Small HMO Licensing: Nearly But Not Yet...
If you are one of the few landlords who still has 3 or 4 bed HMOs in Portsmouth, you will need to get an Additional Licence if you wish to continue to do so. The scheme starts in September but our advice is not to apply now, but to wait until later in the year - you have until December to apply without penalty and it could save you thousands.
Last November, Portsmouth City Council (PCC) agreed to introduce an Additional Licensing Scheme for 3 and 4 bed HMOs citywide starting in September 2023. Along with this decision, new pricing for licences was agreed and the new standards (which apply to all HMOs of any size) and regulations were agreed to be introduced at the same time.
The space and amenity standards are being sold as 'clearer and simpler but largely unchanged' but they contain a range of measures which, if strictly enforced, will drive many previously licensed HMOs out of business.
The June 2023 PCC Cabinet meeting agreed new, increased prices for licences along with approval for up to 40 new staff to administer the scheme. During questions at that meeting, Claire Hardwick of PCC Private Sector Housing confirmed that landlords would have '3 months grace' during which they could apply for their licence before any penalties would be incurred.
When the scheme was being consulted upon, we argued for a lighter touch on existing, previously licensed landlords and those that could show they did not need regular inspection or monitoring. We also proposed that we could provide some of that inspection and monitoring as part of a PDPLA accreditation scheme, allowing PCC to reduce their costs and free up resources to focus upon those landlords who perhaps, needed more of their attention.
Sadly, PCC have set the bar high and start from the assumption that the vast majority of landlords are rogues and need constant monitoring and the few who manage their properties on a full time basis and as part of that, invest in training and CPD (continuous professional development) and who do so in a measurable manner can potentially qualify for a 5-year licence whereas the majority will likely only get a 1-year licence and will have to renew every year.
Against this background and PCC's insistence that they must do all inspections and monitoring of certificates and the like - we have taken the decision that there is no value add for the PDPLA over and above the basic accreditation offered by the NRLA and, as such, are recommending that members achieve NRLA accreditation (if they do not have it already), before applying for a licence for their HMOs.
Have A Small HMO?
The last Additional Licensing scheme in Portsmouth only covered the south of the city but did also include 5-bed and larger HMOs. There were 3,000 properties licensed during the scheme, but only 2,736 by the end - which we believe correctly reflected the market at that time.
Since then, mandatory licensing has been introduced for all 5-bed and larger HMOs citywide and there are around 1,400 licensed.
That would suggest that there are possibly around 1,400 small HMOs (from the prior scheme) that will need an Additional Licence plus those smaller HMOs in the north of the city. 18 months ago we were arguing that at most, there were perhaps 2,600-3,000 HMOs needing a licence in this new scheme (as opposed to the PCC estimate of 4,800 - they estimate there are 6,000 in total including the 1,200 which already have mandatory licences).
Since then, we have had utility prices massively increased, mortgage interest rates rising, the tax changes focussed on landlords introduced steadily since 2016 are fully implemented and the non-HMO market rent levels are at their highest ever. As a result, we know many, many landlords have exited the market and many more have switched from 'small HMO' to 'family let' simply because the economics for small HMOs do not add up anymore. Our estimate today is that there are possibly only 300-600 small HMOs left and these are disappearing fast.
The good news for those selling is there is a ready market for C4 small HMOs (those with planning approval) among developers ready to turn them into super-HMOs as this seems to be the only sector of the HMO market in the city that is still economically viable.
If you still have a small HMO and have not considered switching to a family let, do come to our meeting this month (July 2023) where we will discuss the economics as we suspect some members would be better off switching but have yet to realise it
Why Wait? What To Do?
Anyone applying now will probably get it wrong as no detail of what is required or how to do it has yet been published. Unless you tick ALL the boxes and get everything right, you will likely be granted a 1-year licence. This costs £1,076 plus another £621 each year when it is renewed. So your total cost for a 5-year licence will be (£1,076 + £2,484 =) £3,560.
If instead you wait, follow our advice, tick ALL of the boxes and are granted a 5-year licence, your total cost will be £776.
That is a saving of nearly £3,000.
Our advice, if you have a small HMO in Portsmouth
- Attend our July meeting or watch the recording to decide whether to stay, sell or change tenure
- Keep an eye out for our emails, and respond quickly when advice given
- Our 1st email is likely to advertise online PCC training starting later this month. Watch out for it and sign up
- Our next email will advertise a PDPLA member meeting where PCC will update on the application process – attend or watch (mandatory)
- We will also be running an 'HMO Fundamentals' course which you will need to attend in order to get your NRLA accreditation
- And we will advise the additional steps necessary to get this accreditation
- Once you have done all of the above (BUT BEFORE DECEMBER) you should apply for your licence