Selective Licensing Consultation

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1 Leeds City Council Civic Hall Calverley Street Leeds LS1 1UR Date 23/10/2018 Dear Sir or Madam, Selective Licensing Consultation Thank you for the opportunity to respond to the above consultation. We have read through your consultation documents, and though we appreciate the issues that the Council have mentioned and the effect they can have on tenants, landlords and the housing market in the areas of Beeston and Harehills, the RLA is opposed to the scheme and has many general objections to Licensing overall. The council has failed in its documents to prove sufficiently that private rented sector houses are the main perpetrators of anti-social behaviour and crime. The council has very similar issues in predominantly council/social housing estates with their highly regulated housing management and property standards. Clearly not solely a landlord issue. It is more about concentrated need. To identify a particular area for the introduction of licensing highlights a belief that the area has numerous issues, potentially blighting the reputation of the area. There is also a danger that the issues that the scheme seeks to address are simply moved elsewhere, as difficult or vulnerable tenants are moved on. Fees We understand that Leeds Council s Ingrowth Inclusive Strategy wants to improve the quality of private sector housing. However, these schemes do little but alienate lawful landlords by burdening them with additional costs, while criminal operators continue to ignore regulations and avoid these additional costs. Good landlords will apply for licences and, likely, pass the cost on to tenants in the form of increased rents, doing nothing to address affordability, while the worst landlords the criminal operators will simply ignore the scheme, as they do many other regulations. The proposed standard licensing fee of 825, even with the discounts, is an unnecessary financial burden to put on landlords. To avoid financial difficulties, the council, if it goes ahead with the scheme, should increase the level of discount available to landlords as the current level of discount is not high enough. Tenure Intelligence (Ti) Combining artificial intelligence and housing data

2 Ti provides local authorities with a new tool to help differentiate between properties which are privately rented, HMO and those that are owner occupied or socially rented. Ti can also be used to pinpoint properties that are likely to have serious hazards. The technology can be used to assist with policy makers and managers to understand the make up and changes in housing stock across a borough and how it relates to other policy areas, such as anti-social behaviour, and provides a vital insight into landlord behaviour and helps prevents crime and fraud, such as council tax evasion. It is developed in partnership with council teams to ensure the maximum benefits of Ti are delivered, and to ensure compliance with GDPR, no sensitive data is taken away and all analysis can be completed within the council s digital environment. Such a scheme can be used as an alternative for Selective Licensing for Leeds council, as it could be used as more of an effective tool to identify and target properties in bad conditions and act against criminal landlords. Further information can be found at this link: Impact of Taxation Reform According to our research lab PEARL, the impact of the government s changes to taxation for private landlords has been noticeable, with 70% of landlords reporting that the changes to mortgage interest relief would reduce their profitability as a business, with 62% of landlords reporting this would reduce their profitability by at least 20%. To mitigate the negative impact of these changes, the majority of landlords (67%) reported they would increase the rents. 43% of landlords reported they had increased rents in the past 12 months, with 31% of these landlords reporting this was due to the changes in Mortgage Interest Relief. However, 50% of landlords planned on increasing rents in the next 12 months, with 77% of landlords reporting this was due to the tax changes. These findings show that landlords are planning to take action to mitigate any negative impact of these changes, with either higher rents or reduced portfolio sizes. These consequences do not help tenants, rather it is likely tenants will come under greater financial strain as a result. The additional fees for a Selective Licence will potentially put landlords into further financial difficulty, which could lead to them exiting the sector altogether and reducing the number of PRS available in Leeds. Impact of Welfare Reform According to research done by RLA PEARL, 61% of landlords that let to tenants on Universal Credit have experienced their UC tenants going into rent arrears in the past 12 months. This is over double from 27% of landlords in 2016, and a significant increase from the previous year where it was 38% of landlords. PEARL also found out that the amount owed by Universal Credit tenants in rent arrears has increased by 49% in comparison to the previous 12 months. This has increased from 1, in 2017 to 2, Rent arrears for Universal Credit tenants are likely to be driving homelessness, with 28% of landlords regaining possession of their property from a UC tenant and the primary reason being rent arrears (77% of landlords). The significant increase in rent arrears for both UC tenants and legacy Housing Benefit tenants also points to much wider issues than just the implementation of Universal Credit. The findings suggest that the freeze to LHA rates since 2016 and that LHA rates had not increased with market rents between 2010 and is likely to be driving the increase in rent arrears for tenants that claim benefits. More and more landlords are planning to sell

3 properties in the next 12 months. This now stands at 22% and is up three percentage points since While the proportion of landlords looking to buy properties has continued to decline, and more landlords are planning to sell than buy. This indicates chronic undersupply of privately rented homes in the future. Such a projection will have a knock-on effect on the supply of PRS properties in Leeds. As Leeds prepares for the further roll out of UC for the city, Cllrs have already raised concerns about this roll out, citing difficulties other local authorities have experienced when it comes to demand on front line services. Many landlords may be in a situation where they are not able to pay both licensing fees and deal with rent arrears on their properties, resulting in financial difficulties for landlords, and may lead to an increase of demand on council services. Existing Enforcement Powers There are over 140 Acts of Parliament and more than 400 regulations affecting landlords in the private rented sector. Councils should fully use the enforcement powers already granted to them by the Housing and Planning Act 2016, ranging from civil penalties, rent repayment orders, banning orders and the introduction of a database for rogue landlords and letting agents, rather than rely on Licensing Schemes to regulate landlords in addition to these powers. The Council has also not taken into consideration the amount of informal enforcement activity undertaken between local authorities and private landlords. Additionally, Leeds City Council has access to the Controlling Migration Fund, which allows local authorities to tackle local service pressures associated with any recently increased migration, which includes tackling rogue landlords and driving up standards. The Tenant Fees Bill will also introduce a lead enforcement authority to provide guidance and support to local authorities regarding the enforcement of letting agent requirements. Government review on Selective Licensing On 20 th June, the government formally announced that they will be carrying out a review of Selective Licensing to assess its use and effectiveness by a independent commisssioner to gather evidence on the effectiveness of the scheme. The results of this review will be published next Spring. Taking this into consideration, the council should await the outcome of this review. Property prices in proposed designated areas The RLA has received testimony from several local independent mortgage brokers who operates in the Beeston and surrounding area about property prices, to counter claims that the introduction of Selective Licensing will positively have an impact on property prices, and that the market is currently struggling in that area of the city. They states that property values have been on a upward curve and that despite there not being a great deal of housing stock, and on occasions have had several biddings from different parties wishing to buy the same property. Full letters are enclosed.

4 Pressure on non-selective licence areas Landlords, especially those with properties outside the licence area will become risk-averse in terms of the tenants they let to. Tenant problems such as anti-social behaviour are impossible for the landlord to address alone and landlords will not wish to risk a breach of licensing conditions that may affect their ability to let properties elsewhere. Some may seek to evict already challenging tenants. This could mean additional costs to other council services, as they pick up the pieces created by the disruption to the lives of already vulnerable tenants. Co-Regulation Scheme Should licensing be approved by the council, the option of co-regulation with the RLA should be considered. Liverpool City Council introduced city wide licensing in As part of this the RLA were allowed to introduce a co-regulation scheme for landlords in the city. ARLA and NALS introduced co-regulation for agents. Landlords who join co-regulation receive a discount fee of 150 per registered property. To join co-regulation, the landlord must be a member of the RLA (specified by the council which can also be a mandatory condition that Leeds council can implement) and pay 10 per annum per registered property. This fee is charged by direct debit monthly. The primary objective of co-regulation is to provide safe, legal and secure homes in the private rented sector. It achieves this by recognising good practice and property standards in the PRS. The benefits facilitate risk-based intelligence led enforcement, and encouraging compliance and professionalism in the sector, as well as removing the need for costly duplication in local authorities. Each approved scheme provider will require a central database with details of landlords and properties. The primary use of this database is to allow self-management for members and membership verification for consumers/agents/property portals. This will require uniformity of data collation so that data can be shared. As owners of the co-reg scheme, the RLA is responsible for dealing with complaints: The tenant contacts the council The council writes to the landlord and RLA (if in co-reg scheme) RLA contacts landlord and asks to resolve the tenant enquiry (action) Landlord responds, which starts the trail) RLA send details of landlord action to council Council close complaint if satisfied with outcome The RLA receives the complaint at the point where the landlord/tenant relationship has broken down, and where it has become clear that the tenant is trying to obtain alternative council accommodation. On average, the RLA closes complaints within 30 days, sometimes using a local agent to visit a property to assess a complaint. Investment in a process to automate the complaints process to speed up resolution and provide more transparency is ongoing. Co-regulation involves a full written code of conduct, which details the procedures and processes in place to deal with contractual and other matters as part of the overall scheme. This code is based on the existing RICS code and will be accepted by all members. The

5 code demands transparency on fees, EPC s, deposit schemes, lease details, rent liabilities and payment, repairs and possession arrangements. The benefits of co-regulation for a local authority is targeted enforcement making the best use of more limited resources, reduced workload due to reduced number of complaints being managed by the authorities, easier identification of bad/criminal landlords, control over the scheme requirements to suit local needs and stronger links with the landlord community. The benefits of co-regulation for tenants is the peace of mind with the knowledge that the landlord/agent is more professional, external support from an independent ADR service, designed to deal with complaints and a speedier process for dealing with complaints. The Liverpool scheme can be adjusted for Leeds, and further information can be provided. Liverpool is a good case study for co-regulation and shows in a practical setting it can be successful and work. Conclusion There are alternatives to licensing. The RLA supports a system of self-regulation for landlords whereby compliant landlords join a co-regulation scheme which deals with standards and complaints in the first instance, while those outside the scheme remain under the scope of local authority enforcement. More information can be supplied if required. We also support the use of the council tax registration process to identify private rented properties and landlords. Unlike licensing, this does not require self-identification by landlords, making it harder for so-called rogues to operate under the radar. Yours faithfully, Samantha Watkin Policy Officer Residential Landlords Association

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