Are New HMO Regulations Practical?

new HMO regulations, HMO properties, buy an investment property, HMO licenses, HMO landlords

Did you now that HMO regulations have been under a planning system since April 2015? This means that a “new-use class” will be introduced for the conversion of a residential dwelling to a rental property with 3 or more unrelated tenants. Lawmakers claim that they are introducing these new HMO regulations to curb the rise of “studentification” in HMO properties as experienced in a handful of places in the UK.

Many investors are calling foul on the change, since the solution they are proposing is too broad in application in comparison to the problem they are trying to solve. The National Landlord’s Association even compared this new legislation to a sledgehammer being used to crack a nut.

Rather than zero in on the culprits, the new laws are made to apply to all property investors, even the small time landlords who are just looking to rent out empty bedrooms in their houses.

New regulations may also add unnecessary uncertainty in the completion of some HMO properties.

Before, landlords only worried about whether they could attract tenants into their property and if they can reach their target yield every month. After the implementation of the law, those who are planning to buy an investment property will now have to hurdle through the process of securing planning permissions. This means that they can’t open their rental property to the public and postponing their chances to earn indefinitely until they have received a planning permission from the local authorities

Seasoned landlords also claim that the new regulations will add costs to the process of establishing HMO accommodations. Local authorities are given wider licensing powers under the new rules and many old timers are cautious that prices for HMO licenses may be hiked up to a few hundred pounds. Not to mention all the construction costs you’ll have to deal with in order to comply with building standards provided under the laws.

Aside from the cost of the license and construction, prospective HMO landlords will also have to prepare £330 planning application fee, plus agent fees, and other bureaucratic costs. With the expenses piling up, many experts are afraid that the additional hurdles may turn off first time landlords from pursuing their goals of opening HMOs.

Last but not least, even town planners who are expected to implement the law think that implementing the new regulations will be a challenge.

The law defines HMO as a lodging shared between 3 or more unrelated people. How are these planners going to find out if the dwellers in a property are not related to each other? Can they conduct a full blown investigation on the matter?

What about in cases of some mates living together? Are they considered tenants, because they chip in to pay the mortgage of the house?

Grant Shapps, the shadow Housing Minister, proposed a localised system of control for the problem. This grassroots solution will help landlords, residents and planners to deal with what is a local land use issue at the appropriate level.

Many of my colleagues are giving their support to this alternative solution, but the question of whether these alternatives will be applied remains to be seen.

Hopefully, common sense prevails sooner rather than later and better solutions are brought to the table. It’s just frustrating when government adds more problems than solve them.

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