Planning and licensing crackdowns on private rentals by some councils are putting off 75% of landlords from investing.
Around 90 councils apply article 4 directions and additional/selective licensing schemes to manage buy to lets and houses in multiple occupation (HMOs)
A survey by investment mortgage lender Paragon disclosed three out of four investors are discouraged to invest in towns and cities with the schemes.
Nearly two-thirds (60%) of landlords confirmed they would definitely not invest in selective licensing areas.
Only 20% felt selective licensing made no difference their rental business, even though they have to register with the council and pay licensing fees.
Another 14% cited borough wide licensing or article 4 directions like those in Newham, East London, and Oxford, were their worst fear.
Paragon director John Heron explained while many non-investors complain buy-to-let market is not regulated; landlords must comply with more than 100 different regulations.
“It is clearly important that landlords who operate in the buy-to-let market are regulated and run responsible businesses. However, what our survey shows is that landlords are becoming increasingly concerned about selective licensing and other areas of regulation,” he said.
“If selective licensing is employed in the appropriate way it will be beneficial in areas that need it, but there is a danger of putting off new landlords – which the market needs in order to grow – if a broad brush approach is taken.”
Article 4 declarations control letting family houses to groups of three to five tenants sharing – typically students. Landlords have to gain planning permission to open new shared homes in these areas.
Additional or selective licensing applies to all private rented homes in a designated area. All landlords must register with the local council and pay a licensing fee to rent out property
Meanwhile, a report by property consultants Savills proposes councils urge developers to build halls of residence for students in areas with heavy numbers of privately rented shared houses.
The research suggests 66,000 homes could be returned to families if the plan was taken up, reducing housing shortages and increasing council revenues.
The move is the equivalent of eight years of new home building in some university cities at current rates.