Communities and Local Government CommitteeWritten evidence submitted by Colin Wardle

Executive Summary

This letter summarises problems with current HMO law and definitions and suggests possible future ways of implementation. It also suggests other areas to improve the rental market, by increasing transparency of information via the internet in areas such as ratings for properties, ratings for landlords and rating for tenants.

As a landlord of around 20 properties in central London I wanted to make the following comments, specifically with regard to HMO (House of Multiple Occupancy) definitions.

HMO Problems of definition.

1. Background

Since 2004 when the rules of HMO came into force there has been a lot of confusion as to who this impacts and the law does not seem to have gained any significant uptake. An agency that I spoke to had 300 properties on their books and in 2009 (five years after the law) told me not one of the properties had an HMO licence. As the definition is three unrelated people or more in a property, clearly this does not seem to be a practice which is working. It would thus appear time for an overhaul of such a law.

2. Single Legal Entities should not be included

If you have three or four people who are on a single tenancy agreement, with joint and several responsibility, ie they come in as friends, this should not be defined as HMO, because they are a single legal entity.

If a landlord rents the individual rooms out individually ie each person in a room pays their rent separately to the landlord. Then this is possibly where the problems are more likely to occur particularly for higher numbers of people say over five for example. The HMO law makes no point of differentiation in this instance.

HMO—What problems are you trying to solve? Where are the problems? What practical steps could work?

3. What Problems are you Trying to Solve?

In short where there is overcrowding and poor quality housing in an extremely small sector and possibly is more acute in some geographical areas.

4. Where are the Problems

There are plenty of good landlords and good agencies offering good standard of rental accommodation in most areas. I would have gladly rented one of my properties when I was a student 20 years ago, so standards have improved greatly (Let us not lose sight of this fact).

In short, most people have some choice to leave their rented accommodation and find a better landlord if they are not happy. We should welcome and encourage buy to let as a means to increased competition in this sector, there-by giving people more rental options.

In London problems would appear to be in low cost poorer parts, where many people do not speak sufficient English. Lack of English language creates a sub-culture of letting. As an English landlord it would be extremely difficult to take tenants on who can not speak English. What therefore seems to happen is a Polish or Indian landlord (for example) take on tenants who speak their language. (often advertised only in their own language). The tenants in this scenario do not have much choice and often have poor quality of housing and have multiple people living in one room. The landlords themselves often don’t speak that much English either.

From my experience central London (Bermondsey, London Bridge, and Battersea) it seems to attract more educated younger population: as these are more expensive areas I see no evidence of these issues. However an area like Newham, where there are many who don’t speak English the situation may be more common.

5. What Practical Steps could make a Difference in these Scenarios?

Therefore applying heavy handed legislation, which is expensive and complex to landlords that may not speak English and tenants that don’t speak English is probably not going to solve this problem. It emphasises the bigger picture of the importance of ensuring the migrants speaking a reasonable level of English before they come to the UK is essential.

Helping people who do not speak English would in my opinion only make the situation worse by encouraging people to come who do not speak English and giving them an easy option.

If you are to catch out so called rogue landlords, it should be done through the current tenancy deposit scheme database. By not doing so (Such as Newham) you are accepting that the tenancy deposit scheme is not all encompassing and this therefore weakens this scheme and adds to further confusion and bureaucracy.

Further Comments and Suggestions on the Rental Sector

In short I feel it is a very small minority of landlords and agents that are doing a poor job, whilst there are always improvements that can be made excessive legislation does not solve it.

6. Costs of Licences from Councils

Newham council (as an example) charge £950 for an HMO licence and £500 (currently discounted to £150). Landlords don’t mind paying to improve their properties, but to pay this as an admin fee seems excessive and will encourage evasion. There should be a clear cap on what a council can charge. A “Covering costs” policy seems subject to the inefficiencies of a council procedures. The costs need to be capped and council should be forced to work to a budget not to an unlimited “cover costs” scenario now proposed.

Can it really be expect that someone who does not put adequate money into property maintenance and safety to fill in a lot of paperwork and pay a further £950? The question never asked is, are you happy to see this passed on to the tenants in the form of increased rent?

7. Long Term Five Year Rental Contracts

I am not opposed to five year contracts/tenancy agreements, but don’t feel they are necessary. In reality very few tenants can commit to this. The nature of the rented market is often transient—overseas short term workers, students, people who have recently moved to the area. Many of these people rent to give them more flexibility to move.

8. Build a National Database of Landlords through the Deposit Scheme, don’t Create Further Silos of Information through Separate Legislation

The new laws around the tenancy deposit scheme in place create a reasonable central data base (albeit via three companies). This should be the starting point for further legislation should it be needed. We do not want to get into a situation of constantly entering the same data into different databases such as council licences and laws as well as government laws.

9. Ratings Web Site for Tenants, Properties and Landlords

*Why not kick start a “Trip Advisor” style of ratings website for landlords. If the government initiated a web site where landlords were rated by tenants—this might start to make poor landlords more responsible ie naming and shaming. Like Trip Advisor you would need to allow the ability of the landlord to respond.

10. Agency Fees for References

I personally do not use rental agencies, as I believe I can do a better job. However I am outraged on tenant’s behalf that they are charged £200 per reference in London and that this is not clearly stated by the agencies from the outset. I personally use this to my advantage when advertising properties to say tenants can save £400 for two people when renting directly from me.

This scenario is very much in the vain of “Ryan Air” the airline, ie lots of hidden charges. The answer is not to ban it, as the fees will creep in elsewhere. The answer is that agencies need to be clear and transparent from the outset regarding these fees.

On balance, the rental sector has improved greatly since it has been free of excessive legislation from by gone eras. We should not be going down heavy one sided legislation to stop the growth in this sector. As with everything, the internet can substantially change market forces, by providing much more transparency of information. In this case rating of properties, landlords and tenants could all be achieved and slowly built up through national web portals, perhaps government sponsored. One of the biggest challenges to the government (as with much public policy) is to ensure the high numbers of immigrants speak English when they come to the UK.

Summary of Actions that should be taken

1. After the lack of uptake and understanding of HMO licence, the law needs to be either scrapped or re-written. If it is to be re-written it should focus on large households greater than five or six and where rooms are let separately.

2. Only consider further legislation that builds out the current database of information being collected through the tenancy deposit scheme. In theory given time, the tenancy deposit scheme should cover all rental properties in the England. This should act as the “Master” database. Do NOT create silos of information through separate data bases which do not correlate, such as Newham and now Liverpool council. This adds complexity and further bureaucracy, always a recipe for disaster.

3. If you have to have licence fees, the government should cap them and not let local authorities charge excessive fees eg Newham Council £950 for three unrelated people in a property.

This so called “covering costs”, scenario clearly needs to be looked at.

4. Rental agencies need to be more transparent with their costs (such as referencing) to tenants at the ouset.

5. The future as with many things will rely on transparency of information through the internet to include landlord ratings, tenant ratings and property ratings. This should be started in a style such a and possible the government should partly sponsore and independent company to kick start this initiative. Unfortunately I do not believe governments themselves have enough creative thinkers and flexibility to build such a systems. Far better to try and get this driven by private sector, but possibly funded by government.

6. Governments and councils should steer clear of one sided heavy handed approach to the rental sector. The rental sector has expanded greatly, but has also improved greatly over the years.

7. Finally the government needs to convey to immigrants coming to the UK, that they must speak a reasonable level of English. Private rented landlord and agents can not be penalised through excessive legislation due to a minority of none speaking English sectors of the rental market, which are below standard.

January 2013

Prepared 16th July 2013