Local authorities’ experiences of licensing in London

The application process

Since 2015, local authorities need permission from central government if they wish to implement a selective licensing scheme that covers over 20 per cent of their geographical area or over 20 per cent of their PRS. This requires the local authority to make an application to the Secretary of State for Levelling Up, Housing and Communities (DLUHC).

Officers and councillors from many of the local authorities we interviewed – both within and outside London – spoke of the highly complex and resource-intensive nature of this application process. Although local authorities are provided with a framework for the application by DLUHC, we were told that it is insufficiently detailed and lacks guidance based on previously successful applications. The 2019 review commissioned by the Ministry of Housing, Communities and Local Government on the efficacy of selective licensing found that over 96 per cent of survey respondents from local authorities stated that the process prior to designating an area for licensing was too complex. ¹

Before submitting a proposal to the Secretary of State, officers working in the PRS can spend over a year trying to gather the information they need to present their case for licensing for internal approval. The data needed to make an application are extremely extensive and must be provided on a granular, local level. Among other metrics, they include the number of homes in the private rented, social rented, and owner-occupied sectors in each area; the number of tenant complaints; the number of tenant deposit schemes; and the number of improvement notices and enforcement notices served. If the application is for a scheme to be renewed, it must also review how the previous scheme’s aims and objectives were met.

Local authorities have to provide evidence that they have met a number of legal requirements for their application to DLUHC, with the aim of demonstrating (a) that the chosen area meets one or more pre-defined criteria, (b) how they would use licensing to address these conditions, and (c) that licensing is the only viable way to do so. Depending on the reasons given, they may also need to collate data on occupier turnover in residential properties, average income of households, levels of fuel poverty, levels of crime, and many other metrics – including a housing stock conditions survey.

Several officers said that the high-stakes nature of the application process encourages councils to limit the ambition of their schemes. This can mean excluding from their applications certain parts of the borough that officers believe would benefit from licensing, because those areas narrowly missed certain socioeconomic thresholds, such as deprivation rates. Another negative outcome of this process described by interviewees was the incentivisation of an overly cautious approach to targets: since local authorities are judged on schemes’ achievements, setting less ambitious targets reduces the possibility of non-renewal.

According to the officers we spoke to, the cost of applying for permission to introduce selective licensing adds up to a figure in the low hundreds of thousands of pounds, including a year or more of officers’ time for the application process. This takes time away from tackling complaints, inspecting properties, and enforcing standards. Given that many councils are working with stretched teams, the resource-intensive nature of this process has meant that many have resorted to hiring external consultants to collate the data and formulate the application for their schemes – which can also be extremely expensive.

Set-up and running of schemes

Before a council can internally decide to issue a formal designation notice, they must publicly consult on their intended scheme. This includes making all stakeholders in the borough aware of the scheme, as well as those in neighbouring boroughs, including landlords, tenants, and other residents – a process that often includes holding a landlord forum. It is only following this process that they can send their proposals, if required, to the Secretary of State for approval.

If a council is seeking the renewal of an existing scheme, it has to repeat this entire process to gain confirmatory approval from the Secretary of State by the end date of the original scheme. If this is not achieved, there will be a period during which there is no approved scheme, which can cause confusion for all parties as well as cause gaps during which licence conditions can’t be enforced.

To process the licences and manage all the data collected on landlords and properties, councils must have robust and up-to-date IT systems, often requiring investment in expensive, tailored packages. Local authorities in London told us of the difficulties of this procurement process and cited the IT cost as one of the biggest barriers to implementing selective licensing schemes.

Hiring enough staff to run an effective inspection regime can also be a challenge for local authorities. Qualified enforcement professionals are key to the effective running of licensing schemes, and are in short supply across the country. Building on the Mayor of London’s Private Rented Sector Qualification at Middlesex University, we recommend that the government invest in the pipeline of new Environmental Health and enforcement professionals for local authorities by expanding the provision of apprenticeships, graduate traineeships and graduate qualifications in environmental health. Several officers suggested that an effective way to do this could be via a dedicated training facility that provides a rigorous education in building standards and construction, among other topics, on the model of construction skills centres available for construction apprentices.

What improvements has licensing brought about?

Proactivity

Selective licensing schemes can enable a more proactive local authority approach to housing inspections, particularly where there is an explicit ambition to inspect a certain percentage of properties covered by the scheme in a given period. Combined with an investment of resources and time to enforce regulations – including punitive measures – this can significantly improve standards. ² Interviewees told us that no other policy approach available to local authorities offers the breadth of response licensing allows. The proactive approach made possible by licensing is also designed to make landlords and letting agents operate at a higher standard and be more aware of and attentive to regulation – changing behaviour even in cases where no enforcement practices are used.

Without selective licensing, many councils have to rely on tenants’ complaints in order to identify and address poor property conditions, taking a “reactive” approach to inspection. However, the ease with which landlords can evict tenants under Section 21 of the Housing Act can make tenants reluctant to contact the council and exercise their rights to secure repairs. Many renters, especially vulnerable or migrant tenants, may not even know that their local authority can assist them with issues in private rented accommodation, and may be unaware of the systems in place to report issues and hazards. In a 2021 survey, Generation Rent found that 46 per cent of renters were unaware that councils have powers to tackle unsafe homes. ³

Information

Interviewees stressed that one of the main benefits of licensing for councils is that, in areas with licensing schemes, they can instantly discover who is responsible for managing a property and access their contact details and informally resolve minor problems with landlords. In areas without licensing, councils can spend lots of time trying to identify landlords, properties and agents in the PRS, before they can even begin to address any issues. Manually accessing data from the Land Registry to ascertain ownership currently causes significant delays, a problem mentioned several times by officers.

Our interviews revealed that some councils were surprised to find, after they implemented licensing, that their PRS was much larger than they had previously estimated. We also think there is significant scope for using licensing data to facilitate cross-borough collaboration, which could allow local authorities to share information about landlords that repeatedly violate regulations. This should build on the Mayor’s Rogue Landlord and Agent Checker, which has established a Memorandum of Understanding between the GLA and the boroughs to allow data sharing.

Resourcing and joint working

After setting out the aims and objectives of a scheme, local authorities determine the expenditure that will be necessary to achieve them and set their licensing fees accordingly. The revenue generated can then enable more inspections to take place, as more funding can be allocated to enforcement work – particularly in the hiring of inspection and enforcement staff. The financial penalties issued for non-compliance can also be recycled into enforcement spending, and are at more consistent levels than those gained through prosecution, though vexatious appeals against CPNs can still be costly to oppose.

Selective licensing schemes also appear to have encouraged greater joint working between local authorities and other public services including the police, the fire service, immigration, social services and healthcare. This is facilitated through the sharing of intelligence obtained through proactive visits that are made possible by licensing. Examples of joint-working practices include training compliance officers to look out for signs of mental health issues amongst tenants (with referrals being made to the appropriate department) and identifying potential victims of modern slavery or other forms of exploitation and engaging other agencies to offer help. ⁴

Case Study: Licensing in the London Borough of Newham

Newham Council was the first local authority in London to introduce borough-wide selective licensing in 2013. The scheme was renewed in 2018, excluding the Olympic Park postcode of E20, covering just under 39,000 properties. A third large-scale scheme was recently approved and will commence in June 2023. This covers 22 of the borough’s 24 wards, excluding the newly formed wards of Stratford Olympic Park and Royal Victoria.

Council officers at Newham told us that the revenue (from fees paid by landlords) and the data that the licensing scheme brings in have driven significant improvements in property conditions and management.

Income from the licence fees has allowed the council to:

• Create a compliance team, employing more trained people who have a strong understanding of inspecting premises against licence conditions, identifying defects and assessing the risk of harm for the relevant occupants.
  • Newham Council currently has 12 officers employed purely for compliance work, making 800 to 1,000 visits a month.
  • Between 2013 and 2021, this led to 1,100 prosecutions against criminal landlords, £2.5 million recovered in unpaid council tax from unlicensed landlords, and £350,000 of Rent Repayment Orders for tenants.
• Employ tenant liaison officers who help support and resolve tenant-landlord disputes in order to sustain tenancies.
• Work with external partners such as Safer Renting (to prevent illegal evictions) and Justice for Tenants (on rent repayment orders for tenants living in unlicensed properties).
• Improve the educational aspect of its work, including:
  • Publishing a landlord and tenant pack on its website.
  • Conducting landlord and tenant forums.
  • Sending out advisory letters to landlords and tenants.
  • Offering landlord drop-in sessions on energy efficiency.
  • Sending out a quarterly landlord e-bulletin that goes to more than 17,000 landlords.
  • Serving 2,459 legal notices on landlords to improve conditions between 2013 and 2021.
• Create innovative programmes, such as a proactive pest control pilot scheme, multidisciplinary teams to tackle letting agents under client money protection compliance, and council data analysis to predict unlicensed premises.

Data obtained through the licensing regime has allowed the council to:

• Gain a direct understanding of their existing housing stock and existing conditions in the PRS.
• Easily identify the person(s) in control of these properties.

In this way, selective licensing in Newham has been a key part of moving the council’s enforcement activity from a purely reactive to a primarily proactive model. This approach does not rely on complaints of poor housing conditions from tenants, who may be reluctant to raise issues due to the potential backlash from their landlord using Section 21 no-fault eviction powers. Officers can undertake compliance inspections at scale and identify hazards, which are then addressed either using the Council’s licensing powers or under Part 1 of the Housing Act 2004.

Case Study: Licensing in the London Borough of Waltham Forest

Borough-wide selective licensing was introduced in Waltham Forest in 2015. A new selective licensing scheme covering most wards in the borough started in May 2020 and remains in force until April 2025.

The council is clear that large-scale property licensing has provided an important regulatory framework in which to regulate conditions and management practices in the private rented sector. Its enforcement teams have overseen the improvement of more than 3,000 homes during the term of the first selective licensing scheme and, despite the impact of the Covid-19 lockdowns, hundreds more since its current scheme began in May 2020.

Waltham Forest was cited by several interviewees from other organisations as an example of a borough with strong enforcement processes and effective joined-up working, which has been facilitated through selective licensing.

Though it is the council’s preference to first give landlords an opportunity to investigate reported problems at their properties where appropriate, officers at Waltham Forest stressed that the council does not shy away from taking formal action against landlords.

Formal enforcement action in Waltham Forest can involve the full range of enforcement powers available to local authorities, including prosecution, the imposition of financial penalties and service of formal notices. It is believed to be the leading authority in the use of Interim Management Orders (IMOs), where the council takes full management control of an unlicensed licensable property where there is no reasonable prospect of it being licensed in the near future or where necessary to protect the health and safety of the inhabitant. Since 2015, Waltham Forest have issued 53 IMOs and 11 Final Management Orders. The council has also taken steps to enforce its ability to manage properties that are subject to IMOs, where the dispossessed landlord was continuing to attempt to manage the property, through injunctive relief.

The council has also taken several high-profile prosecutions. In September 2021, a portfolio landlord was prosecuted and fined £187,000 for evading licensing laws through rent-to-rent arrangements, ⁵ and in May 2022, civil penalties of £240,000 were imposed to a portfolio landlord for licensing and management failings.

Waltham Forest has obtained several important decisions at the Upper Tribunal and other higher Courts that have set legal precedents in a number of areas, including around how the First Tier Tribunal should consider local authority penalties to landlords.

The revenue – from fees paid by landlords for a licence – and intelligence licensing has brought in has allowed the council to:

• Set up joint working groups with the police, fire service, and tenants’ advice and advocacy groups such as Safer Renting and Justice for Tenants. These advocacy groups help private renters to negotiate with their landlord for better conditions in their homes, and they work with tenants in cases of illegal eviction and harassment.
• Provide drop-in sessions for tenants to discuss disrepair and concerns with their property/landlord.
• Published a landlord and tenant handbook which are available on the Authority’s website.
• Run quarterly landlord forums to share information on new legislation with various speakers invited.
• Issue quarterly newsletters sent to over 17,000 landlords/agents on the mailing list providing useful information and legislative changes.

What are the limitations of licensing schemes?

While the revenue and data brought in by selective licensing schemes can enable local authorities to undertake more inspections of properties, some councils have reported low inspection rates within their schemes, falling short of their targets. ⁶ One interviewee who had researched the effects of selective licensing stressed that without a meaningful inspection and enforcement regime, landlords may have little reason to take a licensing scheme seriously – particularly if they are rogue or criminal landlords. This appears to be a particular problem for smaller schemes, where the volume of licence fees received is insufficient to fund large expansions in inspection capacity. The 2019 report commissioned by the government found that self-supporting schemes that do not require any subsidy from the local authority are in the minority. ¹

Council officers we interviewed said that landlords sometimes became frustrated with local authorities due to the lack of inspections, although others said this was a rare complaint. One officer said: “It’s also an issue about fairness. If I were a licensee who did all my duties, management, licensing, and everything, why should I not get a visit?” This accords with Safer Renting’s research into the “shadow” private rented sector, which quoted council officers and housing law specialists stressing the critical role of interventionist local authority PRS teams in creating an expectation of enforcement among rogue landlords. ² This should include building teams to support tenants in disputes with abusive or rogue landlords.

Many of our interviewees agreed that an ideal inspection regime would mean inspecting all the properties that are licensed over the lifetime of a scheme. However, this becomes more difficult for larger city- or borough-wide licensing schemes due to the lack of trained officers necessary to carry out thousands of inspections. Given the lack of trained EHOs and enforcement professionals available to hire, even the expanded revenues from licensing are generally insufficient to enable inspections on this scale.

Landlord membership organisations have argued that rather than targeting the worst offenders, selective licensing can penalise good landlords. ⁹ Through licensing, landlords who are already compliant with their obligations pay extra costs – the fee for a licence – while rogue landlords may continue to operate without a licence, under the radar. ¹⁰ Consequently, if local authorities do not have a clear strategy for identifying unlicensed properties, licensing schemes run the risk of not dealing effectively with criminal landlords and instead focusing on technical non-compliance. ¹¹ In practice, combined with an intelligence-led approach to inspections and enforcement, many local authorities can use their licensing data to identify suspected unlicensed properties and provide a level playing field for all landlords.

The lack of information provided by some local authorities about the impact of their schemes has also raised concerns about the efficacy of selective licensing. Data on how many inspections the council has carried out, how many hazards have been found, and how many civil penalties have been issued (for example) is not always published by local authorities – sometimes creating uncertainty about the outputs of the licensing regime. Local authorities could do more work to ease these concerns by publishing open data on PRS enforcement and inspections, as we recommend.

In some local authorities, licence conditions explicitly state that it is the duty of the landlord to take practical steps to reduce the anti-social behaviour of their tenants. As part of their efforts to do so, landlords could threaten tenants with eviction, or undertake actual evictions. Interviewees highlighted that there are issues of equity that need to be considered in this mechanism, as it is possible that some people in selective licensing areas may be evicted or prevented from getting a tenancy for reasons beyond their behaviour – including discrimination due to protected characteristics. However, more research into this phenomenon is needed to make any firm conclusions around the potential effects of licensing on it, and there is real utility in establishing an accountable ‘lever’ to combat ASB in the PRS.

Some local authorities have argued that the effectiveness of licensing is impeded by the fact that councils are not permitted to include conditions on the licence directly relating to property conditions (so-called Part 1-related conditions) – such as damp and mould or excessive cold – despite these often being the reason for the designation of the area as part of a licensing scheme. ¹¹ Currently, the presence of a Part-1-related hazard does not always in itself constitute a breach of a licence condition. ⁴ If hazards are found during a licensing inspection, it is extremely difficult for the local authority to take action until a separate Part 1 HHSRS inspection is carried out, and cannot make their resolution a condition of granting a licence. ⁴ In cases such as ‘beds in sheds’, where rogue landlords conceal tenants in unsafe, unsuitable properties, the 24 hour notice period required for an HHSRS inspection provides time for tenants to be harassed and evicted, reducing the efficacy of enforcement.