In light of the recent decision taken by Brent Council to apply stricter rules against ‘rogue landlords’, the landlord community is concerned about the growing costs required to invest in the property market, let alone maintain current property portfolios. Such concerns have been further magnified as Kamma has recently revealed that over £327 million has been generated from licencing fees imposed on landlords in 50 local authorities.
Licencing Fees
As it currently stands, a growing number of landlords must acquire an HMO licence to confirm the number of tenants living under their properties. As Hounslow Councillor Tom Bruce emphasises in outlining the importance of HMO licencing requirements, the purpose is to ‘reduce anti-social behaviour and the social issues that stem from overcrowding and cramped living conditions.’
Since taking additional HMO licencing measures in 2020, Hounslow Council has issued 937 warnings for formal enforcement action, 652 notices for electrical and gas safety compliance, and 135 notices to remediate housing defects.
The additional revenue required for landlords to receive an HMO licence varies according to local authorities. Generally, London is the highest revenue producer from HMO licences across the country, with Kamma identifying that 60% of the top 20 local authorities are based in London.
As an example, Lambeth currently has the most expensive licencing schemes in the capital. Lambeth charges landlords an average of £2,530 per property, which contributes to the total licencing revenue of over £11 million for the Council.
A significant amount of revenue has been generated when observing the total revenue produced by certain local authorities: Waltham Forest at £18 million, Southwark at £23.4 million, Haringey at £16.5 million, Newcastle upon Tyne at £11.7 million, and Nottingham at £15.8 million.
In Mansfield, the average licencing fee costs around £800 (£500 for the application fee, £300 for the issuing fee). If the landlord applies before 12 September, they will be eligible for a £50 discount. Also, if the landlord is a member of an accreditation scheme, they may be eligible for a further £100 discount.
Chris Morgan, COO of Kamma, provides the following commentary: ‘This data shows the true scale of licensing fees and their growing impact on the private rental sector. With councils generating hundreds of millions from licensing schemes and enforcement efforts intensifying, landlords and agents must factor compliance costs into their business models. As more local authorities introduce new schemes, staying ahead of these changes is now essential.’
Because of Labour’s emphasis on granting more autonomous powers to local authorities, these licencing measures are likely going to be strengthened over the coming years. Considering that Labour has removed the Secretary of State’s approval for introducing licencing schemes covering more than 20% of a borough, it will empower Councils to take further action in clamping down on licencing requirements for landlords.
Regulation Compliance
A major justification behind extending licencing fee requirements for landlords is the emphasis on improving compliance. To take Haringey as a case example, Councillor Sarah Williams argues that updating the civil penalty notice to fine landlords up to £30,000 per violation is a clear demonstration of the Council’s ‘commitment to holding landlords accountable and ensuring all residents in Haringey have access to safe, high-quality housing.’
Although Williams insists that the Council ‘remain[s] committed to supporting our good landlords whilst also cracking down on illegal landlord practices’, there are some members of the landlord community who consider these measures to disproportionately affect law-abiding landlords.
A recent example is a landlord in Tottenham being fined £1,500 for not correctly licencing the number of tenants residing in his property, even though the landlord was unaware of a tenant who was subletting. Furthermore, failure to secure a licence for an HMO property will result in a landlord being fined at a minimum of £17,500 – not to mention a £22,500 fine for failing to sufficiently address improvement notices.
Such costs coming from licencing fees must also be placed in the context of the upcoming Renters’ Right Bill, which, among other things, pledges to overturn section 21 evictions, restrict the bidding prices landlords can encourage to competing tenants, and extend the deposit cap for renting with pets.
The latter of these provisions is likely to incur additional costs for landlords. A survey conducted by Propertymark reveals that 57% of landlords and agents, already feeling the rising costs of maintaining their current property portfolios, are unable to recoup the costs caused by pet damage.
General Observations
Stricter regulations over HMO licencing and tougher financial penalties are alarming the landlord community. A further squeeze on the revenue of landlords is concerning. As the Government has been emphasising tougher regulation protocols to be applied at the national and local levels, it is unlikely that these measures will be relaxed anytime soon.
As shown by the HMO licencing scheme, it is worth paying close attention to the policies undertaken by local authorities when it comes to regulation compliance.
