From October 2005, as part of wide-ranging changes to regulation of the private rented sector under the Housing Act 2004, the government will introduce a new definition of Houses in Multiple Occupation (HMOs). At the same time a complex system of mandatory and selective licensing of HMOs will come into force. Through the introduction of the new legislation the government aims to improve conditions for tenants in the private rented sector.
The National Landlords Association (NLA) fears that excessive red tape could have the opposite effect by actually discouraging investment in the private-rented sector.
Under the new scheme an HMO will be any property shared by more than two unrelated tenants and which is not owned or managed by a public body. Student accommodation owned and managed by educational establishments which have signed up to a Code of Practice is also not classified as an HMO, nor is an owner occupied property with fewer than three lodgers.
Not all HMOs require a licence. Mandatory licensing will come into effect for all HMOs with three or more storeys and if there are five or more tenants in two or more households. HMOs that are not subject to mandatory licensing could nevertheless be liable to additional licensing or selective licensing, which local authorities could introduce in areas of low housing demand or with significant anti-social behaviour. To qualify for a licence HMOs will also have to comply with prescribed amenity standards and will also be subject to inspection under the new Housing Health and Safety Rating System.
David Salusbury, chairman of the NLA, commented: “The new regulations are likely to be cumbersome and complex. The NLA is concerned that the government could be using a sledgehammer to crack a walnut. The short timetable for implementation means that local authorities have very little time to prepare and we believe that the large majority of landlords are unaware of the forthcoming regulatory changes.”
There is also concern that once a property is licensed as an HMO it will not be possible to de-convert it back to a single dwelling. Whilst this would not be a problem for most areas of the UK, local authorities in London could seek to prevent landlords from de-converting an HMO. If this is the case property investors could face substantial losses on their investments.
There is also the problem that if a landlord wishes to sell the property on as an HMO, any tenants would, in theory, have to be evicted until the new landlord received an HMO licence. This could also seriously hinder the market.
David Salusbury concluded: “Whilst quite rightly seeking to safeguard the rights of tenants the government also needs to take into account the rights of the private rented sector. 62 per cent of NLA members say that government regulation is causing them the most concern. If balance is not maintained I am concerned that overregulation could lead to a reduction in the number of HMOs available for rent. This could lead to less accommodation being available to those who are the most reliant on the private rented sector, namely young professionals and the most vulnerable."
