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Affordability and the Supply of Housing
Evidence submitted to the Inquiry by the Committee on the ODPM

1. The National HMO Lobby has been campaigning on housing issues, since 2000 as an informal network, and since 2004 as a formal association. Our membership currently comprises some three-dozen local community groups in two-dozen towns in all parts of the UK. Our particular concern is to mitigate the impact of concentrations of houses in multiple occupation (HMOs) on their host communities. To this end, the Lobby and its members have made representations in consultations on Quality & Choice (2000), Selective Licensing (2001), Use Classes Order (2002), Draft Housing Bill (2003), the Housing Act itself (2004) and Implementation of HMO Licensing (2005), and we have held meetings with successive Housing Ministers (Nick Raynsford 2001, Lord Falconer 2002, Keith Hill 2004). Information on the Lobby and its lobbying may be found on our website.

2. The National HMO Lobby’s concern here is to draw attention to a factor which has a comparatively small but nevertheless numerically significant impact on affordability and the supply of housing. This factor is the demand for accommodation by students in higher education. (The Lobby’s concern is in fact with any concentration of HMOs. But by far the most significant driver of concentrations is student demand.) By way of illustration, in 2001-2002, there were over 860,000 full-time undergraduate students on degree courses in England. Most of these, some 700,000, moved away from home to study. Some were accommodated by their institutions. But the great majority, perhaps half a million, were obliged to turn to the private rented sector. Assuming the average student house to accommodate five students, this means that some 100,000 homes at that time had been lost to the general supply of housing.

3. The National HMO Lobby describes these 100,000 houses as a “loss” for a number of reasons. First of all, student houses are not purpose-built. All student HMOs have been converted from family homes. In university towns there has been a massive haemorrhage of housing from owner-occupation to private renting by students. These houses are not additional provision, they are parasitic on existing stock. In this respect, they are a ‘loss’. Secondly, they are ‘lost’ because they do not constitute residences, but de facto holiday homes. Student occupation is both transient and seasonal. Students attend university normally for only three years, and in each year, most move from one HMO to another. And during each year, students are in occupation only in term-time: in the vacations, they return to their permanent homes, and student houses remain empty for one-third of the year. Furthermore, since Council Tax provisions exempt students from payment, this effectively excludes local young workers (who are liable) from lodging in HMOs otherwise occupied by students. (It is also important to note that it is not only old properties which may be lost. Any new development which is within striking distance of a university is equally vulnerable to student colonisation – in Nottingham, for instance, relatively recently built estates have been targeted for conversion into student HMOs.) As temporary and seasonal accommodation, therefore, student HMOs are in effect a variation on the holiday-home and second-home syndrome which also impacts on the affordability and supply of housing. (For a detailed case-study at Hatfield, see Paul Orrett, ‘Matriculation Invasion’ Inside Housing, 5 March 2004.)

4. Nationally, the proportion of student houses in the total housing supply may be small. But a distinctive characteristic of student HMOs is their tendency to concentrate in particular localities. The impact of these concentrations illustrates many of the concerns of the Committee’s Inquiry. The most immediate of these is the relation between house prices and housing supply. The existing stock in neighbourhoods favoured by students is of course finite. There is therefore competition between residents and students for this stock – or more exactly, among landlords for possession of this stock. And student landlords can rely on high-density occupation to provide a good return. Market forces therefore immediately inflate prices. In Leeds, for instance, in the period 1995-2001 (when student demand really began to get under way), the average house price in the city rose by 60% - but in Headingley (the student area), the average house price rose by 90% (nearly doubling), half as fast again as in the city as a whole. The impact is twofold, leading to a vicious spiral of ‘studentification’ – on the one hand, the children of residents (the new generation) are forced to move out of the neighbourhood; and on the other, many residents (alienated by decline, attracted by inflated prices) are encouraged to move out.

5. The impact of ‘studentification’ sharply illustrates the benefits of home ownership and the social impact of current house prices. Occasionally, students may seek houses in areas in need of regeneration – in which case, their impact can be positive. But much more commonly, they are looking for good houses in attractive neighbourhoods. This is the case for instance in Headingley in Leeds, in Lenton (and elsewhere) in Nottingham, in Selly Oak in Birmingham, and in many other neighbourhoods in other university towns. The quality of these neighbourhoods has flourished precisely because they are home to owner-occupiers – the residents are permanent, they care for their environment, they establish networks with their neighbours, they develop norms of social behaviour, and they sustain their community. The loss of these benefits is devastating to see (and to experience) – such that the term studentification has been coined to describe the decline of community (of social capital) and the rise of social, environmental and economic problems in areas colonised by students. (Such is the seriousness of this issue that a research project into the problems and solutions is soon to be published, which has been jointly funded by ODPM, DfES, LGA and Universities UK.)

6. The importance of increasing the supply of private housing is crucial to the problems of student housing. In the early years of their history, most universities accepted responsibility for housing their students. Numbers and finances now are such that this is no longer possible. Slowly and laboriously, the national market has awoken to the opportunities afforded by student housing, and a number of national developers have begun the provision of purpose-built student accommodation. Two points are important. If the pressure is to be relieved from the existing housing stock, and student HMOs released back into owner occupation, then purpose-built student accommodation needs encouragement by HEIs and by local and national government. But equally importantly, such accommodation needs to be properly managed and appropriately located, so that it does not in fact exacerbate the problems in areas of existing student HMO concentration.

7. In resolving the student housing issue, purpose-built accommodation is the carrot. The stick is how the planning system should respond. All round the country, local authorities are adopting policies to address the issue of HMOs in general and student housing in particular. Some authorities have set ceilings on HMO numbers (Glasgow, Fife), some have designated areas of restraint (Birmingham, Leeds), some are exploring a ‘threshold approach’ (Loughborough). Elsewhere, consultations on the way forward are under way (Belfast, Newcastle, among many others). Unfortunately, all these initiatives are hamstrung by the inadequacy of current planning legislation – despite the manifest problems generated by HMOs, in most of the UK no planning permission is needed to convert a residence into multiple occupation. Throughout the UK, conversion to hotel or care home requires permission (though the impact is less). In Northern Ireland, conversion to HMO does now require permission. What is urgently needed in England, Wales and Scotland is amendment of the Use Classes Order, such that HMO conversion requires planning permission.

8. The National HMO Lobby notes that the impact of student demand on the supply of housing arises from the higher education culture peculiar to the UK. “Unfortunately in England and Wales we remain committed to a model of HE that expects students to live and study away from home” (Vice Chancellor Peter Knight, Education Guardian, 18 October 2005). This is inappropriate: “The question is whether a boarding school model of university life is sustainable for mass education” (Polly Toynbee, Guardian, 22 November 2002). And it is un-necessary: “Students are expected to go away despite the fact that in the majority of cases the subject they wish to study is available at a local university” (Peter Knight). There is a very slow tendency towards more local study. Universities expect this to be encouraged by the new fees structure. Positive promotion of the advantages of local study (individual, social, ecological) would help release student HMOs back into the supply of housing.

9. In this submission, the National HMO Lobby has concentrated on student HMOs, as demand by the student market is currently the principal driver for conversion to HMO – and hence, the loss of family homes from the supply of housing. But there is a more general argument to be made about the viability of HMOs at all, when there is an acute shortage of supply. The government estimates that there are about 640,000 HMOs in England alone. None of these are purpose-built, all have been converted from family homes. This represents a loss of residences. By their very nature, HMOs provide only temporary accommodation. The average tenancy in the PRS is only eighteen months, and HMOs are at the shortest end of the spectrum. Students are one of the markets for HMOs: they are better served by purpose-built cluster flats. Young professionals are a second market: they too would be better served by purpose-built apartments. The third market is benefit claimants: this vulnerable sector should be served by social housing, not left to the mercies of the private sector. (Regrettably, rather than discouraging conversion of residences into HMOs and other forms of temporary accommodation [second homes, holiday homes], the new SIPP pension policy will have the effect of encouraging even more conversion, as pension investors are encouraged to move into the property market.) When there are better alternatives, the provision of 640,000 HMOs is an abuse of the country’s already inadequate housing supply.

Dr Richard Tyler, Co-ordinator, National HMO Lobby, October 2005

Note: the Lobby's representation was published on 20 March 2006 as 'Memorandum by the National HMO Lobby (AH06)' (ppEv88-89) in House of Commons, ODPM Committee Affordability and the Supply of Housing (HC 703-II) The Stationery Office, London, 2006. The report of the Inquiry was published as House of Commons, ODPM Committee Affordability and the Supply of Housing:Third Report of Session 2005-06 (HC 703-I) The Stationery Office, London, 20 June 2006. The Lobby commented noted that our representation is listed in the 'List of Written Evidence', but the Report itself takes no notice at all of what we said. However, there are some points worth noting. Paras 22-24 are concerned with 'Demand for Second Homes.' "There is a danger that if there is an increase in housing supply, a significant proportion of the extra homes in some parts of the country will be taken up by second homes" (24). But the Report has rural communities in mind. Paras 74-77 are concerned with buy-to-let. "The buy-to-let market is attracting additional investment and new opportunities for private renting in may town and city centres. In some areas, however, the transient population living in the private rented housing adds to the instability of the area; the activities of investment funds can skew, albeit temporarily, any indicators of affordability as the house prices reflect the expected financial return rather than what the local population can afford. The local population is thus excluded from homeownership" (76). Paras 86-88 are concerned with 'Mixed Communities', but in new housing developments.

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