Why is regulation for Houses of Multiple Occupation (HMO) not unilateral and why are not more empty or non-renting buy to let homes being converted into HMO’s?
These are two of the questions posed by Whitney UK, which runs property investment courses for professionals, because the company claims 3.2 per cent of British homes are currently deemed as Empty Housing Stock and Government projections only forecast 45,000 new rentable homes to be built by 2010/11.
Whitney believes that not only are these empty properties wasted resources but they can also reduce neighbouring house price values by up to 18 percent, according to research conducted by the Royal Institute of Chartered Surveyors.
David Harwood, a trainer and mentor for the dedicated Whitney UK HMO Advanced Training Courses, said: “HMO Licensing was originally devised to catch out ‘unscrupulous’ UK Landlords with fines from £10,000 upwards for first time unregistered offenders.
“Whilst regulation may have brought into line some of the more professional and educated landlords amongst the 30,000 applications that have been received for HMO licenses, there is still a great deal of work to be done, both at local and national governmental level.
“Not only do definitions, requirements and standards vary around throughout Great Britain but a lack of funding means that some Councils are better staffed within Environmental Health departments to manage HMO’s than others.
“In Scotland all landlords of Buy to Let and HMO properties need a licence, in Wales the majority of local authorities require HMO's to be licensed but in England there is less alignment so more cracks in the system appear. How can this be when populations in England far outweigh those of Scotland and Wales?
“In addition to misalignment between HMO Policy and therefore varying standards within Great Britain, empty properties are left to fall into ruin, not only wasting unused space but also potentially damaging the local community and environment.”
The overall Empty Housing Stock vacancy rate has reduced by 12 per cent since 1997 from 763,234 to 672,924. Of the 672,924 vacant properties in 2007, 271,252 were identified as private sector vacancies of six months or longer. Survey data suggests that half of these are still empty after two years and even after 10 years.
Whitney also questions why developers are not working with these existing properties before tearing up the ever diminishing Green Belt?
Harwood added: “The definition of an HMO can still be called into question: currently the UK Law states that any home with five bedrooms plus and three or more floors requires a licence but many landlords consider smaller 'shared housing' to be exempt.
“This a common misconception. Houses containing more than one household but at least three people are still classed as HMO's but they may not require a licence. It is essential that all HMO landlords educate themselves not just for now but for the long term, considering marketing conditions and what is safe and realistic – for their own business interests as well as for the tenants they are renting to.
“With a responsible approach to their profession, HMO landlords are more likely to ride the storm in the bad times, as well as maintain a healthy profit and loss sheet. Currently, Whitney students who focus on HMO strategies continue to own and manage properties that cash flow positively and continue to convert properties, in spite of the credit crunch. It is all about adopting the right strategy and knowing the difference between right, wrong and let’s see what happens.”
Harwood’s tips on responsible HMO property development and management include:
• Discuss your property with the relevant Environmental Health Officer in your region, ideally before you buy;
• Join and get involved with the local Landlord’s Forum, often run jointly by landlords and the local authority;
• Set a target profit for your property and stick to it;
• Do your calculations based on at least the standard variable rate (NOT the deal rate) of the lender. Remember that the average interest rate over the past 25-30 years is 10 per cent;
• Calculate the occupancy rate for break even. Remember all the costs including insurance, gas checks, wear and tear etc;
• Provide high standard accommodation;
• Get educated and find out how others have done this.
