The Future of the HMO Sector: Being A Review of the Past Decade And A Forward-Looking Prediction for the next Decade

There is a serious problem in the United Kingdom which is not being addressed by governments either current or past.

Housing is at an all-time high due to inward pressure from a burgeoning population and external market forces from overseas demand.

In short: the housing market is at a tipping point.

It is the intent of the author through this white paper to illustrate trends that he has seen over the last decade and by using current statistics and predictions from industry bodies; paint a picture of what the future may be for our housing stock.

It will be focused on a niche sector of the private rental sector commonly known as a HMO being the sector within which Matthew Moodyl the author has been operating multiple businesses over the last 14 years.

Furthermore the author will make several recommendations as to how we could solve these issues going forward.

The rise in the private rental sector of HMO’s has come in part from several sources including restrictions to bank funding, the removal of sale and rent back, restrictions upon house class, growing student population, increasing transient working class and a booming training market.

 

2027 The HMO Sector

What we now need to consider is what the future of this sector looks like 10 years from now and create appropriate but actionable solutions to move forward.

With the future of the private rental sector in sheer jeopardy with the folly of recent and past government actions, one has to wonder; what does the future of the HMO sector look like for us?

In this blog post, we will review the following areas:

  • Housing Act 2004
  • Council Tax
  • Licencing

 

 

Housing Act 2004

Let us begin by reviewing this Act.

Despite the Stature being 13 years old; the foundations of the current approach to Housing is the same as it was back in the early part of the millennia.

Successive governments have tampered with the Act by introducing additional legislature and amendments, but no one Housing Minister has been brave enough to introduce a brand new act to cater for the growth in the private rental sector.

We now found ourselves with yet another ‘White Paper‘ and pseudo-fake consultation on the future of the sector.

What we need to review and contemplate is the very Act itself; what it is designed to do and where it needs to end up.

Given the recent Government concessions that the private rental sector will continue to grow and that we may be moving more towards the continental model; we do need to concede that the current Housing Act is obsolete and needs replacing quickly with a more modern and forward looking approach to the challenges we face.

As to the very nature of this and its contents, this is something that author will consider within the various elements that make up the Housing industry and what could or should be considered moving forward.

Our housing market has changed dramatically but unless the government takes on the task of reviewing and revising this Housing Act; we will end up in a situation where more and more people become homeless, regulations become over-burdensome and the supply of housing will become choked.

 

Council tax

Long the bone of many a home-owner and also a landlord, the very notion of council tax based on bandings from the 1990’s seems at first preposterous and at second, wildly out of tune with the times.

Needless be it for me to kick myself or my fellow landlords firmly in the foot but surely it would be better for the government to consider a legal-of-age ‘per person’ taxation rather than the rather quaint system currently enjoyed where it is entirely possible for a landlord to take a normal terrace property paying Band A or B council tax and transform this into a 5-7 bedroom property BUT still remain paying the same council tax.

Indeed it would almost be fairer if a person just paid a ‘housing or living’ tax as this is what it is no matter where they abode – and certainly for those transient tenants, this would actually raise MORE revenue for the government rather than less.

At the same time, we must also address the current ludicrous decision made by failing councils due to inept financial controls and out-of-control spending to tax a property investor who is refurbishing a home to improve the standard of rental stock or who is looking for a new tenant because the previous tenant left.

It seems unfair to me that a single person qualifies for a 25% reduction in council tax yet an empty property qualifies for no discount at all.

Yet again, landlords are being used as a scape-goat for an ever increasing and desperate government who have sold the family silver, gold and still wish to eat their cake whilst the cupboards are bare.

By moving to a per person ‘housing’ or ‘living’ tax, this would ensure that services are being paid for by the people using the services and move the responsibility from the property owner to the occupant to pay this tax.

 

 

Licensing

Law concept: computer keyboard with word Licensing, selected focus on enter button background, 3d render

The focus on licensing since 2004 has been nothing short of incredible.

Despite what the government would want you to believe; licensing has done little apart from tax the good landlords and allow the rogue landlords to carry on operating.

Whether the licensing scheme be mandatory or selective or additional, the rogue landlords will continue to proliferate and bring down the private rental sector because there are still too many of them, there are far too few council staff and most tellingly, the good landlords effectively continue to subsidise these bad landlords.

We are seeing councils implement ‘Selective‘ or ‘Additional‘ licensing schemes across the country in a desperate attempt to shore up bank balances and create a revenue stream despite the Government’s insistence that a licence fee should be a cost-neutral exercise.  We have seen departments of 8-12 people spring up overnight from new licensing schemes created leading us to ask the question; if this is cost neutral why are so many new employees needed to run the scheme and secondly if there is a serious attempt to crack down on rogue landlords; why is there not a Rogue Landlord squad on each council – similar to a Fraud Squad or similar who investigate financial crimes.

We are also seeing no consistency in approach led by councils on the licensing of properties which leads to uncertainty in the market and certainly will inconvenience the institutional investors the government are so fond of.

It is necessary to have a licensing regime but at the same time, I believe that the scheme should be national in nature; centralised training should be provided at government level on ‘interpretation’ of the licensing scheme and that more help and assistance be given to the good landlords who are trying to comply in order to improve the housing stock.

 

 

So let us know what your opinion is regarding the future of HMOs! 

Leave a comment below and share your thoughts with us!

About the Author Anca Gigui

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1 comment
Sean Robson says October 13, 2017

I agree with much that you have said. It is ridiculous that councils are able to amend tax banding for hmos on a case by case basis some councils doing it one way others not doing it at all. the same applies to licencing. also planning and building rules need to be bought under a national guideline for contributions for things like affordable housing ,public open space, CIL. contributions. the councils have far to much autonomy to do as they please making the rules massively different in every part of the country.

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