One area of local authority budgeting is slipping into a ‘black hole’ as anticipated income fails to materialise.

Finance officers, who projected millions of pounds income from landlord licence fees, are now facing a nightmare as they try to balance public coffers.

The problem stems from the new Housing Act - which requires the UK’s private sector landlords to register with their local authority if they rent out ‘houses in multiple occupation’.

“HMO’s” are three or more-storey properties rented to five or more people in two or more households - typically university and college students, trainee teachers and nurses.

They are at the heart of the Act’s greatest controversy as local authorities struggle with the freedom to interpret the new legislation in their own way, apply it to their own area and even to fix their own registration fee structure.

But private sector landlords are confused too – and only around 25% of the UK’s estimated 400,000 HMO’s have so far been registered.

“Councils are reported to have recruited staff, taken on extra office space, and included the anticipated income from licence fees in their budgets … only to find that the money simply has not materialised,” says Chris Town, Chairman of the Residential Landlords Association - whose members own over 100,000 private rented properties throughout the UK.

“It all adds up to some serious miscalculation as potential income disappears into a mysterious black hole.

“I’ve had reports of finance officers budgeting several millions of pounds in projected income from licence fees – and spending it – only to find it not forthcoming.

“And, even more disturbingly, local officials and councillors are said to be gunning for a test-case prosecution to scare unlicensed landlords out of the woodwork with their licence fee cheques. But we fear that a prosecution like this would only drive defaulters further underground.

“At the consultation stage with Government we argued strongly that there should be longer lead-in time for the legislation. Now we are advocating an amnesty on late applications until this entire confused atmosphere begins to clear.”