According to a survey by specialist buy-to-let lender Paragon, professional landlords and smaller amateurs say they would not be keen to invest in areas where special licenses are required.

In addition 74% believed it would deter new entrants into the buy-to-let market.

Paragon director of mortgages John Heron said the buy-to-let market was already heavily regulated:

“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.

“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.”

In January 2013, the London borough of Newham made it compulsory for all landlords to apply for a license or face hundreds of pounds in fines.

In the wake of the decision, councils across the UK are increasingly considering an expansion of selective or additional licensing.

However, at least one lender – RBS and its subsidiary NatWest – has a longstanding policy not to lend where buy-to-let property requires a special license.