New HMO Licensing
From April 2006 new licensing rules will mean that many properties that previously avoided the tag of ‘HMO’ will now qualify as a House of Multiple Occupation or ‘HMO’.
What is a HMO?
Under the Housing Act 2004 the definition of HMO has been revised to include any house or flat that is occupied by more than 2 people who do not form a single household but share the same amenities (eg. Bathroom, cooking facilities etc).
How do you classify a household?
A household can be a single person, a family or a co-habiting couple whereas a group of individuals sharing a house will normally be classified as ‘multiple occupation’.
Will I need a licence?
Not all buildings that are HMOs will need to be licensed. The Council will only be targeting buildings of 3 + storeys (include sub floor basements) AND 5 + tenants.
Will the student market be affected by this?
Under the new HMO regulations where many landlords had previously avoided HMO classification by claiming that tenants shared the house and lived in the manner of a single household, if they fall within the new HMO categories they will be required to apply for a licence.
How has this affected the market place so far?
Many local authorities are finding that the new more stringent rules are backfiring on them already when it comes to housing more vulnerable people. Houses that used to be let as bedsits for young people are being developed into self-contained flats to avoid the need for the new licensing and the availability of low cost accommodation is becoming scarcer.
The council of mortgage lenders has warned that these new rules could make mortgage lenders very reluctant to lend on student houses and other types of multiple occupation housing. Whilst the mandatory requirement for safety improvements in high risk properties (3 + storeys and 5+ tenants) is a useful outcome of the legislation, there are fears that further extension of the legislation into lower risk property will make rental housing more expensive to provide. The lender also expressed concern that the introduction of HMO licensing may create an upwards pressure on rents with 48% of landlords with HMOs saying that they might increase their rent. In markets such as Cardiff where there are simply too many houses available for rent this is unlikely to be the case for a while.
What will be the costs of this new licensing?
Legislation suggests that once a house has been licensed it may not be ‘unlicensed’ because this could cause a fall in the buildings value. Landlord’s who’s property fall within the new rules should carefully consider whether they wish to continue to let as a HMO and the costs of any conversion and safety work that the local authority may require them to do. Some local authorities have set their standard license rates already. EG. Plymouth council’s rate is £690, Torbay is £400, Cardiff can not confirm an amount at this time.
What is the time scale of these new changes?
Due to the complexity of introducing this new legislation many local authorities including Cardiff have not been able to accept new license applications and it is likely that if the Government continues to push for the April deadline that they will be forced to relax the rules whilst they process these applications. CPS Homes are in regular contact with Cardiff Council and so far they have informed us that they are still undergoing training on the new system and they indicate that current forecasts expect that they won’t be in a position to carry out the new rulings until at least the tail end of 2006 if not later.
What does this all mean for Cardiff Landlords?
CPS Homes advice is to sit tight for the moment. We are in regular contact with Cardiff Council and once they have set the wheels in motion we will be in contact with you to tell you what your options are and to talk you through any queries you may have. Don’t panic! Remember the Council WILL give everyone plenty of time to meet any criteria set and when they do CPS Homes will be here to help!
What is a HMO?
Under the Housing Act 2004 the definition of HMO has been revised to include any house or flat that is occupied by more than 2 people who do not form a single household but share the same amenities (eg. Bathroom, cooking facilities etc).
How do you classify a household?
A household can be a single person, a family or a co-habiting couple whereas a group of individuals sharing a house will normally be classified as ‘multiple occupation’.
Will I need a licence?
Not all buildings that are HMOs will need to be licensed. The Council will only be targeting buildings of 3 + storeys (include sub floor basements) AND 5 + tenants.
Will the student market be affected by this?
Under the new HMO regulations where many landlords had previously avoided HMO classification by claiming that tenants shared the house and lived in the manner of a single household, if they fall within the new HMO categories they will be required to apply for a licence.
How has this affected the market place so far?
Many local authorities are finding that the new more stringent rules are backfiring on them already when it comes to housing more vulnerable people. Houses that used to be let as bedsits for young people are being developed into self-contained flats to avoid the need for the new licensing and the availability of low cost accommodation is becoming scarcer.
The council of mortgage lenders has warned that these new rules could make mortgage lenders very reluctant to lend on student houses and other types of multiple occupation housing. Whilst the mandatory requirement for safety improvements in high risk properties (3 + storeys and 5+ tenants) is a useful outcome of the legislation, there are fears that further extension of the legislation into lower risk property will make rental housing more expensive to provide. The lender also expressed concern that the introduction of HMO licensing may create an upwards pressure on rents with 48% of landlords with HMOs saying that they might increase their rent. In markets such as Cardiff where there are simply too many houses available for rent this is unlikely to be the case for a while.
What will be the costs of this new licensing?
Legislation suggests that once a house has been licensed it may not be ‘unlicensed’ because this could cause a fall in the buildings value. Landlord’s who’s property fall within the new rules should carefully consider whether they wish to continue to let as a HMO and the costs of any conversion and safety work that the local authority may require them to do. Some local authorities have set their standard license rates already. EG. Plymouth council’s rate is £690, Torbay is £400, Cardiff can not confirm an amount at this time.
What is the time scale of these new changes?
Due to the complexity of introducing this new legislation many local authorities including Cardiff have not been able to accept new license applications and it is likely that if the Government continues to push for the April deadline that they will be forced to relax the rules whilst they process these applications. CPS Homes are in regular contact with Cardiff Council and so far they have informed us that they are still undergoing training on the new system and they indicate that current forecasts expect that they won’t be in a position to carry out the new rulings until at least the tail end of 2006 if not later.
What does this all mean for Cardiff Landlords?
CPS Homes advice is to sit tight for the moment. We are in regular contact with Cardiff Council and once they have set the wheels in motion we will be in contact with you to tell you what your options are and to talk you through any queries you may have. Don’t panic! Remember the Council WILL give everyone plenty of time to meet any criteria set and when they do CPS Homes will be here to help!
The information contained within this article was correct at the date of publishing and is not guaranteed to remain correct in the present day.
