In the second of this three part series, we take a look at the impact of licensing on the availability of private sector rental accommodation and rental prices. Oxford City Council is the first council in the country to introduce a HMO licensing scheme that covers the whole of its area and that requires every HMO to be licensed.
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The impact of Licensing on the availability of rental accommodation
Obtaining accurate and complete data on the availability of rental accommodation is difficult. At the start of mandatory licensing many landlords said that they would move out of the HMO market which would result in a significant shortage of HMO accommodation in Oxford. The true outcome was that some landlords sold up and others moved in to take their place because of the profitability of renting HMOs in Oxford.
Very few HMO licence applications drop completely out of the system. There have been 102 withdrawals and of these approximately:
- one third have been rented to a family,
- one third have been sold and
- a third have been withdrawn by the council because the applicant failed to pay the fee.
Follow up checks are made on these withdrawals to check occupancy levels.
A total of 117 mandatory licensable HMOs have come forward which is nearly 80 more than estimated by this stage which means that properties previously occupied by four tenants have now been licensed for more. There have also been a significant number of additional HMOs that have come to light that were not on the Environmental Development database, which indicates that there are more HMOs in Oxford than initially estimated.
There have been concerns that the small bedrooms found in typical 1930’s houses built for families would all fail the space requirements. In answering a recent Freedom of Information request, it was noted that only 40 bedrooms have been found to be too small to be used as a bedroom. This shows the pragmatic approach being taken by officers from Environmental Development.
There have been anecdotal stories of tenants not having their tenancies renewed because the landlord did not want to licence the property as an HMO, but no accurate data on the numbers can be provided. Those that have come to Oxford’s attention for a response number approximately 25. There have also been a handful of cases brought to Oxford’s attention by tenants regarding the difficulty of finding smaller three person HMOs to rent. Oxford’s experience with mandatory licensing was that landlords claimed to have reduced tenant numbers to avoid licensing, so it was inevitable that there would be instances of landlords making a choice whether to licence or not wherever the bar was set for licensing. It is the Oxford’s view that if the bar was set at four or five persons, exactly the same issues would be being raised.
There have also been comments from some agents that there are some landlords with smaller HMOs, not rented to students, who are avoiding licensing and waiting to be caught. These will be dealt with when large scale proactive work begins in 2013 to root out unlicensed HMOs. There have also been instances where a large property has been rented out to a family who are then forced to sublet to pay the rent and by doing so they create an HMO. Oxford have advised agents to ensure they carry out suitable financial checks to satisfy themselves that prospective tenants can afford to pay the rent.
According to Oxford’s Housing Options the only impact they have noticed from HMO licensing is a small increase in the number of larger four bed properties for families owned by landlords who do not want to licence their HMOs.
The impact of Licensing on private sector rental prices
Oxford has a particularly buoyant rental market and has the highest rents outside London. Nationally rental levels have gone up and Oxford is no exception. The Housing Options team view is that the main reason for this is the lack of first time buyers who either do not want to buy or more likely cannot get a mortgage and are choosing to rent in the private sector instead. This additional demand is the chief driver for rent increases as many of these frustrated first time buyers are young professionals who can and are prepared to pay the higher rents asked for by letting agents.
It is very difficult to ascertain exact figures regarding what is happening with rents. The problem with data from the Rents Officer is that it includes rents from about two thirds of the County so does not actually indicate what is happening in Oxford. The exception is the shared room rate as most of this information is derived from Oxford data and this shows a small increase for the last year.
Benefits Officers have tried to compile their own data using websites such as Gumtree and Right Move and this tends to show more of an upward trend in rents. However Oxford’s Rent Officers believe that this is inaccurate as often sitting tenants end up renegotiating the rent to keep it the same. As such it is difficult to know exactly what is happening. What is certain, is that HMO Licensing has not had a significant impact on rents when compared to other factors. This is because the fees are relatively low costs. The initial fee of £378 equates to £1.82 per week per room for a four person HMO and the annual renewal fee of £157 is less than a months rent for a private parking space in Oxford’s Gloucester Green Car Park.
