Selective Licensing Will Create Ghettos

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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As a responsible landlord, if you pay the fees, and at some point in the future the scheme the scheme fails or is withdrawn, are they likely to refund your fees?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.

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