The Housing Act 2004 brought about the introduction of Selective Licensing of private landlords in a local authority’s area. The provisions came into force in April 2006 and apply in England and Wales. In a Selective Licensing area, all private landlords must obtain a licence; the authority can take enforcement action if they fail to do so or don’t achieve acceptable management standards.

COVID-19 Update

ARLA Propertymark Chief Executive David Cox outlines our position on licensing and our call for Government to suspend the introduction of licensing during the lockdown.

What is Selective Licensing?

The Housing Act 2004 allows local authorities to apply for Selective Licensing of privately rented properties in areas which are experiencing low housing demand and/or suffering from anti-social behaviour.

Selective Licensing in Wales

The Welsh Assembly exercised its powers under the Act to determine additional ‘conditions’ for designating an area. For instance, the regulations allow local housing authorities in Wales to apply for Selective Licensing designation where a district, or an area in their district, comprises a minimum of 25 per cent of housing stock let by a private sector landlord.

Additional licensing

The Housing Act 2004 introduced licensing for Houses in Multiple Occupation (HMOs). Under the law, there are different types of HMO licensing.

Mandatory licensing (England): from 1 October 2018, any landlord who lets a property to five or more people from two or more separate households must be licensed by their local authority.

Large HMOs (Wales): a property with three or more storeys and at least five occupants who do not form a single household must be licensed.

Additional licensing (England and Wales): this is when a local authority can impose a licence on other categories of HMOs in its area which are not subject to mandatory licensing.

Landlord licensing does not work, has never worked and never will work

We do not believe that licensing schemes are an effective way of promoting higher quality accommodation. Most schemes fail as they are not adequately resourced to undertake the necessary enforcement activity. The licensing regime becomes an administrative exercise penalising those landlords who comply with the regulations, whilst still allowing the landlords—that the scheme was designed to target—to continue operating under the radar.

Communities and Local Government Committee evidence sessiON

ARLA Propertymark's concerns

Lack of resources
Many licensing schemes fail due to the lack of adequate resources needed to undertake the necessary enforcement activity. Due to the EU Services Directive, the fee to apply for a licence cannot exceed the cost to process the application, meaning that the cost of enforcing the schemes must come from elsewhere. Councils operating licensing schemes have often indicated that the schemes cost more to operate than the funding they receive from licence fees.

Administrative exercise
Licensing schemes focus heavily on the administration involved, often directing staff away from enforcement to process applications. Councils have indicated that processing a single application can take between 15–60 minutes. This can be incredibly time consuming and costly when thousands of properties require licensing.

Penalising compliant landlords and agents
Rogue landlords and agents that the schemes are created to target often continue to operate under the radar. Landlords and agents who are already compliant, pay their licensing fees and fund the administration of the scheme whilst those providing poor housing regularly ignore their legal requirements.

The low number of prosecutions
The Housing and Planning Act 2016 allows civil penalty fines levied for offences in the private rented sector to be retained by the Local Authority for further enforcement. Research conducted in April 2018 by the Housing, Communities and Local Government Committee highlighted that overall local authorities rarely issue landlords and agents with penalties. Existing licensing schemes have demonstrated that only a small number of prosecutions occur. In 2016/17, 50 per cent of all prosecutions (out of 33 boroughs with licensing across England) came from Newham Borough Council.

Collaborative approach needed

We believe that local authorities should adopt a collaborative approach with letting agents, landlords, professional bodies and public services to tackle issues within the private rented sector. This approach recognises and rewards landlords and letting agents who already adhere to good practice and enables local authorities to better target their resources on effective intelligence-led enforcement.

Homestamp
Homestamp is a collaborative approach in the West Midlands which we partner. The initiative combines local authorities, private rented sector bodies, universities, the police and fire services. Homestamp considers regional and national issues affecting the sector alongside providing information and training for landlords, addressing potential issues before they arise. Coincidentally, the West Midlands has the lowest level of licensing in England.

Liverpool City Council 
ARLA Propertymark has a co-regulation partnership with Liverpool City Council. The scheme allows the council to effectively target their resources and rewards our members who are already adhering to high standards. Landlords who opt to use our members also receive a discount incentive on licensing fees.

London Rental Standard
The London Rental Standard ran from 2014 to 2017, we were appointed as one of the accrediting bodies to the scheme by the former London Mayor. The voluntary set of minimum rules separated out agents and landlords performing their duties to a high professional standard, allowing scarce local authority resources to be directed towards inadequate landlords and letting agents.