1. Purpose of the report and policy context

1.1 To update Housing Committee on progress since the Private Rented Housing Update was last reported on 28 September 2022, including:

· Feedback on research in establishing an Ethical Lettings Agency;

· Progress on selective licensing and additional HMO licensing;

· The Private Sector Housing Enforcement Policy;

· Restrictions relating to a ‘Rogue Landlord database’;

· Activity in relation to private sector housing enforcement

2. Recommendations

That Housing Committee:

2.1 Agree that development of an in-house Ethical Lettings Agency will not be pursued at this time.

2.2 Note the progress on the Selective Licensing Feasibility Study and the proposal to arrange a Housing Committee Member Workshop (early February 2023) on options to progress.

2.3 Note that evidence suggests a new Additional HMO Licensing Scheme is potentially viable, and if so that required consultation on this should be linked to any consultation agreed to progress selective licensing.

2.4 Agree a review of the current Private Sector Enforcement Policy is undertaken. and that in the interim where appropriate proactive use of improvement notices is exercised against landlords and letting agents as referred to in 4.3.4.

2.5 Note the options and restrictions relating to a ‘Rogue Landlord database’. To approve further investigation of the establishment a ‘Rogue Landlord database’ in Brighton & Hove and report back to Housing Committee in March 2023.

2.6 Note activity during 2022/23 (to 30 November 2022) in relation to private sector housing enforcement.

3 Context and background information

3.1 Background

3.1.1 Housing Committee considered Private Sector Housing Update report on 28 September 2022 and agreed actions listed with updates below:

3.1.1.1 That Committee notes the updates made to the Council’s website, providing advice to private renters on what to do if they feel discriminated against, and encouraging landlords to support the Council’s commitment to prevent homelessness.

This has been implemented.

3.1.1.2 That Committee agrees that the council website is updated, in line with the Labour Group motion passed at Housing Committee on 17 November 2021, to reflect the agreed zero-tolerance policy on rogue landlords, including a link to the national rogue landlord database.

The ‘national rogue landlord database’ is not publicly available and therefore a link cannot be provided through the council’s website. (See also 8. Legal Implications in this report). Section 4.4 considers other options available to the local authority.

3.1.1.3 That Committee notes the information made available on minimum standards by the Council when assisting households to access more affordable private rented accommodation as enforceable Good Landlord Standards.

No further action required.

3.1.1.4 That Committee agrees the Council explore becoming members of an arms-length ethical lettings agency as a possible alternative to establishing an in-house Ethical Lettings Agency and reports back to this Committee on the potential benefits and costs.

See Section 4.2 of this report.

3.1.1.5 That Committee notes the additional monitoring agreed in the Quarterly Housing Performance Report.

The additional monitoring agreed will be reported from Quarter 3 in the Quarterly Housing Performance Report. In the interim a summary of enforcement activity for 2022/23 (until 30 November 2022) is provided in Section 4.5.

3.1.1.6 That Committee notes the potential changes to private rented accommodation, should the proposals set out in the New deal for private renters white paper be adopted into future legislation, and agrees the Director for Housing writes to the Government’s Housing Secretary, to lobby for the standards set out in the white paper to be enacted as a bare minimum.

See Section 4.6 of this report.

4 Analysis and consideration of alternative options

4.1 Establishing an Ethical Lettings Agency

4.1.1 At Housing Committee on 28 September 2022, it was agreed options on establishing an Ethical Lettings Agency would be further researched, including membership of an arms-length organization rather than establishing an agency in-house. Four options have subsequently been investigated.

4.1.2 Option 1: Membership of Ethical Lettings CIC

4.1.2.1 Ethical Lettings CIC work in collaboration with other local authorities. Most of these are within the South-East, although some London local authorities are also members (see: Ethical Lettings CIC (South East) – Guaranteed rent and fee-free property management (ethical-lettings.com))

4.1.2.2 A comparison of Ethical Lettings CIC in relation to Direct Lets is provided in table 1.

		Ethical Lettings CIC	Direct Lets
No. of lets:Jan22-Nov22		104	181
The ‘offer’		Bespoke letting service mainly focussing on the relationship with their tenants. Transparency is described as ‘key to their success’	‘Tenant finding’ service, offering additional support in the event of any issues. It is reactive to situations as they arise and will take enquiries direct from landlords
Full property management		Yes, including management of repairs. They also offer an ‘out of hours’ contact for emergencies	No – although will intervene if there is a threat of the tenancy breaking down. Will carry out home visits and inventory checks
Not for profit?		Yes	Yes
How they attract/retain landlords		Direct advertising, word of mouth and establishing a good relationship with their landlords, which builds their ‘reputation credibility’	Promotion through word of mouth, council webpage and calling landlords/agencies when properties are advertised, building relationships in the process.
How they address benefit cap/high rents		They rely on the local authority ‘subsidising’ any shortfall. This would be outside the standard fee	Direct negotiation with landlord/agent prior to letting and ‘Landlord incentive’ payment to compensate for shortfall
Referral mechanism		Signposted, rather than referred. They would not provide a service to Schedule 1 offenders or convicted arsonists	As part of a Prevention Duty or Relief Duty, established as a ‘reasonable step’ within the Personalised Housing Plan
Fee		£3.5k per placement (+VAT)	None
Other		They would also be looking for the local authority to provide a marketing budget of £3k-£4kpa	-
	Table 1: Comparison of ‘offer’: Ethical Lettings CIC vs Direct Lets

4.1.2.3 There is no membership fee, instead a fee is charged ‘per let’. This fee is in addition to any other offer made to secure the property, such as deposit and/or rent in advance. Should 50 placements be made over a year, this would require an additional annual budget of £175k (+VAT).

4.1.2.4 Ethical Lettings CIC do not have an operation within Brighton & Hove. They would therefore either be looking to run the agency remotely or establish a new base in the City. However, as they don’t already have established relationships with local landlords, there is a high risk of developing a partnership which is in direct competition with Direct Lets, which is likely to increase rents and/or fees paid to landlords. Ethical Lettings CIC estimate an initial cost of £250k to establish a presence in Brighton & Hove.

4.1.3 Option 2: Establish a partnership through an existing agency

4.1.3.1 Officers have spoken to two possible agencies already operating within Brighton & Hove. An ‘enhanced’ ethical standard does not currently exist. A partnership through an existing agency would require a legal contract to be agreed, including the standard that would need to be met in order to be defined as ‘ethical’. Ultimately, this would mean only working with those landlords that met that ‘ethical’ standard. Other lets through that agency would not then be at the ‘enhanced’ standard. This would create a two-tier system, which agencies are keen to avoid.

4.1.3.2 Inevitably, the ‘enhanced’ standard would be at extra cost, which the council would be expected to meet. It is estimated this enhanced cost would be between £1.5k – £2k (+VAT) per let. In addition, the agency would seek to employ a dedicated member of staff to attract landlords and manage the properties. With management costs and on-costs, this is estimated to be £50k per year.

4.1.3.3 On these estimates, and based on making 50 placements per year, the annual budget required would be £137,000. This cost does not include any fees relating to establishing the legal agreement. It should be noted if this option were to be pursued, it would be subject to the council’s procurement policies and procedures and therefore we could not pre-determine the agency we would be partnering with.

4.1.4 Option 3: Establish an ‘in-house’ Ethical Lettings Agency

4.1.4.1 Officers have engaged with four other local authorities providing an ‘arms-length lettings agency’. It should be noted these were not necessarily ‘ethical’ in the sense they did not provide an ‘enhanced offer’ other meeting the minimal standards. However, they did operate ‘arms-length’ from the local authority on a ‘not-for-profit’ basis.

4.1.4.2 To effectively operate at ‘arms-length’, 5 staff and a manager is the recommended minimum. Estimates based on current staff performing this function within Direct Lets, would require a budget of £252k. Additional set-up costs would be required. Advice sought from other local authorities indicates this would be in the region of £250k, and would incorporate the following:

· Purchase of IT system: This would need to be bespoke from an existing IT system. It would need to identify rent paid by the tenant, payment to the landlord, additional charges to the landlord or tenant (eg carrying gas service checks or lock replacements on the landlord’s behalf.

· Legal Advice: A critical element here is ensuring the agency operates as a commercial venture. Failure to do so could leave the council open to legal challenge from other letting agencies of using public subsidy to gain an unfair market advantage

· Obtaining references, credit checks, etc: In practice this cost would be recharged to the landlord, but initially there would be a cost in setting up the relevant systems

· Emergency repairs and disputes: A mechanism to report and respond to emergency matters outside the usual office hours

4.1.4.3 Experience from other local authorities also indicates this would take 12 months to establish. These costs do not take into consideration any additional financial incentives to attract landlords, encouraging them to provide accommodation at an enhanced standard. Costs associated with leasing a premises have not been explored at this point. As a letting agent operating on behalf of landlords, the agency would be required serve notices on tenants and issue court proceedings. It should be noted this carries a potential reputational risk to the council.

4.1.5 Option 4: ‘Rebrand’ Direct Lets

4.1.5.1 ‘Rebranding’ of Direct Lets could be achieved at a minimum cost, with the key elements relating to website design and materials; assuming this is not set up as an ‘arms-length’ organisation (see 3.2.4). This would be based on delivering a service based on the minimum enforceable standards currently applied - and making sure rents are affordable for the household. However, it would not involve an ‘enhanced’ offer in terms of property standard or housing management.

4.1.5.2 As previously advised, establishing (or becoming members of) an ‘ethical lettings agency’ is likely to have a minimal impact on reducing homelessness or the number of households in temporary accommodation. It would be a voluntary scheme residents would be signposted to, if they wanted private rented accommodation at an ‘enhanced standard’ or ‘enhanced management practice’ above that which is enforceable.

4.1.5.3 A one-off budget allocation of £100,000 has been set aside to explore the options in setting up an Ethical Lettings Agency. Table 2 provides a breakdown of this based on each option.

Option		Year 1	Year 2 (and ongoing)
Option 1: Membership of Ethical Lettings CIC		£425k	£175k
Option 2: Establish a partnership through an existing agency		£137k (plus legal fees)	£137k
Option 3: Establish an ‘in-house’ Ethical Lettings Agency		£500k (not inc. landlord incentives)	£250k (not inc. landlord incentives)
Option 4: ‘Rebrand’ Direct Lets		£30k	-
	Table 2: Budget requirement per option

4.1.6 In conclusion there is limited value in establishing an Ethical Lettings Agency at this time. It is therefore recommended (Recommendation 2.1) to agree that development of an in-house Ethical Lettings Agency will not be pursued at this stage. The £100k resource previously set aside for developing an Ethical Lettings Agency will be reported as an underspend as part of month 9 Targeted Budget Management (TBM) report to P&R Committee.

4.2 Selective and additional licensing

4.2.1 At Housing Committee on 28 September 2022, it was reported that consultants had been appointed to undertake a feasibility study on the private rented sector, the outcome of which would determine whether there was a sufficient case to apply for a Selective Licensing and/or a new Additional HMO Licensing Scheme.

4.2.2 The initial data analysis has now been completed and will be presented at the proposed member workshop (see 4.2.7). At the time of writing this report, the full feasibility study is not available. However, the headline data has been considered and initial findings suggest a predominantly city-wide scheme based on designations of ‘Poor Property Conditions’, in alignment to council strategies, may be an option (Appendix 1). It should also be noted that ‘Census 21 Housing Topic Summary’ data due to be released by the Office of National Statistics in January 2023 could also have an impact on the evidence and will require reviewing.

4.2.3 As reported previously to Housing Committee (most recently in Private Sector Housing Update, 28 September 2022, para 3.6.5), there would be a break between the existing Additional HMO licensing scheme ending and any new scheme commencing. The current scheme, which expires in February 2023, was approved in order to address concerns relating to HMOs which did not require mandatory licensing. Evidence is needed to justify why a new scheme could achieve improvements which were not possible under the previous scheme (or to maintain the improvements of the previous scheme).

4.2.4 It should be noted that although there would be a break between the current Additional HMO licensing scheme expiring and any new scheme being approved, there is no break for HMOs requiring mandatory licensing. Grounds for mandatory licensing expanded in 2018, so some properties requiring licensing under the Additional Licensing scheme would now require mandatory licensing when the current scheme expires. (For example, mandatory licensing is now required for smaller properties consisting of 5 or more people comprising of 2 or more households, with a 3-storey element no longer being required).

4.2.5 Caution is recommended in reaching any conclusions before the final version of the feasibility study is produced. Although initial indications of the headline data may suggest certain courses of action, this cannot be confirmed until all data has been verified and the full report produced. Reaching conclusions prior to this being available could potentially jeopardise subsequent actions. The full report, options arising from this, and resources required to deliver these options will be the subject of the member workshop proposed.

4.2.6 If evidence indicates a new borough-wide Additional HMO scheme is feasible, this would still require consultation before a decision could be taken on implementation of a scheme. It is recommended, (Recommendation 2.3) from a cost and engagement perspective, that this consultation is incorporated into any wider consultation on licensing. If Selective Licensing is not pursued, but a new Additional HMO Licensing scheme is, then consultation on Additional HMO Licensing can still proceed if Housing Committee agree to progress this.

4.2.7 A Housing Committee Member Workshop is planned for early February to provide a detailed briefing on the feasibility study and to consider the different options for progressing this work, prior to recommendations to Housing Committee in March for a decision. It is clearly important that all the relevant information has been considered in formulating options for progressing or not progressing this policy initiative, that it is clear to interested members of the public what information has been considered by Housing Committee members and that Housing Committee have the opportunity to fully consider all the implications (including legal and financial implications) of the possible options before being asked to make a final decision on licensing schemes.

4.3 Private Sector Housing Enforcement Policy

4.3.1 Brighton & Hove City Council’s current Private Sector Housing Enforcement Policy has been effective since April 2020 and is set out on the council’s website (Private Sector Housing Enforcement Policy (brighton-hove.gov.uk)).

4.3.2 The policy initially seeks to use informal enforcement measures to make improvements to properties where these are reported. Many landlords may not be aware that improvements are required or may have a limited understanding of their responsibilities. The approach set out provides the opportunity for landlords to make improvements, without the immediate threat of formal enforcement action such as court action or penalty notices.

4.3.3 There is evidence that this is successful. Of the 339 cases closed since April 2022, 328 (96.8%) have been as a result of working with the landlord to make the necessary improvements. Only 11 cases have required escalation to Statutory Notices or Civil Notices being served (see 4.5.3).

4.3.4 One area of consideration for a revision to the current Enforcement Policy would be to reduce the risk of ‘revenge evictions’. Analysis of cases requiring intervention from the Private Sector Housing Team since April 2022 indicate five cases (1%) had a section 21 notice being served. This evidence would suggest this type of action is rare, but nevertheless has a serious impact on those affected. However, it acknowledged that some cases where landlords have subsequently served s21 notice to tenants after being asked to make improvements to the property may not be known to the council, as we would be reliant on those tenants informing us of the notice being served.

4.3.5 As such, in line with the policy an escalated approach will be considered where the Council has previously taken action against a landlord (or agent), or where the landlord (or agent) has taken retribution against a tenant in the past.

4.3.6 If a ‘zero tolerance’ type approach had been adopted since April 2022, then potentially 462 Notices could have been served. This wouldn’t have necessarily increased the number of properties improved. Potentially this could have reduced improvements or delayed required improvements as landlords would be taking legal action to challenge the notices, rather than working with the local authority to make the required changes to their properties.

4.3.7 The initial data analysis carried out for the purposes of establishing any evidence based for licensing (see 4.2), estimates the private rented stock in Brighton & Hove as being 48,206 properties[1]. A ‘zero tolerance’ type approach could be deemed as being disproportionate based on available evidence about the level of serious disrepair.

4.3.8 However, research and analysis produced by the Department of Levelling Up, Housing & Communities (DLUHC) in June 2022 (see Background Documents) identifies that many local authority enforcement teams operate a reactive, rather than proactive service, narrowly focused on fulfilling statutory duties and targeting only the worst properties.

4.3.9 The initial data in the feasibility study predicts 18 (of 23 wards) in Brighton & Hove have a private rented stock where more than 19% have Category 1 & 2 hazards (see also 4.2.5). This suggests a ‘proactive’ approach would require significantly more resource. A purely ‘enforcement–led’ methodology would be unmanageable and would not necessarily lead to any improvements.

4.3.10 An evidence based approach is needed to underpin changes to the enforcement policy.

4.3.11 It is recommended (Recommendation 2.4) that a review of the existing Enforcement Policy is carried out, based upon the emerging evidence, best practice and required resources, rather than adopting an approach which is neither evidence-based nor has the necessary capacity to deliver.

4.4 ‘Rogue Landlord database’

4.4.1 The Housing and Planning Act 2016 introduced a range of measures to help local housing authorities tackle rogue landlords and drive up standards in the private rented sector. These measures include establishing and operating a database which is a tool for local housing authorities in England to keep track of rogue landlords and property agents. Information held on this national database is restricted through GDPR and is not publicly available.

4.4.2 The Greater London Authority (GLA) has established a public facing rogue landlord and agent checker. This register requires a prosecution of a landlord by a local authority or the fire authority. To avoid litigation, there has to be a factual basis for any inclusion on the list, and it has to be verifiable, accurate and up to date to avoid a defamation claim. All London councils with enforcement records submit them to the checker which contains information about private landlords and letting agents who have been prosecuted or fined.

4.4.3 There have been calls for a similar measure to be introduced nationally but decisions on any national legislation in support of this have currently been delayed. A recent review of other local authorities in Sussex indicates a consistent approach to publicising actions whereby only prosecutions or anonymised publicity about civil penalties being issued is reported. This is in line with Brighton & Hove’s current approach.

4.4.4 The specific powers available to the GLA under the Local Government Act and Localism Act, also apply to unitary local authorities. Therefore, we could utilise the same legislation, which would need to be considered as a new policy.

4.4.5 If adopted, the local authority would be publicly exposing people to scrutiny which could lead to challenge. Legal opinion is that it would be subject to external consultation and a committee decision.

4.4.6 In addition, there are a number of other practical considerations:

· This would require set up on our website and processes would need to be put in place to review and evidence inclusions, oversee appeals for inclusion and remove entries. This would need to resourced and could take up a significant amount of time. Tight ongoing management would be required to ensure the council is not in breach of GDPR.

· At any given time, there would be an incomplete list – due to exclusions being upheld or ongoing appeals, and entries are time limited.

· There could be unintended consequences of alienating landlords who currently do not challenge and pay fines and who subsequently change their behaviour. If landlords think that they are going to be named and shamed there could be the risk, they will become less co-operative and appeal the process. This could make the process much harder which might lead to tenants experiencing greater not lesser issues.

· Decisions on national legislation have been delayed but they might be brought in which would place the council on a level with other local authorities. Recent articles led by the London Mayor have pushed for a national database once again.

4.4.7 If Housing Committee approve further investigation being undertaken to establish a ‘Rogue Landlord database’ (Recommendation 2.4), then this will be reported to Housing Committee in March 2023. This will set out the implications in terms of cost (and identification of an appropriate budget), necessary changes to policy and risk. This will then inform Housing Committee in any decision to adopt a ‘Rogue Landlord database’.

4.5 Private Sector Housing Enforcement Update

4.5.1 At Housing Committee on 28 September 2022, a new set of performance indicators relating to Private Sector Housing were agreed. Outputs against these indicators will be reported from 2022/23 Q3 (i.e. October 2022-December 2022).

4.5.2 In the interim, the following update on HMO licensing is provided (Table 3).

Table 3: HMO licensing activity (November 22)
Total at Application Stage	413
Total at Draft Licence Stage	108
Total at Full Licence Stage	3,562
Total Current HMO Activity	4,083

4.5.3 Since April 2022, 462 new cases of disrepair have been raised. Of these five (1%) have resulted in the landlord serving a s21 Notice (sometimes referred to as a ‘revenge eviction’). Of the 462 cases, eight resulted in Statutory Notices being served and three Civil Notice penalties were imposed (compared with two Civil Notices served during 2021/22).

4.5.4 To date fines issued are set out in table 4 (below)

Period		Number of fines	Amount of fines
April 22-Dec 22		13	· 3 x £8,000 · 4 x £6,000 · 6 x £1,200
April 21- March 22		2	· 1 x £1,000 · 1 x £2,000
April 20- March 21		0	-
Prior March 20		0	-
	Table 4: Breakdown of fines issued

4.6 Technical consultation on consequential changes to the homelessness legislation

4.6.1 On 7 December 2022, the Department for Levelling Up, Housing & Communities (DLUHC) commenced a technical consultation, open for 7 weeks, and closing on 25 January 2023.

4.6.2 The consultation seeks views on the consequential amendments to homelessness legislation as a result of the Renters Reform Bill, namely, the removal of section 21 evictions, assured shorthold tenancies and fixed-term tenancies. The consultation aims to identify and understand the impacts these changes will have on the sector, ensuring councils can continue to deliver their homelessness duties effectively and give people the support they need.

4.6.3 The scope is limited to responses on the legislative technical amendments, following ‘A Fairer Private Rented Sector’ White paper produced in June 2022 (see Background Documents). The majority of the amendments to the legislation are minor and, while the consultation is open to everyone, we expect most responses to be from local authorities and charities in the homelessness space.

5 Community engagement and consultation

5.1 Not applicable. However, should the council decide to progress to consultation on selective or additional licensing; and/or adopting a Rogue Landlord Database, then full consultation will be required.

6 Conclusion

6.1 Establishing an in-house Ethical Lettings Agency (or becoming members of an existing scheme) should not be pursued at this time. The resources already allocated to this should be re-purposed for consultation on licensing.

6.2 Initial evidence on the feasibility study for licensing has identified some potential options which need further consideration. A member workshop should be run (early February 2023) to establish a preferred approach to option(s) and the resources required to deliver this.

6.3 A review of the current Private Sector Housing Enforcement Policy, taking an evidence-based approach, should be undertaken. Further investigation should also be taken on establishing a ‘Rogue Landlord Database’.

7 Financial implications

7.1 There is currently £0.100m one-off resources available for the ethical lettings agency feasibility work for 2022/23 which has not been spent. This is not required in 2022/23 for this purpose and therefore it will be reported as an underspend in the Month 9 Targeted Budget Management (TBM) report to P&R Committee to help reduce the significant overspend of the council in 2022/23.

Name of finance officer consulted: Monica Brooks Date consulted : 10-01-23

8 Legal implications

8.1 The recommendations in relation to Additional HMO licensing are simply to note, so there are no legal implications to draw to members’ attention at this stage. Pending a full review of the Private Sector Enforcement Policy, an interim proposal to proactively use Improvement Notices, where appropriate, is an acceptable addition to the policy. The use of the phrase, “where appropriate” allows for individual consideration of the merits of each case, and does not amount to an unlawful fettering of the council’s powers.

8.2 As noted in paragraph 3.1.1.2 of the report, the national rogue landlord database established under the Housing and Planning Act 2016 is not publicly accessible. Government consultation in 2019 on widening access to it to existing and prospective tenants has not come to fruition. Whilst it is probable that the council’s powers are wide enough to establish its own database, careful consideration will need to be given to the nature of information to be provided, and the length of time that information should remain accessible. The Information Commissioner’s response to the 2019 consultation flagged up data protection areas of concern, such as data minimisation, and these will need to be taken into account.

Name of lawyer consulted: Liz Woodley Date consulted 04/01/23

9 Equalities implications

9.1 There are no equalities implications relating to this report.

10 Sustainability implications

10.1 There are no sustainability implications relating to this report.

11 Other Implications [delete any or all that are not applicable]

Social Value and procurement implications:

There are no social value or procurement implications relating to this report.

Crime & disorder implications:

There are no crime and disorder implications relating to this report.

Public health implications:

There are no public health implications relating to this report

Supporting Documentation

Appendix 1: Summary of PRS licensing feasibility study

Background Documents

1. Local authority enforcement in the private rented sector: headline report (published 16 June 2022) (Local authority enforcement in the private rented sector: headline report - GOV.UK (www.gov.uk))

2. A Fairer Private Rented Sector White Paper (published 16 June 2022) (A fairer private rented sector - GOV.UK (www.gov.uk))

3. Brighton & Hove City Council: Private Sector Housing Enforcement Policy

[1] As already mentioned, this figure is caveated, and could be adjusted when Census 2021 data is produced in January 2023