That almost all Local Authority selective licensing schemes run over budget is a fact that has been confirmed by the MHCLG (Ministry of Housing, Communities and Local Government - now the Dept for Levelling Up, Housing and Communities) in its 2019 Independent Review of the Use and Effectiveness of Selective Licensing. Regarding Selective Licensing as “one of the key powers available to [Local] authorities”, the review also states that: “Genuinely self-supporting (no subsidy) schemes are in the minority and typically have higher licence fees. The largest single cost of operating a scheme is staffing; setting a fee too low can have significant consequences – usually a reduction in the percentage of properties inspected, delays in issuing licences etc.”

The CIEH in their “A Licence to Rent” report, also of 2019, back the MHCLG statement up:

“…. councils we spoke to reported that resourcing allocated was not enough to cover all the work resulting from running the [licensing] scheme” and that “many of the costs associated with enforcement action were being met through existing staff resources, drawn from the general fund”.

So, what are the resource barriers to setting up and running a selective licensing scheme and how can they be overcome?

The financial constraints currently experienced by Local Authorities are now common knowledge. Still reeling from the after effects of the financial crash, authorities are now also constrained by the fallout from the Covid-19 pandemic in terms of their budget allocation. With selective licensing, there is the added constraint that such landlord licensing schemes are, under the 2004 Housing Act, supposed to be self-funding via the licence fee paid by landlords subject to a licensing regime.

The part B fee paid by the landlord can only be used by a Local Authority to cover the administration of the scheme but even the highest fee (on average, circa £800 and usually set by larger urban authorities) still won’t necessarily cover the true cost of administering a licensing scheme.

Before setting up a selective licensing scheme, a council has to commit resources to researching the evidence base, starting a public consultation which will last for 10 weeks (and which will often include arranging public meetings), advertising the scheme in local press as well as distributing flyers and sending letters to residents and the landlords that the council is already aware of. Following the consultation a report has to be prepared for elected members and all these tasks involve upfront costs which smaller authorities may be wary of incurring in the first place. A Council then has to estimate the future cost of administering the scheme over 5 years i.e. officer numbers, IT requirements and the cost of inspection programmes and enforcement via prosecutions.

The evidence from the independent review and the CIEH report suggests that these estimates are usually underestimates because, in many cases, councils don’t have full knowledge of, or complete data on, the PRS market in the area that they are designating as subject to selective licensing. There can, unbeknownst to the council, be more licensable properties than were estimated and this in turn leads to more inspections than were budgeted for and more enforcement (with its own upfront costs) than was predicted. In terms of staff, councils have reported that they have difficulty recruiting the qualified and experienced Environmental Health officers needed to do the inspections and initiate enforcement. Thus, where the part B fee is set too low due to incorrect forecasts then the scheme cannot support itself without extra funding.

Under these circumstances then, councils must now be more creative when looking to set up a selective licensing scheme because operating in the traditional manner is no longer feasible whilst innovative approaches are eminently so. Licensing officers need to investigate bidding for potential funds made available by Government for programmes not necessarily directly linked to administering a licensing scheme (e.g. the Safer Streets fund) but which can be used to improve desired outcomes in the designated selective licence area.

Working with the private sector in a public private partnership is one strategy that is being talked about by, for example, the Local Government Association. With respect to licensing schemes, this could be by way of working with a qualified licensing Delivery Partner carrying out property inspections (as was the case in Doncaster where the licensing scheme was able to inspect 75% of properties by using Home Safe as their licensing Delivery Partner as referenced in CIEH’s report) but other successful strategies mean including real cross departmental working, internally in the council and externally in partnership with other agencies including landlord organisations, third sector agencies, health & well-being services, police and fire services so that the council officers working on selective licensing can focus tight resources on targeting the cohort of properties and landlords that require that targeting - whether that results in civil penalties (which can also help cover the cost of administering the scheme) being issued or in prosecutions and banning and confiscation orders for the egregiously bad landlords.

Thinking creatively and acting proactively is now no longer an option but a necessity for cash strapped councils