Landlord News

Thousands of Rented Homes Free to Operate Illegally, New Survey Reveals

Rose Jinks - October 9, 2018

Tens of thousands of rented rooms and bedsits could continue to operate illegally for the next three years, in breach of new housing regulations introduced last week to crack down on rogue landlords, new research has revealed.

The Government has estimated that new rules governing dangerous and overcrowded properties, introduced on 1st October  will affect more than 100,000 private rental properties not currently licensed.

However, of 326 councils in England with responsibility for housing, only a handful have established the number of properties in their areas that currently meet new Houses in Multiple Occupation (HMO) regulations.

Several large metropolitan authorities including in London, Manchester, Leeds, Newcastle, Bristol and Norwich said they were unaware of how many properties in their areas were operating in breach of the regulations.

The National Association of Landlords (NLA) has been contacted by several members who tried to apply for licenses, but their local authority purported not to know anything about the changes or didn’t have a system in place to process their applications.

The regulations are intended to allow councils to crack down on landlords renting out substandard and overcrowded homes. Licensing requirements cover issues such as emergency lighting, soundproofing and fire proofing and they also set new minimum sizes for bedrooms.

They require properties with five or more occupants in two or more households to be licensed, including houses converted into bedsits where tenants share toilets and cooking facilities. Any such property that does not have an HMO license is operating illegally and the landlord could face a fine of up to £30,000.

A 2008 Government report estimated there were 56,000 HMOs licensed under the previous definition, those of three storeys or higher.

They will automatically be passported over to the new arrangements, but the Government estimates a total of 160,000 properties could be covered by the new regulations and have given local authorities up to three years to identify them.

Research carried out by Doncaster-based Touchstone, a company that runs property investment courses across the UK, has revealed massive gaps in local authorities’ knowledge of where these properties are and who owns them. Most are relying on landlords to submit license applications.

Of the 238 authorities that responded to a Freedom of Information request, sent at the start of September, asking how prepared they were for the changes, 93 said they had carried out research to establish how many properties in their area require an HMO license.

Only 14 said they had conducted research to establish how many of those properties were in a condition where they could expect to be granted a license.

It is estimated the HMO changes will cost buy-to-let landlords £79m, according to research carried out by the Centre for Economics and Business Research.

 

New HMO regulations mean that more landlords could require a license for their properties

Touchstone CEO Paul Smith commented: “It’s clear the Government has passed legislation without any clear idea about the scale of the issue and we could be sleepwalking into a housing disaster,” said Smith.

“We’re aware of one local authority with 1800 properties classed as HMOs and privately it told us that only around 40% will meet the new regulations. If that’s happening across the country, we could be looking at a major problem.”

Smith said many landlords, faced with paying an average of £1,027 for HMO licenses as well as the cost of upgrading, may simply sell-up, exacerbating an already chronic shortage of homes in some areas.

The buy-to-let market is already slowing down following the recent introduction of a 3% residential property levy on landlords, the ending of mortgage interest tax relief and new stress tests for home loans.

“Ministers have estimated 160,000 properties could be affected but I would be interested to know how they arrived at that figure as most local authorities have not conducted any research,” he said.

“Clearly properties cannot continue to operate illegally and so the human cost of this is potentially thousands of people being made homeless.”

Of the councils that responded to the FoI request by Touchstone, only 14 had carried out research to establish how many properties in their area were likely to be affected by the changes as well as into how many were likely to be granted a license.

Manchester City Council estimated it had 5000 properties in its area now classed as HMOs, but it hadn’t researched how many were in a condition to meet the new regulations.

North Somerset Council said it had 2940 properties affected, Peterborough and Bournemouth put the number at up to 2500 while Cambridge, York and Hull city councils estimated they had more than 1000 HMOs. None was able to say how many were currently operating illegally.

Leeds, Bristol and Norwich were among the majority of authorities who said they had not carried out any research to establish how many properties in their area might be affected or how many might pass or fail.

Richard Lambert, CEO of the NLA, remarked: “This is an unacceptable failing on the part of the Ministry of Housing, Communities and Local Government, which should have ensured all local authorities were up to speed with the changes. It’s disappointing that more consideration hasn’t been made for the significance of this change and the challenges local authorities face in implementing it.

“HMO licensing was originally introduced to address fire safety in properties with three or more floors. Smaller HMOs don’t have the same issues, so it’s difficult to see what the Government aims to achieve with this blanket approach.

“Some landlords will have to reduce the number of rooms they let as smaller rooms may not meet the new minimum room sizes. They also must cover the increased costs and so are likely to pass these on to tenants. This alone won’t see landlords leave the market, but when combined with the other regulatory changes, the costs are affecting the viability of running lettings businesses.”

He added: “We‘re also concerned that local authorities appear unprepared for the changes and have, anecdotally, heard that landlords may be being given advice which could put them at risk of breaking the law.

“Our advice to all landlords is to check if your property falls under the new regulations, and if your local authority does not yet have a process in place, make sure you apply using the existing mandatory HMO licensing scheme and receive an acknowledgement of your application.”