New horizons for selective licensing schemes
Tara O’Leary looks at the potential for a significant expansion in the use and reach of selective licensing schemes.
On 23 December 2024 central government introduced changes to the rules which permit local housing authorities (“LHAs”) to adopt a selective licensing scheme in their districts under Part 3 of the Housing Act 2004. In summary, the rules have been relaxed insofar as it is no longer necessary to obtain the Secretary of State’s express consent before adopting a scheme of any particular size. However the usual statutory conditions continue to apply.
This seems likely to result in an increased number of local authorities introducing selective licensing schemes, and/or increasing the size of the geographic areas and numbers of properties over which these schemes will apply.
Selective licensing: the legal framework
Selective licensing schemes operate as a discretionary tool for LHAs to improve the standards of management in private rented sector (“PRS”) properties occupied by single households in their area.
As such, selective licensing schemes under Part 3 are distinct from those which apply to Houses in Multiple Occupation (“HMOs”) under the mandatory and additional licensing schemes operated by Part 2 of the 2004 Act.
Section 80 gives LHAs power to designate either the whole or part of their district as subject to selective licensing, subject to two requirements.
The first is that the LHA must take reasonable steps to consult persons likely to be affected by the designation, and consider any representations made in response: s.80(9).
The second – and often more controversial – requirement is that the proposed licensing scheme must satisfy one or more of a number of specified conditions: ss.80(2) and (7). By ss.80(3)-(6) and the Selective Licensing of Houses (Additional Conditions) (England) Order 2015/977 the conditions include:
A) That the area is, or is likely to become, an “area of low housing demand” as defined by s.80(4), and that the proposed designation will contribute to the improvement of the social or economic conditions in the area when combined with other measures taken in the area by, or in cooperation with, the LHA;
B) That the area is experiencing a “significant and persistent problem” caused by anti-social behaviour (‘ASB’); that some or all of the private sector landlords letting premises in the area have failed to take action which it would be reasonable for them to take to combat the problem; and that the proposed designation will, when combined with other measures, lead to a reduction in or elimination of the problem.
C) That the area contains a high proportion of properties in the PRS in relation to the total number of properties in the area, which are occupied under assured tenancies or licences, and one or more of the following conditions also apply:
- Housing conditions: the LHA considers it appropriate, and intends, to carry out inspection of a significant number of properties to determine the existence of category 1 and 2 hazards with a view to taking any necessary enforcement action;
- Migration: the area has “recently experienced or is experiencing an influx of migration into it”; a significant number of properties are occupied by migrants; and the designation will assist the LHA to preserve or improve conditions in the area, ensure properties are properly managed, or prevent overcrowding;
- Deprivation: the area is “suffering from a high level of deprivation, which affects a significant number of the occupiers of [the] properties” and the designation will contribute to a reduction in deprivation;
- Crime levels: the area “suffers from high levels of crime”; criminal activity affects persons occupying the properties; and the designation will contribute to a reduction in crime levels “for the benefit of those living in the area”.
These conditions have all been in place since 2015 or earlier; none have been amended by the recent changes introduced in December 2024.
Separate conditions apply in Wales per the Selective Licensing of Houses (Additional Conditions) (Wales) Order 2006/2825
2015 General Approval: the “20/20 Rule”
The Secretary of State for Housing, Communities and Local Government has power to give general approvals for selective licensing designations. This means that any proposed licensing scheme – even if compliant with the statutory conditions – will come into force only if it also complies with any further conditions specified in the approval: s.80(5).
The first General Approval issued in 2010 required only that consultation about selective licensing take place for a minimum of ten weeks.
However a second General Approval for England issued by David Cameron’s government in 2015 imposed a new rule that the Secretary of State’s consent would be required to implement any proposed scheme covering more than 20% of an LHA’s geographical area or more than 20% of the PRS homes in the district.
Nicknamed “the 20/20 rule”, in practice the 2015 Approval significantly curtailed the scope of most licensing schemes. Applications were scrutinised by the Ministry of Housing, Communities and Local Government (as it is presently named), and LHAs had to make a persuasive case why a larger scheme should be approved, supported by a robust body of evidence. Consent was not granted in every instance. In particular, whole-borough licensing schemes became unusual. Rather, LHAs often focused their proposed schemes on a small number of wards within their districts where they could show that the statutory tests were satisfied.
2024 General Approval
With effect from 23 December 2024, the government has now introduced a 2024 Approval which abolishes and replaces the 2015 Approval: para. 6.
The 2024 Approval gives the Secretary of State’s general approval for any designation adopted by an LHA in England in accordance with the statutory conditions set out above: para. 4. In other words, the 20/20 rule has been lifted and no longer applies.
Curiously, it appears that the 20/20 rule had already been lifted for LHAs in Greater Manchester by way of a separate General Approval for Greater Manchester Councils made on 14 September 2023. The Manchester Approval has now also been replaced by the 2024 General Approval, which brings all other areas of England into line.
The abolition of the 2015 and Manchester Approvals does not affect the validity of any schemes adopted between 2015 and 2024, which remain in force unless they are revoked or expire in the usual way: para. 8.
The 2024 Approval retains the requirement for a ten-week consultation before making any selective licensing designation: para. 5.
What happens next?
The government’s express intention is to make it easier both for LHAs to adopt selective licensing schemes, and to designate schemes which are larger than many seen in recent years.
The decision to introduce the change was announced in an English Devolution White Paper published on 16 December 2024, the same day that the 2024 Approval was published. It said:
We will also act to give councils stronger tools to improve their housing markets, including removing the requirement to seek approval from the Secretary of State for Housing, Communities, and Local Government for larger selective licensing schemes, so local authorities can take more action to tackle specific and persistent issues in private rented sector properties. Together, this amounts to a rewiring of local government’s constitutional status, under the presumption that councils have the knowledge and expertise to govern their places.
On the one hand this empowers LHAs to identify for themselves which housing problems need to be addressed within up to 100% of their districts and by what means (within the limits of the statutory conditions), and to take proactive steps to improve conditions in the PRS for tenants. LHAs who take advantage of the changes will no doubt face an increased burden in policing and enforcing wider schemes. On the other hand, the likelihood for landlords is an increased burden to apply for licences and comply with licence conditions.
The changes are having immediate results. For example on 10 January 2025 Barking and Dagenham Council announced it will introduce a borough-wide licensing scheme in April 2025, having been waiting on Ministerial approval for a 20% scheme since the summer of 2024.
It would also appear that LHAs operating narrow selective licensing schemes adopted pre-December 2024 could now choose to review and revoke their scheme in accordance with s.84, and replace them with a larger scheme which could remain in place for up to 5 years. They would simply need to show that they can satisfy the statutory conditions in a wider area and have otherwise complied with Part 2 and the General Approval.
LHAs must also now have regard to an updated Guide for Local Authorities on selective licensing in the private rented sector that has been published as of 16 December 2024. Amongst other matters, para. 9 “requests” that when making a scheme LHAs also take steps to:
- Include consultation with the mayor, within mayoral strategic authority areas: para. 60;
- Provide DHCLG with data on their selective licensing schemes upon the commencement and completion of the scheme; paras. 67-69; and
- Publish on their website the outcome of any selective licensing review(s) undertaken pursuant to their legal duty under s.84(3) of the 2004 Act to review the operation of the schemes: paras. 70-71.
Tara O’Leary is a barrister at Cornerstone Barristers.
