New tenancy rules issued on the 1st of October mean that any shared home with five or more residents from more than one family come under the mandatory Houses in Multiple Occupation (HMO) licensing regulations.
Many landlords rent out shared homes and now that the three-storey rule has gone, even a bungalow could be caught in the mandatory HMO licensing system.
For some landlords this could mean having to spend thousands bringing their properties up to the correct HMO safety and room size standards, with fire doors, hardwired fire alarms etc.
Of course, any house housing five or more unrelated tenants was a HMO in the first place, but it was not necessarily licensable unless it had three storeys. Now, with these new rules local authorities will look to impose their own interpretation of the rules which are generally quite demanding.
This puts many landlords in a dilemma: do they evict some tenants to bring the occupancy level below five, which means their income will decrease, or do they apply for a licence, possibly involving a large investment, increasing their costs. Either way they will likely be looking to recover some of that loss of income or cost by way of a rent increase.
The new rules on minimum room sizes mean that in some cases alterations needed to the property could be substantial, or if the minimum room sizes cannot be met, some tenants may have to go.
It is thought that since October 1, around an extra 160,000 houses will be caught in the mandatory licensing trap, and landlords should already have applied for a license and taken the necessary steps to ensure compliance. The rule change means many more properties will be required to be inspected and certificated by local authorities.
Often people see living in an HMO as a cheaper option. They are happy to put up with poor conditions, and many of these shared houses are in very poor condition, either to save up for a deposit, or if they are in low paid work.
Now, with a government drive to improve conditions in HMOs, they are likely in future to be not so much a cheap option.
One tenant in Leeds told the BBC:
“Property prices are so high, so saving for a deposit is hard work, and rents for one-bed flats are extortionate. So the only way I can afford to build a deposit is to live in a HMO.
“It’s a sociable way to rent, but the quality of the properties can vary. I’ve had HMOs where gas leaks have been common, carpets haven’t been fitted and whole kitchen units have fallen off the wall.
“If rents do go up because of this new legislation I’ve got friends who’ll struggle to pay their rent because they just haven’t got the cash.”
It has been estimated by The Centre for Economics and Business Research that this new licensing process will cost landlords an average of £1,200 each, and in total, over £95m.
The new rules only apply to properties in England. They focus on safety issues in the property and also to improving the environment where HMOs are located. Neighbour problems are commonplace with HMOs, often having unsightly bins out front. Landlords will now be required to provide appropriate space for an adequate number of refuse bins.