Landlords are voting with their feet and won’t invest in neighbourhoods where local councils are imposing strict planning and licensing rules.
Three out of four landlords say they do not want their property investments tied up in red tape.
Around 80 local councils apply article 4 directions or additional/selective licensing to control private rental homes.
A survey by Paragon Mortgages was told 75% of landlords did not want to invest in these neighbourhoods, while 60% confirmed they would definitely not buy investment properties in areas subject to selective licensing.
Only a fifth of landlords (20%) polled considered selective licensing had no impact on their property businesses.
When asked about their worst fear for their business, 14% of landlords reported borough wide licensing schemes like those in Oxford and Newham, East London, were their greatest concern.
Article 4 declarations govern letting family houses to groups of three to five tenants sharing. These are typically students or young professionals. Landlords must have planning permission to rent out new shared homes in these areas.
Additional or selective licensing applies to all private rented homes in a specific area. All landlords must pay the council for a license before letting a property.
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.”
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