RESPONSE: LANDLORD LICENSING CONSULTATION
Residents’ experiences of the Private Rented Sector:
• “We’ve had problems with repairs for many years. We’ve had this same leak for several years and it’s just getting worse. I’ve complained several times but the same things are still happening ”
• “I was illegally evicted by my landlord while taking my children to school I couldn't get back in. I called the police, who told me it was a civil matter” .
• In my situation, I had a faulty boiler for years. I repeatedly requested that my landlord repair the system but nothing was done about it. I had to use electric fires to keep warm. This has cost me an extra £100 a month. This is a big financial burden, which I am struggling to afford.
Specifically, residents have raised the following concerns:
➢ the length of the housing waiting list
➢ anti-social behaviour from tenants being left unaddressed by landlords
➢ landlords refusing to make urgent and essential repairs
➢ threats of eviction being undertaken before other potential resolutions have been explored
Why licensing is important and what it could achieve Leicester’s 6000 strong waiting list is higher than waiting lists reported in other cities within the East Midlands, such as Northampton (over 2700) and Derby (4600).i
As was outlined in the report, “A Licence to Rent” by the Chartered Institute for Housing, the rise in the private rented sector has increased the variability of housing standards, and, at the lower end of the market, housing standards can be very poor.ii The median monthly rent for a room within the boundaries of Leicester Unitary Authority is £351 per month, below the national average of £403. This places Leicester as whole at the lower end of the private rental market, where many problems can occur. Leicester also has a higher proportion of private sector housing than the national average – 35% compared to 19% –and there is a correlation between the relatively high numbers of private rented properties in Leicester and Houses in Multiple Occupancy.
The quality of life experienced by Leicester Residents is of particular concern following the revelations regarding the treatment of workers in the City’s garment industry: as Labour
Behind the Label has pointed out, “migrant workers are vulnerable to exploitation”, with garment workers often earning well below the minimum wage. According to the 2019 Indices of Deprivation, Leicester is amongst the 10% most deprived of local authorities for income deprivation Given that high numbers of Houses in Multiple Occupancy tend to exist in areas with high levels of depravation and in which wages are below the national average, the issues of illegally low wages and poor conditions in under-regulated parts of the housing
market may be mutually reinforcing. This may therefore be creating barriers to the improvement of Leicester’s standard of living. A Discretionary Licensing Scheme, which ensures that no areas of the city can be exploited to place a downward pressure on standards is welcome in principle but its success will depend on implementation.
As Leicester City Council’s Business Case for Discretionary Private Rented Sector Licensing makes clear, the growth in the private rented sector and the rise in the numbers of Houses in Multiple Occupancy are inextricably linked to the decline of available council housing. As the Leicester City Council Private Rented Sector Strategy highlights, LCC expects that the stock of available social housing will further “diminish through Right to Buy”. The decision to consider Discretionary Licensing for Leicester’s private rented sector is therefore partially driven by the need to plug the increasing gap between affordable housing provision and demand by preventing evictions through initiating such policies as Call Before You Serve – a policy that aims to resolve disputes between tenants and landlords before they result in evictions – increased regulation and measures to facilitate greater understanding and expectation management between tenants and landlords.
The requirement for Mandatory Licensing was introduced in the 2016 Housing and Planning Act. This hasled to some success in terms of freeing up properties for rent. As a result of Leicester City Council’s landlord incentives and leasing schemes, 201 tenancies were created in 2021/22, which was an increase from approximately 170 tenancies in 2018/2019.
However, this progress represents a drop in the ocean with regards to the wider housing crisis in Leicester. As the Council’s own Private Rented Sector Strategy makes clear, the origins of poor housing provision lie in the decline in available Council Housing. Although additional tenancies created through better intervention in and regulation of Leicester’s private rented sector will address part of the problem, the underlying issue can only be resolved by supplying more council homes. As it stands, only 29 new social homes have been completed throughout the city, with construction due to start on 38 more, and a further 18 proposed for development.iii While the adoption of Discretionary Licensing for Leicester private rented sector is likely to help reduce the housing waiting list, it does not present a complete solution to the City’s housing crisis, which must include a considerable uplift in the number of Council Homes available to rent.
Comments about the prescribed conditions?
The prescribed conditions are the measures that have to be included in any landlord licensing scheme according to Government legislation.
The prescribed conditions of Mandatory Licensing have been criticised for being too reactive and doing little to address the problems caused by rogue landlords: good landlords will seek a licence to operate while ‘rogue’ landlords will not. Consequently, if the policy is not consistently enforced, it may lead to the perception that the scheme punishes good
landlords. It should be noted that mandatory licensing alone will not allow local authorities to identify rogue landlords
There are arguably other limitations to the prescribed conditions Although the prescribed conditions stipulate that all electrical appliances should be well maintained and with up-todate electricity and gas certifications, they do not require similar levels of compliance with regards to other repairs. Regulation of repairs to non-electrical or gas appliances (furnishings, etc.) is presumably being left to private tenancy agreements. This aspect of the prescribed conditions is a considerable limitation, as it relies upon a level of private sector self-regulation if HMOs are to be maintained to the Decent Homes Standard. Thankfully, these issues have to a large extent been addressed in the Council’s Supplementary Conditions section of their consultation document
Comments or suggestions for the proposed supplementary conditions?
In terms of measures introduced through the supplementary conditions to address the limitations of the prescribed conditions. Leicester City Council’s decision to include a fit and proper person test is welcome. The measure is missing from the prescribed conditions established by the government. This test requires landlords to demonstrate that they are suitable people to manage Houses in Multiple Occupancy prior to their receiving a licence. Through this policy, introduced via additional licencing, the local authority will be able to ensure that all HMO licensed landlords are willing and able to provide a high standard of housing to their tenants. If there is a register of landlords, as suggested within Leicester City Council’s business case document, it will be easier to identify rogue landlords; any landlords not on the register would not be regarded as legitimate landlords for the purpose of managing HMOs.
Another major improvement to the prescribed conditions is increased emphasis on Repairs and Maintenance beyond the simple gas and electricity safety requirements specified by Mandatory Licensing, as proposed in supplementary condition 16. The specification that “the license holder must ensure all reasonable and practical steps are taken to respond to repair and maintenance issues at their property and that any works to deal with repairs are undertaken” is essential for ensuring that the legally required Decent Homes Standard is met.
Just as important to ensuring the success of the Discretionary Licensing Scheme is the expectation management supplied by supplementary condition 14. This stipulates that landlords should indicate to tenants how they intend to respond to complaints, and provide a timescale for the steps they intend to take
Condition 14 will help landlords and tenants to understand each other’s requirements. However, the measure could be improved by Leicester City Council setting guidance for landlords regarding recommended timeframes based on its own policy. This would help to
ensure that there is a level playing field in terms of timeframes for repairs and standards expected across the private and public rented sector in Leicester
Further comments on licensing conditions?
Pros and cons of having a selective licensing scheme as opposed to the additional licensing scheme:
The Local Government Association (LGA) has highlighted some of the potential problems associated with Discretionary Licensing. The LGA recommends that policy proposals should be founded on an understanding of the private rented sector in the area first and foremost. This is one reason why it is difficult for Councils to get approval from national government if they are to cover more than 20% of a Local Authority. For instance, Stoke City Council applied for selective Licensing in 2019 but, despite extensive consultation, this was rejected.
This means that proposals for selective licensing schemes covering the whole of Leicester City are unlikely to be allowed by central Government. To seek approval for such a scheme would likely expend time and energy that could be better spent on enforcing a scheme that can be put in place more quickly and without Government approval. Furthermore, as Croydon Council experienced, any option that covers only part of the local authority risks creating a two-tier private rented sector.
Croydon Council, which introduced Additional Licensing to a limited number of its areas found that the scheme was successful in those areas covered by licensing, improving the licensable stock and reducing the number of rogue landlords. However, it also found that some rogue landlords reappeared as landlords of HMO’s & self-contained flats in areas not covered by the scheme. When applied to Leicester, this could lead to the reduction of standards in Leicester East, which according to available data is not among the areas with the highest numbers of HMOs or complaints and would become less regulated than the areas covered by the scheme. Leicester East contains 1622 Houses in multiple occupancy and in the ward of North Evington, the number of complaints regarding HMOs is above the 12% average for Leicester as a whole. All other wards in the constituency have fewer than the average number of Houses in Multiple Occupancy and associated complaints in the City as a whole
The discretionary licensing scheme adopted by Birmingham City Council has received criticism for being too selective and having the potential to simply push housing problems around the city.iv
What lessons can be learnt from elsewhere about these different approaches:
Another issue is the risk associated with enforcement. Court cases are costly and the money is not always won back through court action. The LGA highlights that fines often do not cover costs (and may not act as a deterrent). This is a major problem for the enforcement of
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discretionary licensing schemes. It means that any scheme will need to secure a high level of voluntary compliance from landlords and schemes may have to rely on fees generated from awarding licensing themselves. This could feed into rent rises and gentrification if there isn’t a significant uptick in high quality Council housing.
The potentially prohibitive cost of enforcement through court action means that the support provided by Councils to landlords must carry much of the burden and be worth the initial licensing fee which will, if other schemes are representative, provide most of the financing. Leicester City Council’s proposed strategies for addressing this risk rely on communication. For instance, the Council’s Business Case emphasises the importance of sharing the information that licensing is tax deductible with landlords, “so that rent levies are not increased unnecessarily” However, this is only a partial remedy and there are other strategies for addressing the potential financial burden placed upon landlords.v
One possible, although partial, solution to this would be to follow the plan considered by Enfield Council, which offered significant discounts on registration fees for landlords. With standard fees set at £575 for a license, a reduced fee of £250 was offered to landlords coming forward to engage with the process in its initial months. If a large public register of licensed landlords could be established early-on and this was well publicised by the council, it would create competition and encourage other landlords to sign up.
The London Borough of Haringey approached its concerns with financing by costing an estimated minimum budget, which accounted for likely shortfalls and overspends. This gave the Council the stability to employ a team of five people to administrate the Licensing scheme. To ensure stable and successful self-financing, Enfield Borough Council ensured that revenue generated by licenses and fines would be ringfenced.
i https://www.northamptonchron.co.uk/news/more-2700-households-waiting-list-social-housingnorthampton-131520; https://www.derbytelegraph.co.uk/news/derby-news/social-housing-crisis-hits-derby6213971; https://www.leicestermercury.co.uk/news/leicester-news/leicester-set-declare-housing-crisis6618137
ii https://consultations.leicester.gov.uk/comms/landlord-licensing/supporting_documents/alicencetorent.pdf
iii https://news.leicester.gov.uk/news-articles/2021/february/latest-homes-completed-as-part-of-councilhouse-building-programme/
iv https://www.birminghammail.co.uk/news/midlands-news/landlords-need-700-licences-rent-23251143
v https://www.gov.uk/renting-out-a-property/paying-tax