HMO licensing reform: industry disputes detail

While some of the government’s proposed legislation to tackle rogue landlords of houses in multiple occupation (HMOs) is welcome, brokers have argued that local authorities are failing to make the most of their existing powers.

The Department for Communities and Local Government plans to apply licensing to all shared homes with five or more people from two or more households, and to flats attached to business premises. In a consultation published last month, it also announced plans to introduce new minimum room sizes and tougher checks on landlords in a bid to drive out rogues.

Liz Syms, chief executive of Connect for Intermediaries, welcomed the aims of the proposals but said not all the plans are necessary.

“Whilst I am without question in favour of ruling out rogue landlords, the current legislation of additional and selective licencing already allows for local authorities to extend licencing requirements to properties and areas that they deem require the additional regulation within their own borough,” she said. “The new rules, however, will address the difficulty some boroughs have in enforcing minimum room sizes.”

Syms said she agreed with government that a property let to five tenants over two floors should not be viewed any differently to the same five tenants over three floors, an anomaly in the current system.

“For good quality landlords, which are the vast majority, meeting the licencing requirements should not pose a major problem. The shortage of housing, however, is an important factor to consider and good quality HMO property is in demand. My biggest concern with these proposals is if they put off a good landlord from entering the HMO market.”

Richard Adams, managing director at broker the Stonebridge Group, agreed that this is a potential issue.

‘Bog down’ the good guys

“Tightening the licensing requirements for HMO properties appears, on the face of it, to be a positive move. However, my concern is that like a large amount of regulation it will only bog down the ‘good guys’ in the sector – who are already operating to the highest standards – and the rogue element will carry on as they always have,” he said.

“These rogue landlords, who have been operating outside the law for some time, will simply ignore these new measures and therefore we need to see a concerted push to target these individuals or these types of measures are not going to achieve their aims. Issuing tighter standards for compliant landlords is one thing but the big push has to be around ridding the market of the rogues who have no intention of complying.”

Doug Hall, director of 3mc, said the existing powers held by local authorities could be brought to bear on the rogue landlord element.

“If it is being done to tackle criminal landlords then that is a good thing and it must be a priority. But local authorities do already have enforcement powers. In reality the local authority could be policing it anyway.”

He added that the image of dilapidated properties and uncaring landlords associated with the sector is unfair and needs to change.

“The HMO myth of a rundown property with rundown facilities is very far from the actual market. A lot of people are living in HMOs through choice rather than necessity. We see a lot of investors turning their properties into luxury accommodation with plasma screens on the walls and internet access.”

He didn’t think the legislation would deter good landlords. He thought the HMO sector was only likely to become more popular as tax and underwriting changes for buy to let came in.

“Good landlords are used to putting in what is required under mandatory licensing. I don’t see it putting off investors. More investors are moving to high yielding properties such as HMOs with all the pending tax and underwriting changes,” he said.

Adequate policing

Alison Broderick, planning manager at Platinum Property Partners, agreed that existing powers need to be more effectively deployed. “We responded to the consultation broadly agreeing with the principle of improving the private rented sector, but arguing that greater enforcement powers were needed as the current licensing schemes are not adequately policed,” she said.

“There is no mention of this in the consultation response but we hope this will be included in the further consultation.”

Though the measures will increase costs for HMO landlords in obtaining licences for new and existing properties, Broderick said the silver lining was that legitimate landlords will not have to compete with those cutting corners.

“This will result in all HMO rooms being known to the local authority, making it easier to identify and drive out rogue landlords from the market, whilst legitimate and professional landlords will benefit from reduced competition,” she said.

“These proposed changes to the law will also ensure tenants have greater certainty over the quality of the accommodation they are likely to be renting and the good character of the landlord.”