My Lords, I beg to move that the Committee should consider the Selective Licensing of Houses (Additional Conditions) (England) Order 2015. The purpose of this order is to extend the criteria for the selective licensing of privately rented housing.
The private rented sector is an important part of the housing market, providing flexibility and allowing people to move quickly. There are now 4.4 million households who rent in England. Selective licensing was introduced by the Housing Act 2004. It enables local authorities to designate all or part of their area as subject to selective licensing. The effect of doing so is that landlords of all privately rented accommodation in the designated area must obtain a licence from the local authority. Local authorities must consult persons likely to be affected by the designation, such as landlords, tenants and other residents, before introducing a licensing scheme. A licence typically costs between £100 and £200 per year per property and is normally valid for five years. A local authority can attach conditions to the licence, such as setting a limit on the number of people who can live in the property or conditions relating to the installation of safety devices.
At present, selective licensing can be introduced only on the grounds of low housing demand and/or anti-social behaviour. We published a discussion document last year which invited views on a range of issues, including selective licensing. Many of the respondents, particularly local authorities, made it clear that further criteria needed to be added to enable local authorities to target action where it is most needed, help drive up the quality of privately rented accommodation and ensure that landlords take responsibility for the actions of their tenants. The Government agree that the current criteria for selective licensing are not wide enough and do not give local authorities enough discretion to take account of local circumstances. Subject to parliamentary approval, this order will extend the criteria for selective licensing to cover areas where there are a high number of properties in the private rented sector and the area is experiencing poor property conditions, large amounts of inward migration, a high level of deprivation or high levels of crime. In addition, the local authority must be able to show that making a designation will, when combined with other measures taken in the area, lead to an improvement in conditions or a reduction in the problem that the designation was designed to tackle.
The Housing Act 2004 provides that before introducing a selective licensing scheme a local authority must seek approval to do so from the Secretary of State. However, in March 2010 the department issued a general approval which provides that, subject to the local authority ensuring that it has complied with the statutory requirements around designation and consultation, it does not have to seek approval from the Secretary of State before introducing a selective licensing scheme and can rely on the general approval instead.
The Government believe that licensing can play an important role, particularly when it is strictly focused on discrete areas with specific problems. However, the blanket licensing approach which has been adopted by some local authorities since the general approval was issued can have major drawbacks because it impacts on all landlords. Newham Council and Barking and Dagenham Council have already introduced blanket licensing schemes which cover their entire local authority areas. Three other local authorities—Croydon, Liverpool and Waltham Forest—are also planning to do so shortly.
There is a real risk that, left unchecked, blanket licensing could proliferate, putting additional burdens on reputable landlords who are already fully compliant with their obligations. The vast majority of landlords provide a good service, and the Government do not believe it is right to impose unnecessary additional costs on them or their tenants. Such an approach, without proper justification, is disproportionate and can unfairly penalise good landlords.
The impact is reduced investment by landlords in additional rented housing and unnecessary costs which tend to be passed on to tenants through higher rents. Our specially appointed private rented sector task force has estimated that the impact of widespread licensing in London would be an £8million reduction in investment value on the 5,000 new build-to-rent homes that the mayor wants built each year.
To address this issue, it has been decided to amend the general approval at the same time as the criteria are extended. With effect from 1 April, and subject to the criteria being extended, local authorities will have to seek confirmation from the Secretary of State for any selective licensing scheme which would cover more than 20% of their geographical area or would affect more than 20% of privately rented homes in the local authority area. All applications will be considered on a case-by-case basis. This approach will help ensure that local authorities focus their activity on areas with the worst problems while helping to ensure that they do not adversely impact on good landlords.
In its report to both Houses, the Joint Committee on Statutory Instruments made two comments which I would like to address. The first was that the draft order contained errors in the preamble, specifically that it mistakenly cited subsections (1) and (6) of Section 250 of the Housing Act 2004 as enabling powers and did not refer to a draft of the order having been laid before and approved by resolution of each House of Parliament. These drafting errors, which do not in any way affect the substance of the statutory instrument, will be corrected in the final version.
The second comment was that the proposed additional criteria were too broad and open-ended and could result in significant areas of the country being designated as subject to selective licensing. The committee therefore reported the draft order on the ground that it appears to make an unexpected use of the power in Section 80(7) of the Housing Act 2004. I would like to make the following points in response. First, local authority powers will not be open-ended. If this order is approved, we will publish guidance for local authorities which will set out how they should interpret the new criteria and the evidence base that they would need to develop to support any decision to designate an area. Secondly, widening the criteria will help local authorities target enforcement action in areas where it is most needed. This should help ensure that, overall, fewer properties are designated and that any schemes do not impact on good landlords or their tenants. Thirdly, local authorities will need to obtain confirmation from the Secretary of State of any selective licensing designation that would cover more than 20% of the authority’s geographic area or more than 20% of its privately rented stock. This requirement should help ensure that schemes are kept tightly focused and are only introduced where absolutely necessary.
I recognise that extending the criteria in this way, together with the introduction of a requirement for local authorities to obtain confirmation from the Secretary of State before introducing schemes above a certain threshold, are potentially major changes. Therefore, the Government have decided that they will undertake a review of the impact of these changes 18 months after their introduction. I am sure that that is well appreciated by the noble Lord, Lord Beecham.
The current criteria for selective licensing on the basis of low housing demand and/or anti-social behaviour are too restrictive. The Government have decided to address this by extending the criteria to cover poor property conditions, large amounts of inward migration, a high level of deprivation and high levels of crime, as
I mentioned earlier. These changes will help ensure that local authorities have the right tools to target enforcement action where it is most needed. At the same time, we are amending the general approval so that in future the Secretary of State will need to confirm any licensing designation above a certain threshold. I commend this order to the Committee.
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