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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
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