Are HMO Licensing Schemes for Landlords Working as Expected?

HMO licensing
HMO licensing

Are HMO Licensing Schemes for Landlords Working as Expected?

In October last year, changes were introduced to licensing for Houses in Multiple Occupation (HMOs). Lets that meet the following specification must have a licence:

  • The property is rented by five or more people
  • The tenants are from more than one household
  • They are sharing a toilet, bathroom or kitchen

This used to only apply to homes that were a minimum of three storeys high, but now one and two storey properties are also included. There are also minimum room size requirements in place.

Combined with the 3% Stamp Duty surcharge, as well as changes to mortgage interest tax relief, these extra financial hurdles being introduced to buy-to-let investors are leaving many landlords feeling the strain.

However, the long-term goal is to improve the private rental sector (PRS) and provide safer housing for those living in the UK. Five months on, has the introduction of these HMO licensing changes succeeded in raising standards?

Nottingham specifically saw the launch of its HMO licensing scheme in August last year, covering 32,000 properties in the city. A big problem has been found with the processing side of applying for a licence, as it has proven to be a big task for the team of administration staff.

In February’s edition of the Business Network magazine, Adam Kingswood, Director at Kingswood Residential, has highlighted that 13,450 applications were received by November 2018, but only 5,993 had been processed. Of this number, 3,536 applications were returned to landlords, due to errors in the forms, and 2,457 were validated.

The issues experienced by landlords have been put down to an insufficient online registration system. With it being so difficult to obtain a licence, along with the other financial buy-to-let restraints, there is a possibility that this could deter potential landlords from investing in the PRS, and even convince existing landlords to give in and sell up.

Kingswood states in his article: “Indeed, already some tenants are blaming the scheme for their landlord’s decision to sell up or raise rental prices.”

So, on the one hand, the scheme is helping to weed out rogue landlords, either by scaring them away from the market, or by eventually serving the ones who tried to hide a hefty fine. On the other, it’s tightening the belts of landlords trying to meet the new standards and obtain the necessary licence, which, in turn, is having a negative affect on tenants.

Kingswood shared his view that all landlords and lettings agents should be regulated by an approved industry body, in order to ensure “consistent standards nationally, as it would require agents and landlords to operate at a higher standard than that currently required by law; such as to have minimum levels of qualifications, client money protection and professional insurances.”

Do you have buy-to-let properties in an area that has a HMO licensing scheme? How have you found the process of applying? Get in touch with us on social media, and let us know.

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