Will you be hit by the changes to mandatory HMO licensing in England? We take a look at the changes and what they mean for you.
In 2006, the government introduced the mandatory Houses in Multiple Occupation (HMO) licence in England and Wales. From October this year, the government is extending the scope of the HMO licensing in England.
In 2006, it only applied to properties of at least three storeys housing at least five people from two or more households, but from October the ‘over three-storeys’ element of the regulation will be removed so that it covers all properties that house five or more people from more than two households, whatever the building size.
The Ministry of Housing, Communities and Local Government says this is to create “a level playing field between landlords, so the rogue [landlords] cease to be able to operate substandard accommodation”.
However Chris Norris, Director of Policy and Practice at the NLA, is not convinced it is the right approach. “Rogue landlords are found across the board, not just in HMO properties, so it doesn’t tackle that issue,” he says. “When mandatory HMO licensing was introduced, it was about safety, making sure there were fire escapes and that tenants could get out in an emergency,” Norris continues.
“That’s an issue that applies to three-storey properties in a way that it doesn’t for two-storey ones, and we supported its introduction for this reason. I struggle to understand what the argument for extending the mandatory licensing now is.”
How does the system work?
In part, the NLA’s opposition to the extension is because there has never been a full review of the existing HMO licensing system, so it is difficult to assess whether it has achieved its original goal. On top of this, because local authorities are already able to bring in additional licensing in areas where they deem it necessary, Norris says there are already measures to address inadequate housing and ‘rogue’ landlords in a far more targeted manner without the government’s input.
In Hammersmith and Fulham, for example, where there are many HMOs, landlords who let properties to just three or more people from separate households already need a licence.
And on certain streets in the London borough where antisocial behaviour has been deemed a problem, all landlords need a licence. “We’re already acting to protect renters and make sure landlords have a level playing field,” says Geoff Cowart, a spokesman at Hammersmith & Fulham Council.
It is estimated that the new rules will bring 177,000 new properties into mandatory licensing, affecting thousands of landlords. It’s difficult to estimate the added cost to landlords, as licence fees – which are fixed by local authorities – vary significantly across the UK from £300 in Suffolk to £1,100 in Ealing. Some are in support of the changes.
Housing charity Shelter says: “With at least five people per property, these changes will improve renting for almost a million people who will now receive the extra protection of living in a licensed property.”
Shelter has also welcomed the introduction of the minimum room size for these properties as a means of addressing “overcrowding, which is a serious problem and increases fire risk”. Norris, however, is concerned that specifying room size might have unforeseen consequences for landlords and tenants alike. “There are two issues here,” Norris says.
“First, landlords often offer these smaller rooms at a discount for tenants. If these rooms are taken out of use, not only does the discounted room go, but the chances are it will force rents up in the other rooms in the house to cover the lost rent.
Second, there’s the question of what happens to the undersized room. If the landlord leaves it unrented, there’s a high chance the tenants might sublet it and the landlord would be hard pushed to find out. That’s not a situation anyone would want.”
Minimum room sizes
Not everyone is put off by the changes, however. NLA member Mark Barrett, managing director of The HMO Agency, a property management company that specialises in HMOs, looks after a property where one of the rooms will be affected by the minimum room size regulations. He is converting it into an en-suite bathroom for one of the bedrooms. “It will mean less revenue, but rules are rules, and on the whole I think these changes are a positive move,” Barrett says. “It’s a good idea to even up the playing field. At the moment, you might have a 20-bed property on two storeys that doesn’t need a licence and a five-bed over three storeys that does.”
Barrett says the greatest impact of the new regulations will be for landlords who have bought their property on a buy-to-let mortgage and then rented it out as an HMO.
Jane Simpson at NLA Mortgages says: “This will create further administrative burdens for buy-to-let investors and local authorities, not to mention make accessing finance more challenging as a number of mainstream lenders are reluctant to lend against licensable properties.”
Lenders who offer mortgages to HMOs that are not currently licensed, but will be under the new rules, can change their criteria to factor in these properties. Altogether, the upshot is that landlords need to be on top of their licences and their paperwork. Any landlord who needs a licence but hasn’t applied for one by 1 October could be liable to prosecution and hefty fines. Local authorities will be responsible for overseeing the changes, so it’s likely prosecutions and fines will again vary widely between councils.
What the HMO changes will mean for landlords
1. If you let a property to five or more tenants from two or more households, you will need to apply to your local authority for an HMO licence, irrespective of building size.
2. All bedrooms in any such property will be subject to a minimum room size. For a single room, this is 6.51 square metres and for a double, 10.22 square metres. Landlords have up to 18 months to comply with this.
3. As a requirement of the HMO licence, landlords will have to provide suitable facilities for rubbish storage and disposal as stipulated by their local authority.
4. A licence is valid for five years and each HMO property requires a separate licence.
5. Any landlord who hasn’t applied for a new licence by 1 October 2018 will be in breach of the law.
HMO regulations in Scotland, Wales and Northern Ireland
In Scotland, an HMO licence is needed if a property is lived in by three or more people from three different households. It is the owner of the property who must apply for the licence, whether or not they manage the property themselves.
In Northern Ireland, properties qualify as an HMO if they are rented by three unrelated people who share the bathroom or toilet, and kitchen. Landlords must register HMOs with the Northern Ireland Housing Executive.
In Wales, in addition to Rent Smart Wales requirements, local councils continue to run HMO licensing in line with the 2006 regulations.
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