The Government’s proposals to increase mandatory licensing of Houses in Multiple Occupation (HMOs) provides another key opportunity to crack down on the minority of rogue landlords operating in the private rental sector, a leading provider of automated rental payments believes.
The new rules could improve living standards for private tenants, while, at the same time, reducing the number of overcrowded properties on the market, PayProp adds.
Currently, compulsory HMO licensing only applies to properties that have three storeys or more.
Under the proposed new system – further details of which were announced in December but are yet to be fully agreed in Parliament – mandatory licensing of HMOs will include all properties that are occupied by five or more individuals from two or more households.
It has been estimated that the rules will bring an additional 160,000 homes under mandatory HMO licensing.
Mandatory licensing of HMOs has been in effect since 2006, covering around 60,000 properties. The new system aims to bring more of the estimated 500,000 HMOs under licensing in a bid to push up living standards in the private rental sector.
The Government says: “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.
“[Criminal landlords] cause much reputational harm to the HMO market, and it is often potluck whether a vulnerable tenant ends up renting from a rogue or a good landlord.”
It adds: “We want to remove that uncertainty, particularly in high-risk-intensely-occupied HMOs, by creating a level playing field between landlords, so the rogues cease to be able to operate substandard accommodation for maximum profit.”
Landlord licensing schemes are often criticised as moneymaking projects, but, bringing all HMOs under one framework seems a logical decision, PayProp believes.
Neil Cobbold, the COO of PayProp in the UK, comments: “As we can see, the number of HMOs has increased rapidly over the last decade. With HMOs adapting and more of these properties now two storeys or fewer, it’s important that the legislation is brought up to date.
“Overcrowding has become one of the biggest issues in the rental sector, and this increased regulation could contribute significantly towards solving the problem.”
Although welcome news for tenants, most landlords and letting agents, the proposal will add to the legislative backlog of the private rental sector.
There is currently no set date for the introduction of increased HMO licensing. However, the Government says that it is hoping to bring the new system into force later this year, subject to approval from both the House of Commons and House of Lords.
Other outstanding lettings legislation and policies include the ban on letting agents charging upfront fees to tenants, the movement to include private rental payments in a tenant’s credit score, the reform of the leasehold sector, and the national blacklist of rogue landlords and letting agents, similar to the database recently introduced in London.
Cobbold continues: “There has been plenty of change in the lettings sector over the last few years, but there are still numerous pieces of legislation that are yet to be introduced or existing rules which are not effectively enforced.
“For all these measures to have a long-term positive impact on the industry, there must be appropriate action and enforcement. The more proposals that are made and consultations carried out, the more we risk further delay to policies. ”
PayProp recently encouraged letting agents to respond to as many consultations as possible in its top five New Year’s resolutions for property professionals.
It is worth noting that, as part of the consultation for these proposed HMO measures, just 11 of the 395 responses were from letting agents – representing less than 3% of the total number of respondents.
“It’s unlikely that the Government will stop regulating and monitoring the rental sector so closely in 2018, so it’s vitally important that, when presented with the opportunity, letting agents have their say and do their utmost to shape future legislation that benefits all parties,” Cobbold adds.
Landlords, what are your thoughts on the proposals?