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Selective Licensing Will Create Ghettos

Selective Licensing Will Create Ghettos
Posted on June 10, 2011 by editor
Posted in Economy News, Investing & investments, UK Property Market Comment Tagged , , , ,

Back in February 2011 I wrote about this scheme in Oxford where the local council was making HMO licensing (hose of multiple occupation) mandatory for landlords and charging big fees for non compliance. You can read that post here

Now, just a few months on, and many councils around the UK plan to regulate HMO’s in a similar fashion.  The scheme to be rolled out is called Selective Licensing.  In Manchester this has already caused an uproar from local landlords and the NLA  ( National Landlord Association) have issued a protest against the scheme. Not only that, but the CML -Council Of Mortgage Lenders- agree with them.

Dropping Values

Landlords may find that their properties will go down in value as the scheme seeks to force landlords to  license selected types of rental only, which many believe will create urban ghettos. And, I have to say, that after reading the reports, I would have to agree. Big fines will be levied for non compliance of the scheme, which brings me to the crux of the matter. It is estimated that fees will raise about £2m for the local council in Manchester.

So is it little more than a money making scheme then?

As a responsible landlord, if you pay the fees, and at some point in the future the scheme the scheme fails or is withdrawn, are they likely to refund your fees? Somehow I doubt it. As with many such schemes, councils show a staggering lack of knowledge about the area for which they set legislation. They see landlords as a source of untapped funds and go for the money angle without thinking through the entire problem from start to finish as a joined up idea.

Whilst many of these schemes are well intentioned, in most cases the poorly thought out nature of them will often make a bad situation much worse.Non compliance of the existing schemes has already led to 34 pending cases for consideration and a further 160 under investigation.

Bad Landlords Will Ignore Selective Licensing

The problem with these schemes is that they seek to regulate bad landlords for not keeping their houses in good repair etc. But are the bad landlords really going to bother complying with fines and fees? Pretty unlikely. All this does is make the good landlords pay up ( again) whilst the shoddy ones still go about their business in the same old fashion.

Mortgage providers do not like lending on properties in bad areas, because, they are concerned with the risk for the investment. Creating ghetto areas will devalue property hence making a bigger risk factor. Banks are less likely to lend in that area, which will further exacerbate the problem by driving the area down even further. Banks will refuse to take a risk on something that is likely to loose value.

RLA director Chris Town says:

“selective licensing officially identifies an area where there is low demand for property, usually with problem families and a history of anti-social behaviour, where nobody wants to live. No control is proposed for other types of occupier in mixed residential areas – such as tenants of housing associations, social housing, third party housing or owner-occupiers. So to single out private landlords shows grossly unfair double standards.”

If you would like to join the protest about these schemes you can do so via Facebook and Twitter via the NLA. Other areas are not immune, the scheme is planned in Oxford, Milton Keynes, Manchester, Leeds, York and Newcastle and Portsmouth- so far. Councillors and senior officials within the scheme have already admitted that it has “so far had little impact against exploitative landlords.”

During the last government, hardly any social housing stock was created and in Manchester for nearly 20 years. Last November was the first announcement of new social house building in West Gorton. 171 new houses  were announced. This is the root of the problem, not bad landlords, who actually number so few.

What are your thoughts- does this effect your business? Please comment below.


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  • richard higgs

    i am a landlord of good charactor providing good housing stock to the rental market at fair rates to good qaulity tenants, we are all being branded as “anti-social ” by the local authority in order to justify their proposal to introduce this appalling discriminatory policy of “selective  licencing” The Authortity (Southend borough council ) claim a rise in anti-social behaviour  corelates with  a high percentage of rented propertys. Where is the detailed information to back this up ? this is a seaside area ,with many visitors to pubs ,clubs etc , how do we know that the “apparent” rise in anti social behaviour is not due to that factor ? the whole policy is flawed, non-democratic, discriminatory, I personnally will have to pay  around £2400 for licencing ! almost my entire profit net for a year ! its estimated that my portfolio  will drop in value by approx 15-20%.. a financial loss of around £120.000 !!!  I, along with decent tenants will have to sell-up and leave the area (which has no more or less evidence of anti-social behaviour than any other! ) I  am a good law abiding business man like most landlords , not a ”pressganged” policeman for the loca l council , how can this policy be right !!?? shouldnt ani-social or ilegal behaviour be dealt with by the laws of the land  and apply to everyone  regardless !! ? 

    • http://www.mypropertymentor.co.uk/ Roberta Ward

      Hi, I totally agree with you. To me this is little more than a money making exercise for cash strapped councils which forces landlords to foot the bill for a job the police should be doing. I see little benefit to the new measures so many councils are now adopting. If you object strongly there is a campaign you can join to stop it. The main issue I have is that it lumps all landlords who operate in a few roads in the same category, tarring them all with the ‘slum landlord’ brush, and thus leaving no room for negotiation if you are of good character and upkeep your properties to good standards etc. Councils initially gave permission for these types of investments with planning etc, and are now forcing you to pay up for their own bad planning decisions in allowing large densities of the same type of property letting. Councils should be grateful private LLs are doing their job for them and housing people who would otherwise be on council lists.

  • alan

    selective licensing is total discrimination, i disagree with the system because if it is absolutely necessary to license rented property, then all properties in all areas of the country should be licensed, that way its the same rules for everyone.  at the moment it is unfair as the landlords with property in better more expensive areas get away Scott free, and landlords like me who perhaps can only afford to invest in less expensive property that is in less affluent areas are persecuted and have to pay up !    (in my case £4500 !)  and what makes me sick is the fact that most of my properties are just a stones throw from the border of the next district which does not have selective licensing !  many of my tenants regularly tell me that i am the best landlord they have had and that i provide very good accommodation and service for tenants particularly on the low income end of the market.  some times i think to myself  that its largely comments like that that keep me going,  as i am always considering leaving this property sector. due to the general hassle, risk and unnecessary bureaucracy.  if we are to have rules, have them for everyone or not at all. personally i think the system should be scraped. there are better ways of regulating the private rental sector, instead of charging a license fee of around  £400 per property it would be better to have a single license for the landlord as an individual, this would save landlords of large portfolios thousands of pounds.

    • BRAD_BECK

      hi Alan , your veiws are like a fast growing number of peoples ,,, S/L  is quite simply ,, wrong ! the licence fee starts at £600 per property,! I recently had a meeting with officials from the Local council (southend) and to be frank they have really not thought this through ! they couldnt answer any of our questions !  they were talking rubbish about s/l/ raising standards !.  I suggest you google “redlining”.   property will fall in value ,no one will want to live in an area that has been “labled” as highly anti-social ! DISCLOSURE WILL NEED TO BE MADE TO INSURERS ! LENDERS, AND CREDIT REF AGENCIES ! all of whom will charge more for services , or not provide them at all !..even car insurance premiums will go up  as the perception of high risk will increase !…. my councilor suggested that the licence fee be passed on to the tenants ! does he really think they will pay “more” to live in a ghetto !  this is the mentality of these people ! they havnt got a clue !
       s/l/ is supposed to be for bad tenants and landlords but is going to tarnish “all” who live within the designated  areas as “anti-social  ! stats used to justifie it include calling the fire brigade ! for goodness sake ! when did that become anti-social ! our local community police office have openly said they have had no calls to residents for anti-social behaviour in three years ! the council have manipulated stats  without populational demographics, to justify  their wish to impose this totally undemocratic law ! ON US DECENT HARDWORKING LANDLORDS ! its time to fight back !
      ..  ask to have a meeting with your mp  ! ask him to repeel the additional legislation to the 2004 housing act !….  write to your council advising them that you will be suing them for compensation if the value of your property goes down or your costs increase etc due to the introduction of S/L/.
       I have an appointment with my mp next week .
       I will not make any application for  licences  !!….. they cant take it away or use the enforcement legislation on me if i dont have a licence in the first place !!
      REGARDS

      richard.

      • http://www.mypropertymentor.co.uk/ Roberta Ward

        Of course you are right regarding the knock on effects of selective licensing in respect of higher insurance premiums etc. In respect of the Southend one in particular, the areas designated are all along the sea front where, in fact, some of the most expensive property in the whole borough is located, which absolutely makes no sense to me at all.
        You chaps may be interested in this “Judge quashes one of first selective licensing schemes over “perfunctory” consultation ” article here: http://localgovernmentlawyer.co.uk/index.php?option=com_content&view=article&id=7225:judge-quashes-one-of-first-selective-licensing-schemes-over-qperfunctoryq-consultation&catid=60:housing-articles&Itemid=28
        So even judges think it’s a mad idea. I was told that there is a petition to stop selective licensing -but when I looked I couldnt find it.However, here is the place to check for that too: http://epetitions.direct.gov.uk – if there isn’t one and you feel very strongly about it then you can start your own too.
        Using anti social behavior as an excuse to raise revenue is pretty poor. An lastly, asking tenants to foot the bill is ludicrous because there is a finite amount tenants can afford to pay in any give area, and they are not going to pay more if an area starts to degenerate because of the licensing.

  • GB

    As one of those “landlords” this scheme is a sham. I own a property in a very downtrodden area of Manchester. I have a reputable local agent fully managing the property. However I, living in the other side of the world, need to have some sort of licence. The cost of the licence is 500GBP. In context, the rental value of the property is around 250GBP per month. It’s absolutely more hassle than it’s worth, and effectively takes 500GBP out of the property for any other costs.
    And they’ve done this only in the poor areas?? Go and charge people in Didsbury some money if you like, it would make a lot more sense.
    I’ve left the house empty rather than jump through their hoops – it’s not like something useful like a housing quality or safety check is part of it, either!

    • http://www.mypropertymentor.co.uk/ Roberta Ward

      Yes, this scheme is nothing but a money magnet for the local councils. The good news is that last year a group of 347 private landlords have won the first round of their
      battle to win a judicial review of a selective licensing scheme, so we may see the death of it yet. Fingers crossed ;-)

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