Licensing schemes can serve purposes which are indisputably genuine and valid. They can, however, also be used as money-making schemes, particularly during times when regulatory authorities are strapped for cash. Licensing schemes can, therefore, often be controversial, especially in situations when there are arguments on both sides. Landlord licensing schemes are a case in point.
The argument for landlord licensing
What we would now call rogue landlords have existed for hundreds if not thousands of years. You only need to take a look at classic literature to see fictional examples of them, which were presumably modelled on real-world people. There is no doubt that they exist today or that their ranks are supplemented by landlords who might not, technically, be rogue in the sense of deliberately bad, but unprofessional due to laziness, incompetence or general lack of interest in their tenants’ welfare.
A well-implemented licensing scheme, could, in principle, turn up the heat on landlords who fail to manage their properties in a reasonable manner and either encourage or force them to leave the market, to be replaced either by more professional landlords or by residential buyers. This is certainly the point of view taken by housing charities such as Shelter who have expressed themselves in favour of licensing schemes, seeing them as a way to protect vulnerable tenants.
The argument against landlord licensing
Perhaps it would be better to say the argument against landlord licensing in its current form. Any form of licensing is only as effective as its enforcement and at this point in time landlord licensing is reliant on landlords coming forward and identifying themselves to their local council. This raises the obvious question of whether genuinely rogue landlords will choose to do so if they know that they are highly unlikely to be granted a license and instead will put themselves at risk of losing a lucrative source of income.
In principle, by failing to register, they face the risk of criminal prosecution, but, this will only happen if they get caught, which therefore raises the question of how likely it is that their operation will be discovered. The simple truth of the matter is that we can never know how many landlords manage to avoid getting caught by licensing agents for the simple reason that they do not get caught.
We do know, however, that at present time the significant increase in local authority licensing schemes has not resulted in a corresponding increase in prosecutions for breaches of the housing act. For example, out of the 26 prosecutions brought by Thanet Council in 2016, only three were for breaches of the housing act, the other 23 (that’s 88%) were for failure to hold the correct license.
Croydon, by contrast, only made one prosecution in the whole of 2017, the cost of which should have been more than covered by the £6m it collected in licensing fees - licensing fees which, ultimately, would have been paid by the tenants of licensed landlords as a part of their rent.
Mark Burns is the managing director of property investment firm Hopwood House.