme.

Carleene Lee-Phakoe, the council’s cabinet member for housing needs, homelessness and the private rented sector, said: “Renters in Newham deserve to live in safe, well-managed and well-maintained homes, and that’s what our pioneering Selective Licensing scheme aims to ensure.

“Our teams will be out and about in September to check for unlicensed properties, so I encourage anyone without a license to get their application in without delay.”

Significant failings

However, just days after threatening landlords with taking control of their properties the Housing Ombudsman revealed a pattern of severe maladministration for how Newham Council handled a damp and mould case.

The council took more than THREE years to resolve the issue and repeatedly failed to keep the resident updated on repairs.

The Ombudsman told the council to pay £5,400 to the tenant in compensation.

The Housing Ombudsman, Richard Blakeway, said: “There were significant failings throughout this case which left the resident living with damp and mould for an unreasonable amount of time.

“On multiple occasions throughout the course of the complaint, a lack of proactive action and poor communication, both with the resident and internally, contributed to significant delays.

“Despite repeated issues with communications from its repairs team, the landlord did not change its approach and take ownership of the resolution of the issues.”

Two years after the first report of the issue, the resident requested to be moved to temporary accommodation due to the strong smell of damp throughout the home that he attributed to mould.

Over the next nine months, attempts were made to address the pests and damp within the bathroom.

When the council told the tenant that they could finally return to the property, the tenant deemed the quality of repairs ‘unsatisfactory’ and demanded an independent surveyor’s assessment to validate his concerns.

In a statement, Newham Council said: “Our priority is providing safe, decent homes for our residents and dealing with any issues brought to our attention swiftly, effectively and with compassion.

“We apologise unreservedly for failing to meet our high standards in this instance. We fully accept the Ombudsman’s findings and have acted on each of the orders made.”

A culture of ‘apathy and failures’

And then there is Haringey council which introduced a selective licensing scheme last November to ensure tenants live in ‘safe and well-maintained’ homes.

The council crackdown on private sector landlords saw landlords hit with £207,500 in fines for unlicensed HMOs.

Along with being fined, the council says that the landlords also face having to repay rent to their tenants.

The council says its action highlights its commitment to ensuring safe and suitable living conditions for all residents – and creating an ‘accountable rental sector’.

However, an investigation into Haringey council by the Housing Ombudsman found a lack of accountability, ownership and motivation when having to deal with its own tenant complaints.

The Ombudsman found a culture of ‘apathy and failures’ in addressing mould, damp and leaks in its properties.

Councils ‘named and shamed’

And, more recently, several councils across the country were ‘named and shamed’ by the Housing Secretary Michael Gove over their failure to respond to complaints from residents, ranging from damp and mould to anti-social behaviour.

Many of these councils have also expanded their selective licensing schemes.

Southwark council was recently given the go-ahead for one of the UK’s largest selective licencing schemes.

It got approval from Mr Gove following the introduction last year of a borough-wide additional licensing scheme for HMOs and a small, selective licensing scheme covering 6,000 properties, for five years.

The council says the scheme aims to tackle renters’ biggest concerns including neglected repairs, unresponsive landlords, and damp and mould, which the council wants to see eliminated from rental properties.

However, in a letter to Southwark Council, Mr Gove said he was “appalled” to learn of a case involving a pregnant resident who was left with no heating for six months during the winter.

The second case saw a family left with a deteriorating leak for 11 months and refusing the residents’ requests for rehousing and compensation.

The leak impacted several rooms and the council failed to address the damp and mould issues for 17 months.

Mr Gove said: “Your response to these complaints fell well below the standard your residents should expect. To have four separate judgements published about your service failures gives cause for concern about the quality of service that you are providing.

“I have been clear that social housing residents must be able to put their trust in their landlords to provide a decent home and deal with complaints effectively.”

Government should stop reducing funding

Councillor Kieron Williams, the leader of Southwark Council, apologised to the residents affected but criticised the government for “reducing the money we have to spend on our homes”.

He told Sky News: “I would like to say again how sorry we are to the residents involved with these cases from previous years.

“They should not have happened, and we have since made many changes to ensure we learn the lessons from each case.”

He added: “We take full responsibility for the things that went wrong in these historic cases and will continue to work with residents to improve our services.

“That job would be greatly helped if the government stopped reducing the money we have to spend on our homes.

“Decisions made by government ministers have taken hundreds of millions of pounds out of the funds councils have to maintain our tenants’ homes.

“Tenants need councils to have secure and adequate funding so we can provide the quality services that we, and the government, believe our residents deserve.”

No need for widespread licensing

Peter Littlewood, CEO of landlord organisation iHowz has always questioned the need for widespread licensing.

Mr Littlewood said: “Licensing was brought in with the 2004 Housing Act allowing a local authority to licence a property, or group of properties being badly managed, leading to a degradation of the PRS in that area.

“The government never intended it to be used in such a carte blanche, widespread manner as it is now.”

He added: “Clearly, local authorities are using licensing as a cash cow, and a very lucrative one as well.  All too frequently they are unable to prove that licensing has brought about the improvements they claim.

“The majority of fines imposed by an authority are for not having a licence, not for the landlord failing to meet the required criteria.”

Mr Littlewood says with the publication of the Renters Reform Bill selective licensing should not be required in future.

He says: “iHowz especially question whether licensing should be allowed to remain if the two proposals are introduced in the Renters Reform Bill of mandatory property registration and all properties to adhere to the Decent Homes Standard, as well current requirements under HHSRS (Housing Health and safety Rating System).

“Surely, this makes borough-wide licensing obsolete? It is obvious that, as usual, tenants have to bear the brunt of the cost of government legislation.”

Licensing schemes fail

Propertymark says that selective licensing is not an effective way of ‘promoting higher quality accommodation.’

Timothy Douglas, the head of policy and campaigns at Propertymark said: “Overall, we do not believe that selective licensing schemes are an effective way of promoting higher quality accommodation.

“Many licensing schemes fail because they are not adequately resourced, leading to low levels of enforcement activity which means those criminal landlords and agents that the schemes are created to target continue to operate under the radar.”

Mr Douglas says instead of selective licensing, local authorities must work together with landlords and letting agents in a collaborative environment.

He said: “Professional agents and landlords who are already compliant, pay their license fees and fund the administration of the scheme whilst those providing poor housing continue to ignore their legal requirements.

“Instead, local authorities must have a proactive rolling programme of inspecting private rented properties in their area and adopt a collaborative approach with letting agents, landlords, professional bodies and public service providers all working together.”

He added: “An example of this includes providing information and training for landlords and agents which addresses potential issues before they arise.

“This approach enables local authorities to better target their resources on effective intelligence-led enforcement.”

Councils will still continue to expand

In our series of special reports this week, we’ve discovered why selective licensing may not be the best way forward.

This ‘unnecessary expense’ causes problems not just for landlords but tenants too.

It seems that even with fines from the Housing Ombudsman and criticism from the government, many councils will still continue to expand their own – often unwanted by landlords and tenants – selective licensing schemes, while neglecting their own duties as social landlords and making their tenants’ lives a misery.

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Mick Roberts

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18:00 PM, 15th September 2023, About 10 months ago

Nottingham got investigated by the National Audit office who said something along the lines, wasted money.
So Nottingham didn't renew their scheme, they just started a new one. If last scheme successful, why not expand it?
These Councils have no shame.

Mick Roberts

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18:01 PM, 15th September 2023, About 10 months ago

Ooh by the way, Nottingham is on its 4th Councillor in charge of Selective Licensing who knows ZERO about keeping people safe in their homes at cheap rents.


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20:17 PM, 15th September 2023, About 10 months ago

Well Peterborough council have declared a third party to use for inspections after increasing the area used for licensing(what a surprise!) and also admitted it will make the council over a million pounds 'profit'! the irony of it when I walk past a council house in our village with the obligatory double mattress and kids broken trampoline dumped for months in the front overgrown garden. Utter leeches.


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21:15 PM, 15th September 2023, About 10 months ago

We need to get the message out there…

‘This is a tax on tenants.’

Old Mrs Landlord

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8:04 AM, 16th September 2023, About 10 months ago

I find it somewhat ironic that councils are claiming failures in services to their own tenants are the result of reduced funds from government while they themselves are reducing the funds private landlords have for maintainance by imposing extortionate licensing fees. This failure to join the dots and an attitude of "one law for us and another for you" seems prevalent throughout both local and central government. They pile unnecessary costs on PRS landlords who are then forced to raise rents to remain compliant, whereupon they look to enact further measures to control PRS rents! Either they can't see the wood for the trees or,, to quote Mick Roberts, "they proper thick".


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10:42 AM, 16th September 2023, About 10 months ago

Poor tenants. In the end the tenant always pays

Steve Hards

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10:09 AM, 17th September 2023, About 10 months ago

The bully-boy council threats about the need to apply for a selective licence and the calculations of how much income the schemes will bring in reinforces the view that selective licencing has much in common with protection rackets. (https://www.property118.com/selective-licensing-if-i-were-a-criminal/)
Moreover, the small print disclaimer at the bottom of Southwark's HMO licences that landlords are required to display in properties confirms that licencing schemes are not actually about the protection of tenants from poor living conditions. There didn't used to be a disclaimer but now that their ability to inspect the large number of rental properties requiring some type of licence or another appears to be overwhelmed, the disclaimer includes: "This licence...does not guarantee that the property has been inspected and approved as being of an acceptable standard." It says it all!

Mick Roberts

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11:24 AM, 17th September 2023, About 10 months ago

Reply to the comment left by Old Mrs Landlord at 16/09/2023 - 08:04
It's not rocket science either is it Old Mrs as u say.

If they take £890 off us EACH house for a License, then it's less for new kitchens new bathrooms etc. for the tenant. Then rent increases to recoup this back over the years.

How Govt & Councils can't see this is beyond me. They think ALL Landlords are charging top rent & ALL houses are crap.

Now if I was charging top rent, I would have less of a problem with being asked to pay £890, but on the other hand, I would, as I'd still think
Hang on a minute, she's just had new boiler, windows, kitchen, bathroom, & u NOW want to charge me £890. For what?

Well u see Mr Roberts, him 3 miles up the road, that Landlords house is crap, so we using your money to go after him.
Selective Licensing summary:
They will find a few bad houses;
The majority good houses get worse.

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