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More action needed to tackle impact of HMOs in town centre

More action needs to be taken to tackle the impact of houses in multiple occupation (HMOs), according to an opposition leader in Wrexham.

Poor living conditions and rubbish being dumped in the street are among the issues which have been raised in recent years amid an influx of applications to convert properties in the town into shared homes.

Cllr Alun Jenkins, who is the leader of the Liberal Democrat group on Wrexham Council, said some landlords were failing in their duty to look after tenants.
He said there were almost 100 in his ward of Offa, which covers part of the town centre, some of which were causing problems for the community.

Cllr Jenkins made his comments as leading councillors met to make minor tweaks to the authority’s policy on HMO licences and fees.

The report’s main aim was to reflect the outcome of recent landmark court rulings, which require licence fees to be paid in two parts.
However, he said he would have liked to see a greater overhaul of how licences are monitored.

Speaking at the Executive Board meeting at the Guildhall, Cllr Jenkins said: “For those of us that have town centre wards, HMOs are a big issue.

“I could take you round my ward, where I’ve got approaching 100 HMOs.

“The majority of those you wouldn’t know were HMOs because they’re well run, but it’s the same ones at the bottom of the pile which keep coming up and causing problems.

“There is a need to be certain that we’re doing all we can to make sure the conditions in which people are living in HMOs are satisfactory and that we’ve got enforcement ways of dealing with all of that.”

The changes outlined included revised charges for HMO licensing fees.

The report asked members to agree to proposed payments of £100 for the recovery of costs incurred by immigration inspections and £35 per hour to landlords for providing advice on a prospective HMO.

It also requested them to remove the current enforcement charge of about £415 for hazard awareness notices from 1 April 2019.

But Cllr Jenkins questioned whether the council had enough staff to enforce against landlords who do not act responsibly.

He said: “We know the constraints there are on the department. You’re under resourced and you’ve got fewer officers than are needed to do all the enforcement that’s needed.

“There are huge issues there about how we enforce and police all of this.

“You are revising the document and it would have been nice to have the opportunity to be able to comment and suggest some other tweaks.”

In response, the authority’s deputy leader said he sympathised with the difficulties mentioned by Cllr Jenkins.

Cllr Hugh Jones (Con), who is also lead member for people, told the meeting efforts were being made to improve the quality of HMOs in the area.

He said: “Can I just say that Cllr Jenkins and I have had long discussions over the problems of HMOs in Wrexham and I’m fully aware of what they are.

“I’m fully aware of the frustrations that all of us as members have faced over the years in trying to improve the standards, because it affects people’s quality of life and it affects the whole character of wards.

“It is a hugely important and significant problem for mainly town centre, but not entirely town centre wards and members.

“All I can say to you Alun is that had there been any significant change in policy other than bringing the document up-to-date, we would have gone through a different process.”

By Liam Randall – BBC Local Democracy Reporter

Source: Wrexham

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HMO Property Investments Booming

Many buy to let property investors are moving over to HMO property investments as they battle increasing regulation and taxation changes.

HMO property investments can offer a higher yielding option when compared to standard buy to let, and many lenders are now recognising this and offering finance products for HMO property investments.

Leeds Building Society recently announced that it is now including five-year products in its bespoke HMO mortgage range. This move came on the back of intermediary feedback that landlord clients were looking for additional five-year options for small and large HMO property investments, as growing numbers sought to diversify their portfolios and move into this sector.

Houses in multiple occupation (HMOs) are nothing new, but with affordability issues continuing to impact first-time buyers and rents sitting at high levels, it’s evident that more people are staying in accommodation such as house shares for longer, well beyond their student years.

A study into HMO property investments by broadband and utilities provider Glide looked further into house shares, highlighting that London remained the best location in terms of the variety of house share opportunities, with over 19,000 rooms available. However, with the average monthly rent six times higher than the most affordable city to live in (average rent in London was suggested to be £3,278 pcm, compared to £499 in Bradford), the capital ranked 17th overall as the best city for house sharers.

Ranking the biggest UK cities on a range of measures – including the number of house shares in the city, number of job opportunities advertised, the cost of rent, university rankings and broadband speed – Bristol came out on top. The rest of the top 10 consisted of: Nottingham, Birmingham, Manchester, Liverpool, Derby, Southampton, Brighton and Hove, Leicester, and Portsmouth.

Landlords looking to venture into HMO property investments need to be fully aware of wider legislation changes as well as local licencing requirements when operating within this space. But, with increasing numbers of lending options becoming available, this is certainly an area worth considering.

Source: Residential Landlord

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FOI shows how little councils know about unlicensed HMOs

Government plans to protect tenants from poor living conditions through the expansion of mandatory HMO licensing look set to fall way short of their ambition.

Figures obtained by Simple Landlords Insurance reveal the majority of local authorities don’t know how many unlicensed HMOs are in their area – let alone where they are – leaving them ill-equipped to seek those who break the rules or take advantage of new enforcement powers.

The findings reveal that the rules are “practically unenforceable”, according to one HMO licensing expert, with the government’s recent commitment of £2m of additional funding to help implement the scheme unlikely to have any real impact.

The freedom of information requests returned by 90 local authorities reveal:

  • Two thirds (65/90) of local authorities have no idea how many landlords are breaking HMO licensing rules
  • Nearly one third (29/90) have no idea how many properties should come in under the new regulatory scheme
  • Over a third (31/90) did not prosecute any landlords for infractions of existing rules in the last two years
  • There were only 103 HMO licences rejected at application over the last 12 months, versus a total of 18,881 licenses granted.

Houses in Multiple Occupation (HMOs) containing five or more people in two or more households with shared facilities such as a kitchen, bathroom or toilet must be licensed.

To gain a license, landlords must now pass a ‘fit and proper’ test as well as providing proof of compliance with fire safety regulations and provide tenants with a written statement of the terms of their occupancy.  The rules were widened on 1 October, removing a minimum three storeys high requirement whilst new conditions on minimum room size and waste collection were imposed.

The known unknowns

The government’s Housing Minister Heather Wheeler MP claimed the new rules would increase the number of mandatory HMO licenced properties in England from 60,000 to an estimated 220,000 properties.

However, this new research shows local authorities are hamstrung in their efforts to apply the new legislation – due to a combination of poor intelligence about housing stock and stretched resources.

Carl Agar, founder of The Home Safe Scheme and managing director of property management company Big Red House, says: “It’s a big worry that local authorities don’t seem to have the resources available to manage this new workload. And the new rules are going to be practically impossible to enforce. The government is essentially relying on honest landlords coming forward to apply for a licence – leaving the so-called rogue or down-right criminal landlords that really need to be identified – out of scope. The £2m promised support is literally a drop in the ocean.”

Cities overwhelmed

Amongst the local authorities that have the intelligence and data to make a prediction about how many more HMOs would need a license, cities unsurprisingly show a major hike.

Liverpool City Council had 1,195 HMOs with a mandatory license before 1 October, and expects that 5,000 will require licensing. Birmingham expects numbers to swell from 1,853 to 4,000 and Southampton expects the numbers will increase from 551 to 2500.

Many London boroughs had no idea at all how many additional HMOs would come under scope, whilst those that did are expecting a huge jump – in Greenwich from 147 to 3,250 HMOs under scope.

66% of the local authorities who responded were able to estimate how many HMOs were likely to require a mandatory license from 1 October, and the average increase recorded was 227%.

Carl Agar adds: “Many local authorities are now faced with at least twice as many licences to process and check with the same amount of human resource – leaving even less time for enforcement. The major conurbations will be swamped.”

Mystery housing stock

Environmental Health Officer and Chair of the National HMO Network Paul Fitzgerald, explains: “Most local authorities simply do not fully understand the housing stock in their area, and they are kidding themselves if they claim that they do.

“Trying to identify an HMO from scratch is an incredibly challenging job, made harder by the failure to join up systems like council tax and benefits registers, and immigration databases. Those who are determined to break the law do not apply for a licence in the first place.

“Once they have been identified, dealing with criminal HMO landlords will be yet another problem. Pursuing a prosecution – or applying for a banning order – takes time, stretches resources and is not guaranteed. Many local authorities will opt for issuing fines, but there’s no guarantee that these will be paid without going to court, and that’s another resource and cost-heavy process.”

“The bottom line” sums up Carl Agar “is that the Housing Act, in its current form, is no longer fit for purpose and the government need to prioritise helping local authorities know who is renting property in their areas and what type of properties are being let. A central government funded national register would be a major step forward.”

Richard Truman, Head of Operations at Simple Landlords Insurance commented: “Earlier this year, we found that 85% of landlords we spoke to weren’t aware of the looming HMO regulations. A month on from their implementation, we wanted to find out exactly what those landlords are facing on the ground.

“The changes may be well-meaning, but a failure to support local authorities to communicate about them and enforce them is bad news – for good landlords and for tenants.

“We want to see the emerging class of professional landlords supported by central government and local authorities, and that can clearly only be achieved with more effective regulation and resource.”

Source: Property118

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Tighter regulation makes HMO investment an area for specialists

The Licensing of Houses in Multiple Occupation Order 2018 came into effect on 1 October, changing which residential properties will be categorised as houses in multiple occupation (HMO) for mandatory licensing purposes. From now on, properties occupied by five or more people, forming two or more separate households, will be classified as HMOs. The Residential Landlords Association estimates that this will affect 160,000 properties that didn’t require a licence before.

Many houses and some flats will now be required to have mains-powered fire alarms, fire check doors and fire escape areas that could result in considerable expenditure. Also, the penalty for not obtaining a licence can be a criminal conviction, a £30,000 fine as well as being required to refund rent received.

This long-awaited extension will offer greater clarity of minimum standards, including specified minimum room sizes deemed suitable in HMOs for occupation. Prior to this, many councils interpreted the definition for licencing differently.

The new rules allow a valuer, investor or lender to accurately establish if accommodation meets minimum standards. It should enhance the stock in this sector, which until now has included HMOs with substandard living accommodation.

Many in this sector have welcomed the minimum standards, including valuers and lenders, with the legislation further professionalising the market. With many councils unable to police HMOs due to limited resources, the roll of chartered surveyors and lenders inspecting and deeming properties fit for purpose and suitable security can’t be underestimated.

However, the cost burden for investors and property owners may increase, and where rooms are excluded from letting when minimum room requirements are not met, landlords’ rental income will fall. This could affect capital values and loan-to-value covenants of properties held as security for bank lending.

Some investors may withdraw from the market. This new order is likely to result in a reduction in the supply of HMO accommodation, creating upward pressure on rents at a time when there is a need to increase affordable accommodation.

The legislation is likely to further increase the specialist nature of HMO ownership, requiring a much more professional approach from landlords. The times of amateur investors buying HMO properties for possible high returns has passed. The need to understand and comply with the licensing requirements, as well planning legislation, means HMO ownership is now best suited to those with specialist knowledge of this sector.

Source: Property Week