New HMO Letting Rules Could Drive Landlords Out Of The Buy-To-Let Property Market

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!The UK government recently announced tough new minimum space requirements for private lettings in a bid to reduce overcrowding and other problems in the HMO rental sector.

The widely expected new rules for HMOs (Houses in Multiple Occupation) will bring the national mandatory licensing, currently only applying if properties are three or more storeys, to all flats and one and two-storey properties.

The new rules will allow local councils to force more landlords to register their HMO properties, which should raise standards. My own local authority has around ten times as many unlicensed houses in some form of multiple occupation as those licensed as HMO’s.

The majority of buy-to-let landlords in the UK are law abiding and should have no problems complying with new regulations. However, based on the previous experience of other local authorities, which have brought in blanket licensing for all rental properties, many landlords will be probably fall short of the minimum safety requirements for a rental property.

A housing officer in the London Borough of Brent told me that when they brought in licensing in selected postcodes of the borough, they discovered that hundreds of landlords did not even meet basic minimum standards and many didn’t even have a smoke alarm installed or in working order.

In addition to tightening the HMO rules, the Department of Communities and Local Government has also specified minimum room sizes for HMOs properties.

Single bedrooms will have to be a minimum size of 6.51 square metres, and doubles, or those occupied by two adults, 10.22 square metres. 

Children’s rooms, for aged 10 and below will have to be at least 4.64 square metres in size.

The new HMO licence will have to specify the maximum number of persons occupying any room and the total number across the different rooms must be the same as the number of tenants that the property is deemed suitable to live in.

The requirements are yet to be made law, but are expected to be on the statute books this spring. Despite the heavy snow, today is in fact the first day of spring!

In a statement, the DCLG said:

“The increased demand for HMOs has been exploited by opportunist rogue landlords, who feel the business risks for poorly managing their accommodation are outweighed by the financial rewards. 

“Typical poor practices include: overcrowding, poor management of tenant behaviour, failure to meet the required health and safety standards, housing of illegal migrants and intimidation of tenants when legitimate complaints are made. 

“Tenants are sometimes exploited and local communities blighted through, for example, rubbish not being properly stored, excessive noise or anti-social behaviour. 

“Although only a minority of landlords, the impact of their practices are disproportionate, putting safety and welfare of tenants at risk and adversely affecting local communities.

“They cause much reputational harm to the HMO market and it is often pot luck whether a vulnerable tenant ends up renting from a rogue or a good landlord.” 

Although many of the above concerns are justified, when the government ran a public consultation they received just 395 responses, which is extremely low when you consider that there are millions of tenants and over one million buy-to-let landlords in the UK.

I spoke to several HMO landlords, who did not wish to be named, about the new regime. The mood was mixed, with some favouring tougher rules to drive out the “cowboy landlords”, leaving more tenants chasing fewer rooms and higher rents for them!

Others were more negative and even angry, accusing the government of burdening smaller landlords with more red tape and bureaucracy, which would ultimately make the housing shortage worse as landlords are driven out of the market.

There is no doubt that HMO letting has boomed in the last few years, as the demand for rooms and studios has mushroomed for a variety of reasons including, relationships breakdowns, lack of affordable single let properties and immigration.

AIRBNB has also opened up a market for short term holiday lets and the tax free the rent-a-room scheme has encouraged people to let a room in their own home to earn some extra cash.

We will have to see the exact interpretation of the new rules, which currently varies from one council to another, once they are in force.

Private landlords have already been hit with punitive tax changes being phased in during the next tax year, as well as higher stamp duty, which will reduce their net income and may drive up rents.

Changes to the benefits system (Universal Credit) are apparently making it more difficult for tenants claiming housing benefit to find a landlord willing to rent a property to them.

Homelessness is on the rise according to the BBC and other commentators, although the exact cause is not clear.

In terms of Money Tips, there are still many investment opportunities in the UK housing market, seen by foreign investors as a safe haven for their cash. As always, you should take legal and financial advice and remember that financial education is key.

If you would like to learn more about investing in UK property, I have a limited number of complimentary tickets to a LIVE EVENT  - Beginners Property Course (held in the UK), which will give you the basic knowledge and techniques to get started. If you are interested, email me your full name and telephone number to charles@charleskelly.net.

Want to diversify? If you would like to learn more about investing overseas in one of the fastest growing economies in Asia, email me at charles@charleskelly.net.

See also:

Leasehold Properties Are A Legal Minefield, Read This BEFORE Buy A Flat

UK House Prices Fall Leaving First-Time Buyers And Buy-to-Let Investors Wondering Where The Market Is Heading

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