The winners and losers of Selective Landlord Licensing

By - Tuesday 2nd December, 2014

As Croydon Council revises its proposal for a Selective Landlord Licensing scheme, former tenant and current landlord Robert Ward takes a look

Landlord paperwork.
Photo author’s own.

Whether you call it ‘Selective Landlord Licensing’ or, like Croydon Central’s Tory MP Gavin Barwell, you call it ‘the tenant tax’, if you rent from a private landlord: take notice. Depending on who you believe, the proposal by Croydon’s Labour council will either improve your living conditions or put your rent up.

Figuring out which – as it’s unlikely to be both – necessitates negotiating a statistical minefield. Let’s start with the oft-quoted English Housing Survey, which in 2012 showed 22% of dwellings failing to meet the ‘decency’ standard. The private rented sector had the highest proportion of non-decent homes (33%) while the social rented sector had the lowest (15%).

Failing the health and safety standard was the most common cause of being classed as non-decent, with 19% of private rented dwellings failing, compared to only 6% in the social sector. Typical failures were on the risk of falls and excess cold. Both are influenced by private rented houses being older and more likely to be flat conversions.

The scheme is justified on the basis of reducing anti-social behaviour

Croydon Council’s proposal mentions these issues, but the scheme is justified on the basis of reducing anti-social behaviour. It may surprise private tenants that they are being singled out, but this is because Selective Landlord Licensing is intended to tackle persistent anti-social behaviour in small, well-defined areas. If a council wants to implement such a scheme legally, it must be on this basis – or the even less-supportable basis of low turnover.

Croydon are exploiting the same loophole as another Labour Council, Newham, by defining the whole of Croydon as an area of persistent anti-social behaviour. The government is consulting on closing this loophole but any action before the May 2015 general election seems unlikely.

It is here that the council’s ‘business case’ flounders. Claims that analysis shows a clear link between private rented accommodation and anti-social behaviour are based on weak evidence. Anti-social behaviour complaints about private tenants are, unsurprisingly, shown to be most prevalent in areas where there are more private rented dwellings.

An attempt is made to link private tenants to fly-tipping, by pointing out that the top ten wards for fly-tipping incidents are similar to the top ten wards for reported anti-social behaviour by private rented tenants. Evidence of a causal link to private tenants is tenuous. The anecdotes on offer leave much to be desired as an example of bad behaviour. Look at the case in Purley of a dead tree notified to a private landlord, who after clarifying a few details, arranged for the tree to be removed. Not exactly a horrifying dereliction of duty.

Aside from the legal issues and the business case, the questions are whether the scheme is fair and effective, what it will cost, and who will end up paying.

The market will decide, but rents going up looks the most likely outcome

Licensing schemes are criticised as unfair because they punish good landlords – by making them pay for a licence – while criminals evade the system. The council now proposes a £700 fee, a reduction from their initial £1,000 proposal. Contrary to popular opinion, private landlords make little money, so absorbing this cost is unlikely. If the added cost causes some private landlords to bank recent capital gains and move out of the sector, then rents will go up.

Sitting tenants will see the increase at their next renewal date, which might not have happened in the absence of this extra cost. New rental agreements will start from a higher asking price. Ultimately the market will decide, but putting rents up looks the most likely outcome.

To be effective, licensing schemes must be coupled with strong enforcement. One must prosecute both landlords who avoid the scheme, and those who obtain one but don’t fulfil their obligations. Indeed, many of the problems identified are already offences – one could argue that strong enforcement would make a licensing scheme unnecessary.

The evidence is that Croydon is poor at enforcement. To their credit, Newham Council vigorously enforced regulations prior to implementing the licensing scheme. In 2012/13 they prosecuted 7,283 flytipping offenders. In that same period Croydon prosecuted 108. This figure was under the previous Tory Council, and Labour have pledged to increase it – they reported at Monday’s council meeting that they had issued 300 fixed penalty notices in the last five months .

Evidence for success or failure is poor

Quantifiable evidence for the success or failure of similar schemes is poor. There is likely some reluctance to publish hard evidence that might expose political decisions to criticism. However, a survey of 16 councils with similar schemes, published by the Chartered Institute of Environmental Health, showed that outside of Newham there have been a very small number of prosecutions for hazard offences. Three councils had made no prosecutions of any kind. Positive evidence was limited to vague statements about ‘driving up standards’ and unsubstantiated claims of effectiveness.

So are there any definite winners? Well, the council will certainly raise additional revenue, from a politically easy target. Additional council employees, estimated as costing around £65,000 each in the original council briefing paper, will also be pleased.

Ultimately though, what seems likely is that the first years will be spent registering the good landlords. Benefits, if any, will take a great deal of time to come through. Meanwhile, there will be additional bureaucracy and increased costs. Tenants, council tax payers and, to a lesser extent, landlords will foot the bill.

Robert Ward

Robert Ward

Engineer and project manager specialised in helping businesses make better strategic decisions and improve safety, quality and effectiveness. Conservative Party Councillor representing Selsdon and Addington Village on Croydon Council. He tweets as @moguloilman.

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  • Sean Creighton

    The Council held a discussion forum on the proposed scheme on 27 November. It was mainly attended by landlords and agents, plus a couple of tenants, Conservative Councillors Mead and Pollard and myself. There was clear support for action against rogue landlords and against the proposed scheme.

    With only 4 weeks allowed for the public consultation and with criticism of the fact that lots of landlords and agents, and most tenants did not know about the consultation, I urged Cllr Allison Butler to extend the consultation.

    I argued that although there were problems with the consultation and that there are legitimate concerns among landlords and agents about the anti-social behaviour rationale for the scheme, and the belief that mortgage lenders will stop loans and insurance companies will withdraw cover if the scheme goes ahead, the consultation was useful if enabling a discussion on the private rented sector.

    I asked those present:
    *to let their MPs know that they should support the bill to be debated in the House of Commons the next day to stop landlords evicting tenants who make complaints against them, and the Council know that it should sign up a a Shelter anti-rogue landlords statement.

    • Robert

      Regarding the 27th November meeting, which I also attended, perhaps unsurprisingly the (mostly) landlords present were against Selective Licensing being applied across the whole Borough.

      Regarding the bill that was being debated the following day, it did not proceed, partly due to the bill being very poorly drafted but mainly due to poor organisation by the Bill’s sponsor, Sarah Teather. The bill was, surprisingly imo, supported by all parties but she had not organised enough MPs to be present to prevent the bill being talked out by one or two MPs.

      Lastly on analysis, a problem is that good information is very hard to find. The Council probably has the best available but from what has been published it is of poor quality. It was also presented to justify a decision already made whilst wriggling through a legal loophole, rather than as an analysis.