Is selective licensing a ‘blunt instrument’?

COMMENT: An increasing number of buy-to-let landlords across the UK are being hit by the introduction of selective licensing. But is this is the correct way to regulate the PRS sector, or is there a need for an industry body? In Nottingham, the city council this month launched its licensing scheme for more than 30,000 properties in the city. The result is that 91% of non-HMO privately rented homes will become part of the scheme, making it the largest of its kind outside of London. Landlords were given just one month from 1 July to register each of their properties on the council’s online portal before the implementation date of 1 August. This short timeframe and lack of clarity over the required documentation raised concerns amongst those in the lettings industry. On the morning of 1 August, the council had received just over 7,000 applications. By 9 August, this stood at 15,000 and the council says the figure is steadily rising. Given that the financial penalties for failure to licence properties are high (as much as £30,000) the reputable landlords and lettings agents who are the backbone of the PRS sector in Nottingham have been making the required preparations for some time, ensuring all the necessary documents are in good order to ease their application process. Each application takes a considerable time, registrations appear to have been slow and, for larger portfolio holders, even the possible time extension being allowed is not going to ease the pain. The fee? Well, landlords accredited with “DASH” (Decent and Safe Homes) or UNIPOL will benefit from a discounted fee of £480, whilst unaccredited landlords have to spend £780 for the five-year license. Membership of other regulatory bodies such as ARLA PropertyMark is not recognised. Some would argue that the fee amounts to around £2.00 a week for the duration of the licence and that, as a contribution to raising standards within the private rental sector, this is a small price to pay. Afterall, this is the intention of the scheme. Others claim that the fee will do little to weed out bad landlords. We wait with interest to see how effectively the council will use the £20m raised by the scheme. Reputable landlords who already maintain their properties to a high standard are entitled to ask, “What’s in it for me?” They are being required to pay the fee upfront, spend time submitting evidence of compliance to standards they already achieve or often exceed and are therefore right to question how this scheme will meet its aims of raising standards in the private sector for all tenants, enabling them to enjoy a safe, well-managed home. In response, the council has said that it will inspect 50% of non-accredited properties and 10% of accredited properties over the five-year license period in order to safeguard tenants and protect them from so-called rogue or criminal landlords. The assumption here is that such landlords have registered under the scheme. What if those landlords just fly under the radar and continue to profit from tenants who are afraid to report them, typically the most vulnerable in society? Based on evidence from other areas of the UK, selective licensing seems like a blunt instrument when it comes to rooting out and penalising those who are non-compliant, make the lives of tenant’s hell and give landlords and lettings agents a bad name. Many of those involved in the sector would argue that councils should have used existing powers under housing legislation to tackle the problem rather than introduce a costly scheme. We have to hope that Nottingham does not echo the trend identified by ARLA, which shows that resources raised are not being directed at tackling the criminal elements but are instead consumed by the bureaucracy and expense of administering the scheme. My concern is that given the onslaught of financial and regulatory changes affecting the sector, it’s possible that selective licensing could become “the straw that broke the camel’s back” and result in landlords selling up. The tenants this scheme was intended to help could end up worse off as they compete for fewer properties and face higher rents. Nottingham is a fast-paced and competitive rental market right now, in need of more landlords and properties in the marketplace. Regulation of the PRS sector is essential to raise standards across the industry and improve the professional image of landlords and agents, especially in cities such as London, Nottingham and Manchester where we play a vital role in the city’s housing market. In my opinion, the best way to do this is to ensure all landlords and lettings agents are regulated by an approved industry body. This would ensure consistent standards nationally as it would require agents and landlords to operate at a higher standard than that currently required by law; such as to have minimum levels of qualifications, client money protection and professional insurances. None of these are currently required by the Nottingham scheme. Last month, the government announced that it will conduct a review into licensing schemes. I hope that this leads to a policy of best practice that raises standards for tenants, helps improve the reputation of the sector and ensures a level playing field for landlords across the UK. Adam Kingswood, Kingswood Residential Investment Management, Nottingham.