Introduction

Part 3 of the Housing Act 2004 (the Act) sets out the scheme for licensing private rented properties in a local housing authority area. Under section 80 of the Act a local housing authority can designate the whole or any part or parts of its area as subject to selective licensing. Where a selective licensing designation is made it applies to all privately rented property in the area, unless an exemption applies, such as being managed by a registered provider. 

A selective licensing designation may be made if the area to which it relates satisfies one of six conditions defined in the Housing Act 2004:

• low housing demand (or is likely to become such an area)
• a significant and persistent problem caused by antisocial behaviour
• poor property conditions
• high levels of migration
• high level of deprivation
• high levels of crime 

Since the 1 April 2015, a local housing authority needs to apply to the Secretary of State for Levelling Up, Housing and Communities for confirmation of any scheme which would cover more than 20% of their geographical area or that would affect more than 20% of privately rented homes in the local authority area.   
If the local authority makes a Selective Licensing designation that covers:

• 20% or less of its total geographical area
• and, includes less than 20% of its privately rented properties 

The scheme will not need to be submitted to the Secretary of State for Levelling Up, Housing and Communities for approval, provided the authority has consulted for at least 10 weeks on the proposed designation. Larger Selective Licensing Schemes covering a wider designation or whole borough will require specific Government approval. The selective licensing scheme that Bexley is proposing will not need to be approved by the secretary of state.

Bexley’s current selective licensing scheme

Bexley’s selective licensing scheme commenced on the 1st October 2018 and ended on the 31st August 2023. The scheme was based around 11 Local Super Output Area (LSOA) in 4 distinct areas:

• Thamesmead North
• Abbey Wood/Lower Belvedere 
• Erith
• Manor Road

The intention of the scheme was to improve conditions for the most vulnerable tenants and provide further regulatory control of the private rented sector. The identified areas evidenced high levels of private renting coupled with high levels of antisocial behaviour (ASB) when compared to national and borough averages.

The scheme is a proactive approach that resolves the issue of relying entirely on complaints to flag issues; will improve conditions for the most vulnerable tenants and provide further regulatory control of the private rented sector. It is important that we ensure landlord compliance with the licensing scheme and that we take the necessary enforcement action to ensure properties that require a licence are licensed.

Over the duration of the scheme, there were 2,104 (86%) applications out of the estimated 2,451 licensable properties within the selective licensing areas. 

The Council investigates unlicensed properties through a combination of its own data and complaints received from tenants and neighbours. Where landlords fail to licence a property, the Council can either prosecute the landlord or issue a civil penalty notice (CPN). Income received from the payment of a Civil Penalty Notice can be retained by the Council provided that it is used to further our statutory functions in relation to enforcement activities covering the private rented sector. 23 Civil Penalty Notices have been issued for failure to licence properties in Bexley since the scheme began. 

The Council has inspected 310 properties within the selective licensing scheme. In total, 220 of these properties had at least Category 1 and 2 hazards that were removed by either formal or informal action.  

Part of the consultation is to review this scheme and see whether there should be changes or improvements made to the proposed scheme.

There is no evidence to support introducing a selective licensing scheme based on the current areas. Whilst the areas meet the threshold for Privately Rented Sector (PRS) they would not meet the criteria for property conditions or ASB. As a result, there is no justification for introducing a new scheme based on these areas.

Proposed new selective licensing scheme

Selective licensing schemes are time-limited to five years and Bexley’s current scheme ended on 31st August 2023. 

Prior to the scheme ending the Council appointed the Building Research Establishment (BRE) to model our current housing to analyse the PRS to help determine whether to continue with selective licensing in Bexley. The report can be found in Appendix 2.

Possible options for future Licensing Schemes

Option 1 - Licence just the Belvedere Ward

This is the councils preferred option. Belvedere Ward has the highest amount and percentage of PRS, the highest amount of Category 1 hazards and has elevated levels of antisocial behaviour spread throughout the Ward. Introducing a Selective Licensing scheme in Belvedere will address both of these issues.

Pros

• the evidence, by some distance, strongly supports designating Belvedere Ward. Any other geographical selection, would carry an elevated risk of a successful Judicial Review by comparison
• the Regime will be focussed on the Ward where the Regime can have most impact both in terms of hazards within the properties and antisocial behaviour
• increases the enforcement powers available to the council to deal with rogue landlords
• a single geographically contiguous area is considerably easier to communicate to residents, landlords and tenants. This should make awareness and compliance easier to achieve

Cons

• Council will only be licensing a single Ward in the Borough
• increased regulatory costs to landlords

Option 2 - Reconsider the Geographical extent of the Selective Licensing Scheme

The previous licensing scheme was based around 13 LSOAs in 4 distinct areas. The areas chosen all had the highest proportion of PRS and antisocial behaviour (as per the evidence in 2017/18). Whilst it was not ideal to have four separate areas in terms of awareness for tenants and landlords, those areas were grouped relatively close together in the north of the Borough.  

One option could be to seek to designate not a Ward level but individual LSOAs. However, the current evidence would not lead to similarly tight grouping as per the current scheme.

The map below shows the LSOA areas with the highest PRS. The current Selective Licensing areas are marked in green.

*The below image of a map showing the LSOA areas with the highest PRS is not suitable for users of assistive technology (Screen reader) and does not allow users to zoom in without degrading visual quality. If you would like to understand any details about this map, please email rentitright@bexley.gov.uk

Image

If Bexley were to base the licensing areas on LSOA the map above gives a good illustration of the likely areas covered by selective licensing. There may be a small cluster in the Sidcup area, then areas spread throughout the middle and North of the Borough that are not linked together.

Experience shows that most people do not understand what a LSOA is. Residents, landlords and tenants would question why the scheme starts and ends in apparently arbitrary places. In the view of officers, it would not aid awareness of the scheme, which would have implications for compliance (and income). On other hand, Ward-level designation is a comparatively well-understood geographical area.

A scheme with very small areas dotted around the Borough would be difficult to communicate with residents, landlords, members and agents and lead to confusion about the areas covered and not covered and increase non-compliance amongst landlords and agents as they are unsure if properties are covered. There would be additional administrative work processing and issuing refunds for applications for properties that erroneously apply but are in fact outside the scheme. It is also anticipated that such a scheme’s costs would increase as additional money would need to be spent marketing and promoting the scheme to assist people in understanding the areas covered.  

Additional work will also need to be undertaken to identify the areas to licence which will cause a delay in introducing a new selective licensing scheme.

Pros

• there may be the potential to maximise the areas covered by selective licensing

Cons

• there will be a delay in selective licensing starting in Bexley
• there is a greater risk of a judicial review as compared to option 1, as the evidence is not as clear-cut
• counsel has advised Bexley that there is unlikely to be further evidence that we could obtain over and above that already produced to us
• a scheme based on LSOA (Lower Layer Super Output Area) will result in lots of small areas and people will not understand what areas are covered. There is increased non-compliance as landlords are unsure of the areas covered. There will be an increase in administration costs and implications for income versus costs

Option 3 - Do not designate a new Selective Licensing Scheme

The council’s selective licensing scheme ended on the 31 August 2023.

The council would lose enforcement powers to deal with properties in poor conditions. Currently there are conditions attached to licences that require landlords to become accredited which helps to train landlords on their legal responsibilities.

Having a selective licensing scheme, enables the council to do proactive visits to properties and identify hazards and issues within a property before they cause harm or problems. The team would only be able to deal with reactive complaints otherwise. This would mean that officers would only respond to complaints about poor housing conditions received by tenants living in private sector property or from people living in a neighbouring property who are affected by antisocial behaviour from privately rented property.

The problem with this reactive approach is that only the more empowered tenants come forward to complain about their housing conditions. People who are privately renting in the lower end of the private rented sector are more likely to be living in poor conditions and are the least likely group to make a complaint. Continuing to provide a reactive service is therefore not going to improve those properties in the poorest condition.

This option may also cause concern as it may appear that the council is not serious in dealing with rogue landlords or improving conditions within the privately rented sector.

Part 2 of the Housing Act 2004 requires all local authorities in England and Wales to license properties that are occupied by five or more persons who form two or more households and contain shared facilities. A mandatory HMO licence will specify the maximum number of people who may live in the HMO along with specific licence conditions that the landlord must comply with. The licences are valid for five years. Currently, there are over 170 HMOs licensed and a further 30 licence applications are being processing.

Licensing just Mandatory HMOs isn’t wide enough to provide the level of control Bexley needs to improve housing conditions across the PRS.

Pros

• less regulatory costs to landlords

Cons

• council loses legal powers to deal with rogue landlords 
• limit the works the council can do to identify properties in poor condition
• there may be objections from members and residents

Links to Bexley’s Strategic Aims

How the scheme will operate and requirements

Whilst the selective licensing scheme is in force:

• landlords who rent out property within the areas designated for selective licensing are required to obtain a licence from the Council for each of their properties (unless an exemption applies)
• landlords and managers must be ‘fit and proper’ to hold a licence
• landlords and managers must comply with the conditions attached to a licence

The selective licence application form will be an online form see Appendix 7 - guide to completing online application form.

An address lookup will be available on the Council’s Rent it Right web page so specific addresses can be identified.

Licence Fees

Sections 87(7) of the Housing Act 2004 provide for the fixing of selective licensing fees. In summary, they say that local authorities consider all costs incurred when carrying out their functions in relation to selective licensing. The power to charge for fees for selective licensing is set out in section 87(3) of the HA 2004. Those powers to charge allow the Council to require a licensing application to be accompanied by a fee.

The administration of the scheme is such that it is intended to be self-financing over the five-year period. Selective licence schemes tend to be front-loaded as councils receive most of their income in the first years of the scheme, then this drops off as they will have licenced most of the properties within the scheme. Benchmarking with other Councils suggests Councils receive 50% of the total licence applications in the first year of the scheme. The income would then normally be carried forward into future years as there is a reduction in the number of applications and this helps to make up the shortfall. The fees are reviewed annually and adjusted to ensure that the scheme’s costs are balanced given that it is unlawful for the Council to inadvertently make a profit on the fees. 

The costings of the scheme are set out in Appendix 4.

Two-stage payment

It is proposed that the cost of the licence will comprise an initial fee of £340 for processing the licence application, which is non-refundable.   
Successful applications will attract a further fee payable before the grant of a licence, which covers a contribution towards the costs of operating the respective licensing schemes. 

The costings of the scheme are set out in Appendix 4.

Licence fees

Any properties that are licensed when the scheme ended in August 2023 will be eligible for a £300 discount.

The council will continue to offer a £50 discount to licence holders who are accredited at the time of applying for a licence.  The list of organisations that the council will recognise as being accredited is set out in Appendix 6.

Following the designation of the schemes, the council must wait three months until the discretionary licensing schemes come into force. During this period the council will accept applications and begin processing them.

Licence conditions

Proposed conditions for the scheme can be found in Appendix 3. These conditions will be applied to all properties within the proposed area. The conditions are designed to ensure that licensed properties are responsibly and effectively managed in the proposed area.

The conditions are carried over from the previous scheme, they will be reviewed throughout the scheme and may be amended or updated if required by legislation.

It is proposed that we continue with the requirement that all Licence Holders and Managers (landlords) will be required to become accredited to ensure they understand and carry out their legal and moral obligations in managing property.

Landlords that are already accredited when they apply for a licence will be eligible for an additional discount of £50 for each property licence.

Exemptions to Selective Licensing

Various dwellings and lettings will be excluded from the licensing requirements of Part 3 of the 2004 Act. For example: 

• where the property requires a Mandatory (HMO) licence
• where the tenancies or licences are granted by registered social landlords and housing providers, including most housing associations and the Council. Also, Tenancies or Licences granted by police, fire brigade or health service body
• where the tenancies and licences are subject to a prohibition order whose operation has not been suspended (section20/section21 Housing Act 2004)
• commercial lettings
• premises that are licensed for alcohol consumption (not off licences)
• certain agricultural tenancies
• university/college accommodation occupied by students and controlled by the university/college
• there the owner or their relatives occupy a property on a long leasehold
• holiday homes and lets
• where a family member rents the property from you (evidence will need to be provided, for example, birth certificates or an affidavit)
• long lease tenancies, where a landlord grants a lease for a term of over 21 years to a tenant
• properties leased to a local authority on a private sector lease and used as temporary accommodation

Enforcement of the selective licensing scheme

The Council will proactively seek out landlords who fail to license property and will make full use of the range of available enforcement powers.

Failure to license a property is a criminal offence and the Council may take prosecution proceedings or impose a financial penalty of up to £30,000. On conviction, the Court may impose an unlimited fine.

If convicted of operating a property without a licence (or the council is satisfied that the offence has been committed even though the landlord has not been prosecuted), the council can reclaim any benefits paid when you were operating without a licence by applying for a Rent Repayment Order. Similarly, tenants (including former tenants) are also allowed to make an application for a Rent Repayment Order where landlords have been convicted of the offence or where a Rent Repayment Order has already been granted to the council on the same property.

In addition to failing to licence properties, under the Housing Act 2004, the following are offences and carry a fine of up to £5,000:

• failure to comply with an Improvement Notice served under sections 11 and 12 of the act
• failure to comply with a Prohibition Order made under sections 20 and 21 of the act
• failure to comply with the Management of Houses in Multiple Occupation (England) Regulations 2006
• failure to comply with licence conditions etc...

Failure to licence a property will also have implications on evicting tenants from the property because, under section 75 of the Housing Act 2004, no section 21 notice served under the Housing Act 1988 may be given in relation to a shorthold tenancy for an unlicensed HMO. 

Timescales for next steps

The below sets out the timescales for designating a new selective licensing scheme.

How to give your views

This consultation is now closed.

Further information about this consultation (appendices)

• Appendix 1 - Area Maps
• Appendix 2 - Stocking Modelling and Data Analysis carried out by the Building Research Establishment (BRE)
• Appendix 3 - Licence Conditions
• Appendix 4 - Costings of the scheme
• Appendix 5 - Equality Impact Assessment
• Appendix 6 - Accreditation
• Appendix 7 - Guide to completing online application form