Agenda item

Report of the External Auditors, Grant Thornton

Andrew Smith, the Key Audit Partner from Grant Thornton, presented the report of the External Auditors on the Selective Licensing Scheme for 2019/20. The following points were made:

(a)  local electors have a right to make objections to the accounts of local authorities, and Grant Thornton received a purported objection to the Council’s 2019/20 accounts in relation to the Selective Licensing scheme. The request did not meet the statutory requirements for a formal objection, but given the subject matter of the objection request it was felt to be appropriate to conduct a review and produce this report;

(b)  the would-be objector outlined a number of concerns:

  i.  the scheme is highly bureaucratic and time-consuming for landlords to comply with;

  ii.  the scheme is too broad in focus, targeting good as well as bad landlords;

  iii.  the scheme is not value for money, with a low number of inspections carried out;

  iv.  the scheme has had an adverse effect on some tenants, leading to increases in rents and in some cases to tenancies being terminated, causing an increase in homelessness;

  v.  licence fees are disproportionately high;

(c)  given these concerns, the purpose of this review was to assess how far the Selective Licensing scheme was achieving the intended policy aims and providing Best Value;

(d)  the report identifies a number of issues:

  i.  there were problems with the application process;

  ii.  the planned number of inspections was not being carried out;

  iii.  the Council was struggling to monitor the outcomes of the scheme, which was a common issue identified in a national review of Selective Licensing schemes across the country;

  iv.  there is some supporting evidence to show unintended consequences in terms of rent increases, but difficult to conclude these were solely due to the Selective Licensing scheme;

(e)  in terms of fees and costs, the scheme was broadly in the same range as other comparable schemes across the country;

(f)  the implementation of the scheme had not gone entirely as planned, in part due to the impact of Covid-19, and implementing Covid-19 guidance led to the policy’s aims for internal inspections being delayed by more than a year, national shortages of Environmental Health Officers qualified to inspect were also a factor. Inspections targets would not be achieved before the scheme end date but resources were in place from the scheme to continue inspections. Also actual application flows and the split between accredited and non-accredited applications had differed markedly from forecasts. However, officers have recognised issues and learned lessons which will inform the second scheme which is due to be launched later this year.

Pete Mitchell, Head of Regulations, highlighted the point that the first Selective Licensing scheme is now in its fifth and final year before a new scheme is launched. He agreed that there were errors at the beginning of the scheme which have been identified, and is supportive of the audit.

In the discussion which followed and in response to questions by the Committee, the following points were made:

(g)  Members felt it was crucial to get Selective Licensing right, as the City is experiencing a housing crisis, with high rents and high mortgage interest rates, and need landlords to be able to meet the requirements of the scheme;

(h)  the Licensing team have provided figures to show that the number of inspections is improving;

(i)  it is important for Communications to make it clear to tenants and to landlords that there is no stigma attached to being part of the Selective Licensing scheme, but that meeting its standards is a mark of pride. The Licensing team have sought to improve Communications, attending the Landlord Forum, producing content for newsletters, and promoting engagement with tenants. The team are looking at ways to highlight examples of good practice among landlords with properties in the Selective Licensing scheme;

(j)  Members felt it is important to be clear that there are significant problems with some landlords that the scheme is helping to address. In the Meadows, 239 notices have had to be given to landlords for failing to engage with the Selective Licensing scheme and 170 properties have needed improvements after inspection. The death of a child due to black mould in a property in Rochdale has been national news recently, and Members have heard of local cases in which poor housing conditions have contributed to children’s ill health;

(k)  Members reported concerns that Selective Licensing had been funded by those landlords with more properties who engaged positively with it, and worried that it had been missing the very worst landlords. Members noted that issues of damp and mould were also being reported in social housing, not just private housing;

(l)  Members suggested that government rules on funding such schemes only allowed for schemes applying broadly to landlords, which was suboptimal in terms of value for money.

(m)Pete Mitchell confirmed the funding is only available for broad schemes, and there are a lot of good landlords and lettings agents who have driven the market forward and adhere to the standards required in a professional way. There is a group in the middle, often accidental landlords, who aim to meet good standards but are not as professionalised and require some support. There is a group at the bottom with very poor standards who often try to evade the scheme. The aim is to engage with the first group, support the second, and bring the last group into the scheme with enforcement action when necessary. He confirmed that the Council was implementing the recommendations made in the report.

Resolved to:

1)  Note the report of the External Auditor on the Selective Licensing Scheme 2019/20;

2)  Note that Licensing officers accept the report and have started to implement solutions to issues identified.