A London council is to force all private landlords to take out licences if they want to continue to let property in the borough. The scheme, which will come into force on 1 January 2013, is estimated to cover 35,000 private tenancies, representing a third of all the borough’s households. Landlords who do not comply face fines of up to £20,000.
Newham Council decided to go ahead with the scheme after a consultation in which it says 74% of residents and 76% of private tenants expressed their approval for the proposals. We do not know how many landlords agreed with the scheme or indeed if they were even consulted.
Private landlords will be required to pay £150 for a 5 year licence if they register before 1 January 2013. Otherwise the full fee is £500. The licences are per property, not per landlord. So landlords will be required to buy a separate licence for each property owned.
Newham believes it is the first council in the country to require all private landlords to obtain licences and describes the scheme as “pioneering”.
The Housing Act 2004 allows local authorities to create areas of “Selective Licensing” – defined geographical areas in which private landlords would have to apply for a licence before being allowed to rent out property. The measure was designed to target specific problems of crime or poor housing in particular neighbourhoods. There are a few such Selective Licensing schemes already in operation across the country but this is the first “Selective Licensing” scheme to cover a whole local authority area.
Newham Mayor, Sir Robin Wales, said “We want to ensure that private sector rented properties are well managed and meet a good standard. We also want to deal with the crime and anti-social behaviour that is sometimes associated with bad private sector rented housing. We will never accept private sector tenants being directly exploited by landlords who force them to live in dangerous and unacceptable conditions. Good landlords have nothing to fear from this scheme. For the bad ones, this is a clear message they must clean up their act – or pay the price.”
The proposals have been welcomed by Shelter, who urged other councils to follow suit. The National Landlords Association have expressed their view that this is “the wrong tool at the wrong time”.
RentFair believes that a blanket licensing scheme across the borough will be counterproductive for Newham’s tenants. At a time when there is a dire shortage of property to rent in London, particularly at the lower end of the market, additional red tape and expense will do nothing to address the shortfall.
Nor, do we believe, will it do anything to tackle crime or anti-social behaviour, which the Mayor seems to believe is caused by poor housing. Whilst crime may be higher in areas of poor quality housing, we not believe that there is any causal link. Unemployment is also higher in areas of poor housing, yet few would argue that smartening up the housing stock would reduce unemployment amongst the affected tenants. Correlation does not equal causation and it is far too simplistic to suggest, like the ill-fated ID card scheme, that simply licensing people will reduce crime.
The problem of poor housing and unscrupulous landlords is mainly caused by the fact that landlords are in a position to exploit tenants because of the severe shortage of available property. Some landlords undoubtedly take advantage of this situation. However, the way to tackle the problem is to increase the supply of private rented housing, so that tenants have a greater choice. The licensing measures will unfortunately do the opposite and the increased costs will be passed on to tenants in the form of higher rents.
A final thought: 35,000 multiplied by £500. We make that £17.5 million – a nice addition to the Council’s revenues. Or is that too cynical?
UPDATE: October 2, 2012: Landlords in Newham have been sent notices that they must license all their properties by 1st January. It is possible to apply for a licence online but it is understood that the process will take about 40 minutes per property.