Setting Up a Selective Licensing Scheme: Step-by-Step

Selective licensing under Part 3 of the Housing Act 2004 gives local authorities the power to require all privately rented properties in a designated area to hold a licence. Unlike HMO licensing, selective licensing is not limited to shared housing. It captures the entire PRS within the designated area, making it one of the most powerful tools available for raising standards and gathering intelligence on local rental markets. With the Renters' Rights Act 2025 strengthening the enforcement landscape and the PRS Database arriving in late 2026, selective licensing schemes are increasingly seen as complementary rather than competing tools. A well-designed scheme generates local data, funds inspection capacity, and creates a legal basis for enforcement action that the national database alone cannot provide.

Before designating a selective licensing area, the council must demonstrate that the area meets one or more of the conditions set out in Section 80 of the Housing Act 2004. The original conditions were low housing demand and significant anti-social behaviour. The Housing Act 2004: Licensing of Houses in Multiple Occupation and Selective Licensing of Other Residential Accommodation (England) General Approval 2015 added four further conditions: - Poor property conditions - High levels of migration - High levels of deprivation - High levels of crime The evidence base should draw on multiple data sources: council tax records, environmental health complaints, police data, deprivation indices, EPC ratings, and tenant complaints. Quantitative data should be supplemented with qualitative evidence from ward councillors, tenant groups, and housing officers. Critically, the council must demonstrate that other courses of action have been considered and that the scheme is consistent with the authority's overall housing strategy. A scheme that cannot show it is a proportionate response to an evidenced problem will fail at consultation or, if challenged, at judicial review.

The council must consult for a minimum of 10 weeks before making a designation. Consultees must include local residents, landlords, letting agents, tenant representatives, and other stakeholders. The consultation must be genuine and open-minded, not a formality. Best practice approaches include: - Publishing a detailed consultation document setting out the evidence, proposed area, fee structure, and expected outcomes - Holding public meetings in the proposed area - Writing directly to known landlords and agents operating in the area - Using online surveys to capture wider views - Engaging with landlord associations (NRLA, local landlord forums) The council must publish a summary of consultation responses and explain how they have influenced the final scheme design. Ignoring substantive objections is a common ground for judicial review challenges. The London Borough of Enfield and Thanet District Council both had schemes quashed after courts found consultation deficiencies.

Under the 2015 General Approval, a selective licensing designation that covers more than 20% of the local authority's geographical area or more than 20% of the privately rented housing stock requires confirmation from the Secretary of State. Schemes below these thresholds can proceed under the general approval without referral. Applications for Secretary of State approval must include the full evidence base, consultation summary, equality impact assessment, and a description of how the scheme fits within the council's wider housing strategy. Processing times vary but councils should allow at least three months. Many councils design their schemes to stay within the 20% thresholds to avoid this process. Phased approaches, where different areas are designated in sequence, can achieve borough-wide coverage over time without triggering the referral requirement for any single designation.

Licence fees must reflect the actual cost of administering the scheme, not generate a surplus. Following the Hemming v Westminster City Council Supreme Court judgment, fees must be charged in two parts: Part A covers the cost of processing applications and is payable on application; Part B covers enforcement and compliance monitoring and is payable only when the licence is granted. Typical fee ranges for selective licensing in 2026 are £500 to £900 per property for a five-year licence. Discounts are commonly offered for early applications, accredited landlords, or landlords with multiple properties. The financial model should account for: - Staff costs (licensing officers, inspectors, admin) - IT systems and database management - Legal costs for enforcement action - Premises and overheads - Projected compliance rates and late applications The £18.2 million national enforcement fund can supplement but not replace fee income. Councils should model scenarios with different compliance rates, as a scheme where only 60% of landlords apply voluntarily requires more enforcement spend than one with 85% compliance.

Once designated, the scheme typically begins after a three-month lead-in period during which landlords must apply. Key implementation tasks include: - Launching an online application portal (essential for volume processing) - Establishing a dedicated licensing team or expanding the existing team - Writing to all known landlords in the area using council tax and land registry data - Setting up inspection schedules (risk-based, not sequential) - Preparing enforcement templates for non-compliance Failure to obtain a selective licence is an offence under Section 95 of the Housing Act 2004, carrying an unlimited fine or a civil penalty of up to £30,000. Councils should adopt a clear enforcement policy that escalates from informal warnings through to civil penalties and prosecution for persistent offenders. Cross-referencing with the PRS Database once it launches in late 2026 will help identify properties in the designated area that have registered nationally but not obtained a local licence.