London’s licensing lottery could drive landlords from PRS, says NALS

Monday, January 29th, 2018 - NALS

A ‘lottery’ of landlord licensing fees across London could force more landlords out of the private rented sector (PRS) according to research commissioned by the National Approved Letting Scheme (NALS).

The findings from the research show that licensing fees can be vastly different depending on locations, with boroughs in the capital charging significantly different fees. NALS is concerned that landlords will leave the PRS as they struggle with these rising costs and the complexity of licensing schemes.

Following the government’s decision to widen the mandatory House in Multiple Occupation (HMO) licensing scheme to another 160,000 properties across England, the issue of fees is even more important as these increasing costs could also drive rents up across the country.

NALS research, conducted by London Property Licensing shows that in 2017, licensing fees for a three storey House in Multiple Occupation with five unrelated occupants can range from £125 (City of London Corporation) to £2,500 (Lewisham Council).

In fact, in 23 of London’s 33 boroughs licensing fees are over £1,000 for a similar sized property. Overall, average fees have climbed every year since 2014 and the average cost has risen by 12.9 per cent in 2016/17 and a further 5 per cent this year (standing at £1,119).

As well as increased costs, there are now 29 separate additional and selective licensing schemes in operation across London with more schemes on the way. This means that landlords can potentially face licensing their properties through different schemes in different parts of the city, each with their own application processes and requirements.

Whilst the above fees relate to mandatory HMO licensing, the research also showed the average additional licensing fee for a five person shared house is £1,164 and the average selective licensing fee for a single family let is £560. Most licences are issued for five years.

NALS is calling on the Mayor of London to take the lead and create a single licensing scheme across London. This would cut the administrative burden on landlords and introduce efficiencies across the sector.

Isobel Thomson, NALS Chief Executive, said:

We should be clear: licensing HMOs helps protect tenants and drives up standards in the PRS. At the same time, the maze of licensing schemes operating in the capital is a huge financial and administrative burden on landlords, with some councils seeing them as a new revenue stream.

With landlords under pressure from a host of regulatory changes, this increased burden is likely to push them out of PRS exactly at a time when they have a key role to play in providing much needed housing.

If we want to improve the PRS for all, we need to see a more joined up approach, with a light touch, streamlined licensing scheme for London. This would help to minimise operating costs and keep fees to a more reasonable level.

London Property Licensing conducted the research for NALS between November 2014 and November 2017. For comparative purposes, the figures quoted relate to each council’s standard schedule of fees for a three-storey shared house with five single person lettings. The information has been collated from each council’s website, FOI and/or other information requests. It does not include any early bird or accreditation discounts, or higher charges such as ‘finder’s fees’ that are imposed in certain circumstances.

A summary of the research findings can be downloaded below.

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