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A Representation on
Homes for the Future
Housing Green Paper

1 The National HMO Lobby is a network of fifty local community associations in thirty towns in all the regions and all the countries of the UK, who are concerned about the impact of concentrations of houses in multiple occupation (HMOs) on the cohesion and sustainability of their communities. There are many markets for HMOs (students in university towns, claimants in coastal towns, migrant workers in market towns, and so on), but the effects of all are equally detrimental to communities. But they also have a significant impact on the housing market and housing supply. For this reason, the National HMO Lobby is responding to the consultation on the Housing Green paper.

2 The National HMO Lobby welcomes Homes for the Future, the Housing Green Paper published in July 2007 by the Department for Communities & Local Government (DCLG). Quite rightly, the Paper states that “Our first challenge is to provide more homes” (p7). However, the National Housing Federation’s response to the paper identifies two problems, over and above ‘more homes’. “New housing supply is often being sidetracked into investment and second home purchases. Over 1% of all homes are now second homes and, according to London Development Research, two thirds of all new homes being built in London are being bought by investors, rather than as a main residence. Oxford Economics argues that the increase in Buy-to-Let and second homes is ‘undoubtedly contributing to the overvaluation of housing’,” National Housing Federation, Home Truths: the case for 70,000 new social homes a year, 2007 (p9). The Lobby agrees that these are two crucial issues. But we also have a further concern. Neither the Federation, nor indeed the Green Paper, gives anything like adequate attention to the effective and efficient use of existing housing stock. The Executive Summary of the Green Paper (p8) offers the promise of ‘Recycling homes and land’ – but on turning to Chapter 4, we discover a mere two pages, which are concerned solely with brownfield sites (for new build) and with empty properties. No consideration is given to other properties taken out of the general housing market by investors or by holiday-home-owners.

3 In principle, the National HMO Lobby does not oppose investment in property in general, nor even Buy-To-Let (BTL) in particular. There is no question that the private rented sector (PRS) is an essential element in the housing market as a whole. But the Lobby does consider that in practice, BTL has run riot, and has become a significant obstacle to housing supply. BTL mortgages are currently actively promoted (for example, by Cheltenham & Gloucester in the press); but in the South West, English Partnerships has imposed restrictions on BTL (Catherine Early, ‘Regional buy-to-let market faces limits’ Planning, 4 May 2007). On the one hand, BTL transforms what should be family homes into investment properties – the places where people live become mere trading stock. On the other hand, the intervention of BTL reduces affordability, the subject of the whole of Section IV of the Green paper (23 pages). Those who already have assets are able to appropriate both new and existing stock, at the expense of those without, those who are seeking to acquire their own home. In an unpleasant vicious circle, the exercise of superior financial muscle guarantees a dependent rental market for investment properties. The concerns raised by BTL are well known, and were the subject of a series of articles in The Guardian earlier this year (Patrick Collinson, ‘A plague on all their houses’ The Guardian, 2 June 2007, and subsequent articles on 9 and 16 June). One thing which emerged from these articles was that, rather than BTL as a whole, it was BTL properties used for multiple occupation that were especially problematic. On the one hand, from the Buyers perspective, multiple occupation of course increases the return of their investment. On the other hand, those to whom the property is Let are (inevitably) transient occupants, disengaged from the local community.

4 The National HMO Lobby considers that the possession of second homes by a privileged few is morally repugnant when many disadvantaged families lack a decent first home. In addition (as with BTL) competition in the housing market from second-home-owners prices out first-time buyers. Data from the Survey of English Housing shows that well over 1% of houses are used as second homes – amounting to nearly 300,000 houses (DCLG, Housing in England 2004/05 October 2006, p56; meanwhile, 2.5% are overcrowded, p12). The phenomenon is well known in the countryside. What is less well known is that it is not confined to rural areas, and that there are thousands of urban second-homes not counted by the Survey. The fact is that many houses in university towns are bought by parents as second-homes for their children while they attend university. In order to recover costs, these to are let to additional occupants, and thereby become HMOs.

5 Therefore, both BTL and second-home-ownership generate HMOs. Purchasers compete in the open housing market, and thereby price out aspiring first-time-buyers. But at the same time, these HMOs also undermine communities, ‘Places and homes that people want to live in’, which is the substance of Section III of the Green paper (28 pages). This aims specifically “to promote and create sustainable, inclusive, mixed communities” (p57). Concentrations of HMOs accommodate polarised, transient, unsustainable neighbourhoods. It was this impact which prompted the development of the National HMO Lobby. Occupation of HMOs is inevitably temporary (who would choose to settle in a HMO?) – in the PRS as a whole, the Survey of English Housing shows that over 40% moved in the previous year (DCLG, Housing in England 2004/05 October 2006, p103; the figure will be higher for HMOs). A transient population undermines the cohesion of a community. A community which loses cohesion also loses sustainability. DCLG describes a sustainable community as ‘a place where people want to live, not leave.’ Concentrations of HMOs generate places where people want to leave, not live. The DCLG's publication, Evaluating the Impact of HMO and Selective Licensing (August 2007) devotes a whole chapter to 'Key Issues for Residents', which catalogues the impact of HMOs on anti-social behaviour, crime and personal safety, shortage of accommodation and affordability, feelings of community, and the condition of properties and the area generally. HMOs are not only detrimental, both to the cohesion and sustainability of communities and to the viability of the housing market – they are also un-necessary, and an inefficient response to demand. The temporary housing of students, of migrant workers, of claimants, and so on, is not best served by the appropriation of family homes. Much more efficient provision could be made in the form of purpose-built accommodation, supplied by the public sector or the private sector or the third sector, as appropriate (NUS has an admirable project for co-operative student housing, which has never been realised).

6 The National HMO Lobby considers that, not only are HMOs detrimental to community cohesion and sustainability, but they are also significantly detrimental to the housing market. This is true of HMOs in general. It is especially true of the primary market for HMOs, the demand by students in higher education. (“Students represent one of the largest demand groups for private rented accommodation” David Rhodes, The Modern Private Rented Sector, Chartered Institute of Housing, October 2006, p76; in many university towns, students account for between a third and a half of the whole PRS, p68.)
6.1 Directly or indirectly, student demand is a major driver of the BTL market. About a third of BTL investments are in city centre apartments – but a quarter are in student housing (according to a survey by Property Investor, website <www.propertyinvestor.co.uk>). Any resident in a student area in a university town will be able to attest to the inflationary impact of the student housing market. “A report from website Rightmove showed university towns had seen some of the strongest property price rises as many parents buy a rental property in the town where their child goes to university” (Ashley Seager, ‘Rural areas have least affordable house prices’ The Guardian 25 August 2007). “Reduced supply has been accompanied by increasing buy to let demand from parents of students (5.3) ... In Inner NW Leeds, the impact of the student housing market has been profound, leading to rising prices and difficulties for first time buyers to enter the market (5.6.4)” Huw Jones, Analysis of Leeds Housing Market Renew, July 2007. “House prices in university cities are rising up to four times as quickly as they are in the rest of the UK, according to Halifax Estate Agents” (‘Universities lift city property prices’ Dundee Courier 17 August 2007). A recent article in The Times promoted student BTL: Lorna Blackwood, ‘University Challenge: Follow our guide to the places with the best buy-to-let prospects’ The Times, 24 August 2007.
6.2 Student houses are de facto second-homes. This is obviously the case where a parent buys a second house to accommodate their children while they are students. But it is equally the case where investors do the same, or professional landlords do so. These houses are occupied on a seasonal basis (the opposite seasons from holiday homes). They provide the students’ ‘term-time’ address – but not their ‘home’ address. And yet these houses are in towns where there are thousands of families without adequate full-time accommodation. (In Leeds for instance there are probably about 5,000 student houses – yet a recent vacancy advertised by the Council attracted 490 applications from families seeking a decent affordable home, see Ian Rosser, ‘Council house attracts record 490 applicants’ Yorkshire Evening Post, 23 August 2007.)
6.3 The impact of studentification, that is the domination and disruption of a community by student houses, is now widely recognised. Even though they refuse to admit the real depth of the problem, both Universities UK and NUS have published guidance on addressing the collapse of cohesion which follows (UUK, Studentification, 2006, and NUS, Students in the Community, 2007; see also, DCLG, Dealing with ‘Problem’ Private Rented Housing, Housing Research Summary 228, 2006).

7 The National HMO Lobby recommends a number of measures to address the impact of HMOs on the housing market, both directly and indirectly.
7.1 Both Chapter 2 and Chapter 5 of the Green Paper include discussion of ways in which the planning system can support housing provision. But these measures are concerned entirely with new developments. What is also needed is controls on the use of existing stock. As indicated above, HMOs fuel both the BTL market and aspects of the second-home market. Yet Local Planning Authorities have no control over change-of-use of properties from family homes to HMOs. This arises both from the lack of adequate definition of what a HMO actually is, and also from the structure of the Use Classes Order. So the National HMO Lobby recommends
(a) redefinition of HMO in planning legislation, by the simple expedient of adopting the definition provided in the Housing Act 2004; and
(b) removal of HMOs from Use Class 3, so that conversion constitutes change-of-use, thereby requiring planning permission; the Lobby proposes that the simplest means to do so would be by declaring HMOs sui generis.
(This measure has already been adopted in Northern Ireland, and is recommended for England by the House of Commons CLG Committee, Coastal Towns, 2007, p21.)
7.2 The appropriation of the housing stock as HMOs may also be discouraged by indirect intervention. One such measure is HMO Licensing, introduced by the Housing Act 2004. “The buy-to-let initiative has increased the number of small investors who sometimes live remotely and often have little idea what being a landlord involves and no sense of responsibility or belonging to the local community. Such landlords are unable to deal with the distress that is caused for other residents when their homes are occupied by problem tenants and/or seriously overcrowded, without extensive support from the LA and other agencies. Licensing, where applied, is likely to encourage at least some to sell or put the property in the hands of a reputable agent," DCLG, Evaluating the Impact of HMO and Selective Licensing August 2007, p116. HMO Licensing should be encouraged, not only to protect the interests of vulnerable tenants (its primary purpose), but also as a disincentive – in the interests both of community cohesion and of housing supply. The National HMO Lobby recommends
(a) extension of Mandatory HMO Licensing from properties which have three or more storeys and five or more occupants, to properties with three or more storeys or five or more occupants; and
(b) active encouragement of Additional HMO Licensing, for other HMOs, especially in areas subject to concentrations of HMOs.
7.3 Another disincentive to appropriation of family homes as HMOs may be pursued through their taxation. Many neighbours who pay Council Tax feel a deep sense of injustice where HMOs impose extra-ordinary demands on local services (waste disposal, environmental health, planning, highways, policing, etc) – yet when they are occupied by students, they are exempt from any contribution to the costs of these services. The Campaign for a Sustainable Canterbury (a member organisation of the Lobby) recently posted a petition on the 10 Downing Street website to this effect, calling for change. The government response resisted the call, stating, “All property is assessed for taxation on the basis of its primary usage. Where it is used as a person's permanent residential accommodation it is classed as domestic and subject to the council tax ... The Government has no plans to make owners of HMOs liable for business rates. To do so would mean treating them differently from other domestic property.” As note in 5 above, however, it is not the case that HMOs afford ‘permanent residential accommodation’, for students or for any other occupants. HMOs constitute an intermediate category of temporary accommodation, between the short-stay accommodation offered by hotels (Use Class C1) and the settled homes of families (in Use Class C3). The National HMO Lobby therefore recommends
(a) amendment of Section 66 of the Local Government Finance Act (1988) such that HMOs no longer qualify as domestic property; and
(b) the subjection thereby of HMOs to Business Rate instead of Council Tax.

Dr Richard Tyler, Co-ordinator, National HMO Lobby, October 2007

 


National HMO Lobby
email: hmolobby@hotmail.com website: www.hmolobby.org.uk