The developer behind a housing project on London Road has said council fees will stop people from investing in the city.
Sam Monk is set to build 90 new flats at a car wash site on BBC island but despite the development meeting national standards, the council want to charge him to ensure his homes are still safe to rent.
The developer has said he is being charged £70,000 under the selective licensing scheme, which was introduced by Nottingham City Council to weed out rogue landlords and improve living conditions in the city.
Concerns have been raised the "wholly inappropriate tax" will stop developers from investing in the city and push them into neighbouring counties to build new homes.
There are also worries landlords will pass the extra costs onto the tenant, with rent at some homes increasing by up to 10 percent.
Mr Monk, 34, from Nottingham, said: "Once we have built it to a national standard, the highest possible standard, we have to pay the council to inspect it to make sure it is lettable.
"I can understand on a second-hand refurbished property but they want £70,000, which is money that could be spent on architecture or more services for residents.
"It is being spent on nothing, on thin air. It puts me off as a developer. It will have a major impact and influence on investors who are starting to look at our region.
"They will be put off or deterred by additional costs. They already have to pay high costs for construction and land and this additional cost is wholly inappropriate.
"The only way to recoup it, sadly, is to pass the cost onto the tenant. Rents are going to have to increase. It could be 10 percent over the next year.
"We are looking at opportunities in Leicester and Derby now because we don't want to invest any more money in the city.
"Nottingham City Council seem hellbent on taxing everyone and driving them out."
Mr Monk said he is considering building more properties in West Bridgford, which is run by Rushcliffe Borough Council and does not include the additional costs.
He is currently working on the multi-million pound development to create 121 high-end apartments at Trent Bridge in the former Rushcliffe Borough Council's Civic Centre.
Nottingham City Council introduced selective licensing in parts of the city last year, including Lenton, Sherwood, The Meadows and St Ann's.
Having a licence means the council can check properties are safe to rent and to tackle bad landlords. To obtain a licence, accredited landlords must pay £480 per property while non-accredited pay £780.
Around 32,000 properties need a licence, but so far the city council has only received 15,000 applications.
Issues have been been raised over the plan, with developers believing new builds, which already meet the required standards, should not have to face the extra costs.
Giles Inman, business development manager at East Midlands Property Owners Group, which represents around 600 landlords, said: "Why invest in Nottingham? There is a high demand for built to rent properties in the East Midlands but why come here when you have this extra tax when you can go to Derby, Leicester or Lincoln and not pay it?
"The big companies have massive pockets but that does not reflect the sector completely. These are few and far between.
"Selective licensing should not affect new builds because everyone is already compliant.
"What problems are they going to find on a property that has just been built? I think there are developers that are being put off."
The city council believes that this is not the case and that the local authority is still receiving many applications.
Councillor Linda Woodings, portfolio holder for housing and planning at Nottingham City Council, said: "There’s little to suggest that developers are being dissuaded from investing in Nottingham – there's plenty of development of private rented accommodation underway in the city and we’re continuing to receive many applications for this kind of development.
"People spend millions on developing properties, so our licensing fees are a drop in the ocean by comparison. We've been encouraging landlords to become accredited, since this reduces the fees further, so that the total for a 90 unit development would be just over £40,000, for example.
"We have received around 15,000 selective licensing applications so far, which is where we expected to be up to at this stage of the scheme.
"Licensing remains an important part of our drive to ensure that tenants in the private rented sector are in safe, good quality accommodation and that they and their landlords are clear about each other’s responsibilities."
