Government Proposals Examined

Last weeks Government bombshell about their latest plans to introduce even more regulation for landlords has been widely condemned from all areas of the landlord community.

Property Hawk is incredulous that a Government which professed to be in favour of light touch regulation could in the last throws of their ‘reign’ decide to give landlords both barrels in an attempt to gain a few cheap headlines and presumably a few votes. Cheap but not surprising!

Now that the dust has settled we wanted to explore some of the potential implications of the announcement by the government last week to bring rental properties with more than 3 tenants within the control of the planning system by altering the Use Classes Order.

The old system of HMO regulation

The previous system of HMO (Houses in Multiple Occupation) regulation was bought in by the Labour Government through the 2004 Housing Act, and came into force on the 6th April 2006. This bought in a confusing duplicitous approach to HMO control.

The regulations defined an HMO property as where 3 or more tenants occupied a single property who form two or more households. However, confusingly a landlord would not necessarily require a licence for their HMO property unless their local authority had bought in a local licensing scheme. Any property where there were 5 or more tenants living over three or more floors would automatically require a mandatory HMO licence.

Licensing logic ‘woolly’

The logic for this regulation was to regulate HMO properties and partly to ensure that through the licensing system that properties would have adequate fire protection. There was ‘some’ evidence that there is a greater potential incidence of fatalities in these properties. However, it has never been completely established whether it was the types of property in the HMO sector that represent the danger or the nature of the tenants who have a greater risk profile through being younger or having higher rates of smokers for example.

New system of HMO regulation

The new system proposed by the Government completely over turns this system by bringing HMO regulation within the control of the planning system. A step resisted probably for good reason by a succession of previous governments.

The new system will mean that a new use class will be introduced for any change of the use of a residential dwelling to a rental property with 3 or more unrelated tenants. The Government anticipates bringing in the new system by April this year, prior to the anticipated date of the general election.

Inside sources suggest that the push to bring in these new powers had come from John Denham the Secretary of State for Communities and Local Government who despite over 900 responses with differing views on the effectiveness of the new powers was determined to push through the legislation. Probably just to make him feel like hes made a difference before he loses his job.

Why we think the new legislation is rubbish:

1. Firstly, the legislation is as the National Landlord Association have said: “a sledgehammer to crack a nut”. Why introduce a system that will impact on every landlord potentially looking to renting to a couple of tenants when it is a local problem concentrated in very specific areas? The main driver for this legislation was the problem of ‘studentification’, a very specific issue in a few cities and local areas. Surely it would be far better as Grant Shapps the shadow Housing Minister has suggested to address the problem through a localised system of planning control through the Local Planning Frameworks. This would allow landlords, residents and planners to deal with what is a local land use issue at the appropriate level.

2. It will introduce unacceptable levels of uncertainty. Any investment decision that a landlord makes has a level of uncertainty and risk associated with it. Will I get a tenant? Will I achieve sufficient rent? Now the introduction of the planning controls means that many landlords looking at buying an investment property and letting it to several tenants will now have the uncertainty of having to apply for planning permission. This will inevitably put off some landlords from investing and thereby reduce the amount of rental accommodation. Less supply means higher rents. This means higher rents for just the student tenants from less privileged backgrounds that the Government is trying to get to university. Is that what they really intended?

3. It is yet another cost to landlords. Landlords who are looking at letting a property to a number of tenants now will have to pay the £330 planning application fee, plus any fee to their agent. The expected introduction of wider licensing powers of local authorities warranting more landlords to require a HMO licence will inevitably be an added expense requiring a landlord to obtain a expensive licence often costing hundreds of pounds. The cost of complying with these licences through required works such as mains wired fire alarms and sinks in bedrooms could add thousands to the overall costs. Not so bad if you are an experience HMO landlord letting a property with 10 beds, but if you are just letting to 3 postgraduate students – ridiculous, uneconomic and wasteful. For example what happens if a new owner then wants to turn it back into a family home?

4. It’s an added bureaucratic costs. The cost of processing these applications in terms of planning budgets will be great. Fine at the moment when planning department are idling after the fall off in development. But when the economy recovers it will mean more staff, more costs and ultimately higher taxes.

5. Finally it’s unenforceable. Even the town planners who are charged with administering the the new law think it unworkable.

How can you tell when a group of 3 people are unrelated. How would the planning authorities establish this? Can you imagine the fun and games of trying to prove this in court? What about residential landlords taking in lodgers as tenants. You take in a couple of mates as tenants to help pay your mortgage and suddenly you’re an HMO landlord. Crazy!

Landlords suffer from policy making ‘on the hoof’

This legislation looks like it has been rushed out by a Government determined to grab a few headlines and votes without thinking through the implications. As far as we can see it will create unnecessary bureaucracy and legislation. It will also not solve the problem of ‘studentification’. Why? Because the areas that have this problem are almost completely ‘studentified’ already. This legislation is not retrospective and only relates to new HMOs. It will therefore not even tackle the very problem it was intended to address.

Yet again – pointless – needless – illogical. Shouldn’t somebody be regulating these regulators? Oh yes – that’s us!

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Dear Sirs,

I can’t believe that the Government is that blind and stupid as to consider changing the existing HMO regulations and make them as onerous as they intend. It beggars belief that we let these idiots rule and ruin our lives to the extent that they can financially penalise and steal from us by forcing totally unnecessary measures designed to protect tenants from an imaginary threat. 99% of landlords are honest, hardworking citizens of the UK just trying to make a meagre living and improvements to their lives and the lives of their families. They are not claiming outrageous (and now it turns out… illegal) expenses for second homes, cleaning, decorating etc.

The government’s plan will impact negatively on the private rented sector and the available housing will be in very short supply as landlords that find themselves penalised by these laws will move to sell their properties and have to evict their tenants. The immediate financial costs of transforming a 3-storey 5 bed house being shared by four tenants (all close friends) where currently there is no need to licence (neither mandatory nor selective licencing currently affects this property) will be very high indeed, and out of the realm of most people since they cannot afford to borrow any more money against the value of the property (which has dropped substantially in the credit crunch and economic meltdown we’ve just experienced) in order to carry out the necessary works needed to comply with the proposed new regulations. Give us the grants to pay for the work and we will do the work.

A preposterous situation, not borne of any logical reasoning or thought, by selfish incompetents people in government hell bent on destroying the livelihoods of others just to further their own failing career and bolster their own egos to supplement their miserable, wretched existences. I hope you can tell from the tone of the last sentence that I feel they are nothing more than scum and wish that for once true capitalism and partial financial anarchy in favour of the people was allowed to reign. Over 45% of my earnings is stolen by the government and I am left to live on the rest. Even in the book called "The Richest Man in Babylon" by George S Classon, in old Babylonian times, thousands of years ago, the ratio was 1/10th – pay yourself first so there was copper and silver in your pocket to jingle, which could grow into gold, 2/10ths to pay your creditors and reduce/pay off your debts, and the remainder to be spent on feeding and clothing and housing yourself and your family (if you had one)! The ratios in this day and age are wildly out of kilter!! Gareth

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Ever since the disastrous election result after WW1 when Clem Atlee and his lefties were elected, private landlords have been branded scroungers and baddies.
The 1954 Landlord and Tenant Act reinforced this attitude by inferring that all tenants are good and all landlords are bad, by introducing the "can’t get tenants out" legislation, no matter what.
Not until the 1980 was this situation eased by introducing the Shorthold Tenancy. But lo and behold, the lefties are in charge again, looking to turn the clock back and make it impossible for a landlord to make any money never mind a decent living.
Roll on May 2010.
Kind regards NH Storbeck

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