Understanding the True Impact of Council Licensing Schemes on Landlords and Tenants
The Background: What Is Selective Licensing?
Selective licensing was introduced under Part 3 of the Housing Act 2004, allowing local authorities to require landlords in designated areas to obtain a licence before letting a property.
These schemes are intended to tackle low housing demand, poor housing conditions, and anti-social behaviour (ASB) by ensuring that landlords meet certain standards of management and property maintenance.
To designate an area, a council must provide evidence that it meets one or more qualifying criteria. This often includes high levels of crime, poor property conditions, or significant deprivation. Once approved, every privately rented home in the area must be licensed, usually for a period of five years.
The policy aim is clear: to improve housing quality and community wellbeing. But whether it achieves that — and at what cost — is open to debate.
The Financial Side: How Much Money Do Councils Make from Licensing?
Over the past decade, property licensing has become a major revenue stream for councils.
Revenue Data from Across England
Recent published data shows that:
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The top 50 UK councils have collected an estimated £327 million in fees through landlord licensing schemes.
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Waltham Forest Council raised around £18 million, while Southwark Council collected approximately £23 million through selective and additional licensing combined.
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According to industry research, English councils took in more than £20 million in 2023 from selective licensing schemes alone.
Licence fees vary significantly, from around £350 in smaller authorities to as high as £1,290 per property in others such as Leicester. The average national fee is approximately £700 per property.
These are not small sums. They represent millions of pounds channelled annually into local authority budgets.
Who Actually Pays? The Cost Passed On to Tenants
While councils collect fees from landlords, the economic reality is that tenants ultimately foot the bill.
Landlords operate as businesses: when faced with new costs, they either absorb them (reducing profit margins) or pass them on. In practice, many increase rents slightly to recoup the licence fee and associated administrative burden.
The result? Tenants in selective licensing areas often face higher rents — not because the property is improved, but because the council requires the licence.
It’s an uncomfortable truth: while licensing may be aimed at improving standards for tenants, it also risks making housing less affordable for the very people it’s supposed to protect.
Do Selective Licensing Schemes Actually Work?
This is the heart of the debate. Councils argue that licensing improves neighbourhoods, reduces ASB, and raises property standards. But what does the evidence show?
Government and Independent Reviews
A government-commissioned review in 2019 concluded that “selective licensing can be an effective tool when implemented properly.”
However, the same review highlighted large variations in outcomes between councils, with some showing clear benefits and others failing to demonstrate measurable impact.
Academic studies, including work led by the London School of Hygiene & Tropical Medicine (LSHTM), suggest that there may be some positive community outcomes — such as better tenant wellbeing and reductions in ASB in certain areas — but the overall evidence base remains limited.
Local Evaluations
Some councils, such as Scarborough and Nottingham, have produced local assessments of their schemes. These often show:
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Increased inspections and enforcement activity
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Better documentation of property hazards
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Improved landlord engagement
However, few reports provide quantifiable before-and-after data showing that selective licensing has led to sustained improvements in property condition, rental affordability, or community satisfaction.
Where Is the Missing Data?
Given that selective licensing is such a significant policy intervention — and a major source of local revenue — one might expect robust, publicly available data proving its effectiveness. Yet comprehensive national datasets are surprisingly scarce.
Many councils publish consultation reports or enforcement summaries, but few provide clear evidence of:
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How conditions have improved since implementation
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Whether ASB or housing hazards have genuinely fallen
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How licensing income has been reinvested into housing improvement
The lack of consistent reporting raises an important question:
If selective licensing truly transforms communities, why isn’t the data readily available to prove it?
The Risk of Unintended Consequences
Without transparent evidence, there’s a growing concern that selective licensing may be doing as much harm as good — at least economically.
Key Risks Include:
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Rent Inflation: Landlords recovering licence costs through higher rents.
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Reduced Supply: Some smaller landlords leaving the sector due to regulatory pressure.
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Uneven Standards: Well-run properties being penalised alongside poor ones.
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Revenue Focus: Councils tempted to view licensing as a funding mechanism rather than a targeted improvement tool.
If tenants pay more, landlords face higher costs, and councils cannot show measurable results, the rationale for many schemes begins to look questionable.
When Selective Licensing Can Work
It’s important to acknowledge that licensing can succeed — but only when it’s implemented properly.
The most effective schemes tend to share key characteristics:
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Clear, evidence-based targeting of areas genuinely suffering from substandard housing.
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Transparent use of revenue, ensuring that income funds inspections, enforcement, and support for landlords and tenants.
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Robust evaluation and public reporting of outcomes, ideally using measurable metrics (e.g. reduction in category 1 hazards, ASB rates, or housing satisfaction).
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Constructive engagement between councils, landlords, and residents.
Where these conditions are met, selective licensing can genuinely help to raise standards and protect tenants. Where they are not, it risks becoming little more than an additional tax on renting.
The Bottom Line: Accountability and Transparency
Selective licensing has the potential to improve the private rented sector, but accountability is key.
With hundreds of millions of pounds raised in licence fees, tenants and landlords alike deserve clarity on where that money goes and what outcomes it achieves.
Until there is consistent, publicly available data showing clear improvements, many will continue to ask:
Are tenants paying more for better housing — or just paying more, full stop?
NetRent’s View
At NetRent, we support genuine efforts to improve housing standards and tenant safety. But any scheme that increases costs without demonstrable results must be carefully scrutinised.
Landlords should always comply with licensing obligations, but they also have every right to demand transparency and fairness from local authorities.
Disclaimer
This article is provided for general information purposes only and represents NetRent’s understanding of current UK housing and licensing law. It does not constitute legal advice. For professional guidance, you should consult a qualified solicitor or housing specialist.
Contact NetRent
For more information or to discuss property compliance and landlord support:
📞 Telephone: 01352 721 300
📧 Email: support@netrent.co.uk