Does the HMO and selective licensing scheme ‘punish’ good landlords?

Does the HMO and selective licensing scheme ‘punish’ good landlords?

Tackling rogue landlords who rent out unsafe and over-crowded properties is often highlighted as the main purpose of the house in multiple occupation / HMO and selective licensing scheme. 

Newham Council introduced the licensing scheme in 2013. The HMO scheme is now nationwide. 

The Council reports, to date, 1,225 rogue landlords have been fined or prosecuted for housing crimes. My home and investment property is located in Newham Council so I’ve seen the ‘changes’. 

Initiatives that improve the living conditions for tenants are necessary. And, I do not doubt the good intentions of this scheme. But, I often question whether this licensing scheme ‘punishes’ good landlords who do not break the law. 

Does the HMO and selective licensing scheme ‘punish’ good landlords?

A HMO and selective licence in Newham Council costs £1,250 and £750, respectively. The licence is valid for five years, but it’s non-transferable. So, if you buy a new property with a valid licence, you must pay for a new licence under your own name. Refunds are not issue for declined applications.

Some landlords argue that the licensing fee is expensive. For me, it’s not the price that’s the issue; it’s the principle. The majority of landlords in Newham Council do not act illegally. Yet, it’s mandatory for all landlords to pay for a licence.

Landlords are paying for licences, but enforcement is not improving

I applaud Newham Council for prosecuting more landlords than any other London borough. But, enforcement remains a big issue. Rogue landlords, rogue tenants and rogue letting agents are often one step ahead of the Council.

When I purchased my home, it was a registered as a large HMO. Under this licence, only five or more people, who form two or more households, can legally live in the property. But, in actuality, there were 12 tenants, who formed six households. Worst, a long-standing local letting agent managed the property.

Another example: A selective licence was granted for my neighbour’s house. This means only one household, or two unrelated people, can live in the property. But, five tenants, from four households, were living there. One tenant slept in the storage room underneath the staircase. Seriously. 

Both scenarios are not uncommon in Newham Council because landlords, tenants and letting agents believe the threat of enforcement is minimal. 

I have yet to uncover any comprehensive research and findings on how the Council will improve enforcement. If you do come across any reports, please forward it to me. My assumption is that the Council Enforcement Team is under-resourced and under-funded.

Will the licensing fee be abolished?

The Government reviews the licensing scheme every five years. But, what if the scheme is successful, and there are no more rogue landlords – will the licensing fee be abolished? My concern is that the fee will remain permanently, like Council Tax. Why would an under-funded council abolish a fee that generates revenue? 

In my view, the HMO and selective licensing scheme is of good intentions, but of poor enforcement. Do you agree or disagree? 

Sign up for more property investment tips

Be the first to comment

Leave a Reply

Your email address will not be published.