United Kingdom

Where did the HMOs go?

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A row of residential apartments

Houses in Multiple Occupation (HMOs) are in decline, according to a new report.

Specialist finance company Octane Capital found that there are now just under 490,000 HMOs in England, down from 510,776 in 2019/20. Over the last year, numbers fell by 2.4%. Company spokesperson Jonathan Samuels said that numbers had slid since the introduction of tougher licensing rules in 2018, and warned that investors needed better incentives to stay in the sector.

Setting up a new HMO isn’t easy. All large HMOs (those rented by five or more people who form more than one household) must be licensed. There can also be planning obstacles: HMOs for seven or more unrelated people automatically require planning permission, but local councils can also require planning permission for HMOs of three to six people under Article 4 of the Town and Country Planning Act.

There are also tougher building regulations for HMOs than for regular residential properties. For example, HMOs must have self-closing fire doors and a smoke alarm in each separate unit. The minimum size of bedrooms is also regulated.

Risks versus rewards

Getting it wrong can come with heavy financial penalties. Letting out an HMO without a licence can carry an unlimited fine or a civil penalty up to £30,000, and may also result in repaying rent to tenants under a Rent Repayment Order. In more serious cases involving health and safety breaches, fines can run into the hundreds of thousands of pounds.

And even if Article 4 restrictions aren’t yet in place, local communities often see HMOs as causing crime, antisocial behaviour, fly-tipping and more – and support clamping down on them. This month, Arun District Council in South East England brought in new Article 4 restrictions on HMOs in several wards, while residents in Rugby have launched a petition calling on the council to license all HMOs in the town.

Despite these barriers, there are some regions where the HMO sector is growing. The West Midlands and Yorkshire and the Humber saw large increases in their HMO stock, while the East of England and the South West had smaller rises. Despite the difficulties involved in running an HMO, some investors are still willing to take the plunge – and if the rising cost of living encourages more tenants to look for cheaper accommodation, they could see demand rise quickly.

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