Selective Licensing Will Devalue Property - warns RLA

And it could be the first step in what will turn four of the city’s suburban areas into “social ghettos” – according to the UK’s leading professional association for private sector landlords.

[UKPRwire, Wed Jun 20 2007] Buy-to-let investors in Manchester may find their properties devalued when the city council introduces ‘selective licensing’ of rented homes.

And it could be the first step in what will turn four of the city’s suburban areas into “social ghettos” – according to the UK’s leading professional association for private sector landlords.

The Residential Landlords Association - whose members own over 100,000 private rented properties throughout the UK - warns that Manchester City Council’s programme of ‘selective licensing’ will have the opposite effect to what councillors hope.

And the warning is backed by mortgage lenders who argue that, although a problem area may already be evident, official designation is likely to accelerate its decline.

”The creation of selective licensing areas could have an adverse affect on saleability and values,” says Jonathan Moore, Head of Marketing for leading buy-to-let mortgage broker Mortgages for Business.

“Financiers prefer not to lend on properties within selective licensing areas and recognise that, if the majority of lenders take a similar approach, certain locations could be ‘blighted’. But the risk of lending on a security where adverse locational factors have been identified would not be prudent.”

Manchester City Council is using new government powers to licence landlords of over 3,500 privately rented properties in Harpurhey, Lightbowne, Bradford and Gorton by the end of the year ... and more over the next few years. Landlords who don’t obtain licences – the national average cost is £500 per property – will risk fines of up to £20,000.

And other large local authorities are likely to follow their lead in a bid to target bad landlords and drive up property management standards. They hope to improve neighbourhoods and regeneration prospects by combating anti-social behaviour, encouraging people to move back into safer areas and thereby increasing rental values and property prices.

But that is unlikely, says RLA director Chris Town because “selective licensing officially identifies an area where there is low demand for property, usually with problem families and a history of anti-social behaviour, where nobody wants to live.

“And few areas will recover from that level of official negativity from their own local authority. It’s as close to being formally declared a ghetto as you’re likely to be.

“No control is proposed for other types of occupier in mixed residential areas – such as tenants of housing associations, social housing, third party housing or owner-occupiers. So to single out private landlords shows grossly unfair double standards.

“Local authorities are being tempted by the scale of income that selective licensing offers. Manchester City Council could be set to collect £2 million or more from the first four areas alone. That’s a substantial amount of money.

“Landlords, meanwhile, in order to protect their standards of property management - and themselves from stringent fines - will be forced to deal with anti-social tenants themselves as well as imposing much higher selection criteria before granting a tenancy. But, when the local authority has already labelled an area as a ghetto, they will have an insurmountable problem in attracting the right kind of tenants in the first place.

“And, as we’ve heard, if mortgage lenders won’t lend on property in downgraded areas then new owner-occupiers will not be able to raise mortgages to buy-in … and people already in will not be able to sell up and move out.

“It will drive in the final nail and kill whatever chances of regeneration such an area might have.”

Licensing is among several issues on which the Residential Landlords Association is campaigning. They also include lobbying for the formal acceptance of a Code of Practice laying down expected standards for professional landlords, a common sense approach to Housing Act licensing for houses in multiple occupation, as well as a re-think on fire safety regulations, amenity standards, Housing allowance payments and the Tenancy Deposit Scheme.

The Residential Landlords Association is a leading national organisation for professional landlords, residential property investors and self-managers – with members owning over 100,000 properties in the UK private rented sector. The range of members’ services - on www.rla.org.uk - includes legal advice, insurance, financial services, credit referencing and training. For tenants there is www.tenantdocs.co.uk – where tips include a download of the RLA’s award-winning Plain English tenancy agreement. The RLA operates a web-based property search on www.homes2rent.net and publishes the bi-monthly Residential Property Investor magazine.




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