According to PayProp, the revenue raised by landlord licensing schemes could be used to help improve standards in the lettings market if reinvested into enforcing rental sector legislation.
The lettings payment provider says that if councils use this money to police an increasingly diverse private rental sector this could benefit tenants, landlords and letting agencies in the long-term. It is estimated that around 16% of English local authorities have a selective licensing scheme in place, covering almost half a million rental properties.
On top of this, since October 2018 it has been mandatory for all landlords of Houses in Multiple Occupation (HMO) to obtain a licence for their property. However, there are currently no obligations for local authorities to invest licensing revenue back into housing.
Average landlord licence costs an estimated £600
A recent study carried out by Direct Line revealed that the typical cost for a landlord licence across the country is £591. The research also found that the average local authority with a licensing scheme raises £144,629 each year, with Liverpool City Council earning a high of around £4 million from its scheme which covers 42,000 properties.
Moreover, despite rules which can see landlords handed civil penalties of up to £30,000 for non-compliance with a licensing scheme, the average fine for a licensing offence in 2017 was £926.
Licensing revenue can help to raise industry standards
Neil Cobbold, Chief Operating Officer of PayProp, says: “Effective enforcement of rental sector standards is one of the biggest problems facing the lettings industry. Landlords might be happier to pay for these licences if they know the money is going to be used to raise PRS standards and identify rogue operators.”
Licensing schemes are sometimes criticised for being ‘revenue raisers’ for local councils.
However, if authorities are more open about where the money is going and more focused on reinvesting it into housing, licensing schemes could be more effective with higher rates of compliance.”
A uniform licensing system could prove more effective
The research by Direct Line shows that the costs, terms and exceptions of licensing schemes vary depending on which local authority is running the scheme. For example, the cost of some licences is based on the property type, while others are charged based on the number of occupants or number of rooms in a property.
Cobbold adds: “A standard approach to licensing could make projects easier to enforce, while making things less confusing and creating a level playing field for landlords."
Last summer the Ministry of Housing, Communities and Local Government announced a review of the selective licensing scheme system, the results of which are expected to be made public soon.
Cobbold concludes: “We await the results of the government’s review of selective licensing with interest. Effective enforcement and details on what licensing revenue is used for are two of the key topics that could be addressed.
Thirteen years after selective licensing schemes were first introduced, it’s encouraging that the system is still being reviewed to determine whether it is fit for purpose in its current form."