The UK Apartment Association is spearheading discussions with local authorities about selective licensing, arguing that the policy will “hurt the viability” of build-to-rent schemes.
Brendan Geraghty, chief executive of UKAA, said: “Selective licensing was designed to provide local authorities with greater powers to address perceived problems in the private rented sector. However, we’ve recently seen several local authorities taking a broad-brush approach and applying the scheme to all rental properties – including registration and payment of a licence fee.”
Geraghty told EG the implementation of the policy will hurt the viability of BTR schemes, noting: “It just becomes a tax on doing business, and it was not very well thought out, and there was also very little consultation done on it.”
The UKAA says the policy – under which owners and operators of residential accommodation in a particular area must hold a licence for their properties – could result in loss of investment, leading to the provision of fewer BTR homes at a time when there is an overwhelming need for new homes.
Knock-on effects could include a reduction in the number of affordable homes being built and a loss of employment opportunities, council tax revenue and new social and physical infrastructure.
There is also a potential financial impact on renters when selective licensing is applied to BTR schemes, Geraghty said. Increasing supply/demand imbalances, due to fewer BTR homes being provided, could push already spiralling rents even higher. Where schemes do go ahead, the increased operating cost due to licensing fees could be passed on to tenants in the form of higher rents.
The cost of the bureaucratic and administrative burden in processing the selective licensing scheme could also filter through to rents, added Geraghty.
Local authorities have shown willingness to add nuance to licensing schemes. Last month, Brent Council said all landlords renting out properties in the borough will be legally required to have a selective licence, except in Wembley Park.
It was exempt from the licensing scheme as it is the only ward in the borough where the number of disrepairs in private rentals does not meet the critical threshold set by the government.
In a cabinet meeting last July, the council chose to exclude the Wembley Park ward. The cabinet documents said: “The area is characterised by build-to-rent purpose built block of flats, which are owned and managed by institutional landlords. In defining the selective area, the council considers it more appropriate to focus… on the worst-affected areas.”
The UKAA’s Geraghty acknowledged the value of such schemes, saying: “The UKAA’s position on driving quality in the rental economy is already established. We support the principle of selective licensing to tackle rogue landlords and to improve standards in the private rented sector as a whole.
“Nevertheless, a broad-brush selective licensing scheme across all private rented sector homes, including BTR, will have a disproportionate and negative impact on the BTR sector and its future delivery. “As such, we are encouraging local authorities to engage constructively with the BTR sector and the UKAA to agree a way forward which is both of benefit to renters and supports the future delivery of high-quality rental homes.”
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