Understanding HMO Licencing Requirements in the UK

Understanding HMO license requirements in the UK

As we dive headfirst into the year 2023, the student population worldwide has exhibited an interest in attaining higher education from internationally recognised universities in the UK. With houses of multiple occupancies (HMOs) gaining traction as a key accommodation type in the UK, property operators need to obtain an HMO license to operate an HMO in the market. For that, it is integral for operators to understand all HMO licencing requirements to operate this property type.

Transcending Towards the Trend of Higher Education in the UK

Higher education can be the yellow brick road to accelerating a student’s growth as an individual and amplifying their skills as a professional. On that note, there are several factors shaping the trend toward enrolling in undergraduate and post-secondary courses at the best colleges in the UK:

• The Higher Education Statistics Agency (HESA) recorded a 4% increase in student enrollment for both undergraduate and postgraduate courses, reaching a whopping total of 2,862,620 students in the 2021–22 academic year to up-skill their knowledge.
• As the number of students travelling to the UK for higher education multiplies every year, the demand for quality student accommodation has been on the rise. The National Housing Federation (NHF) and Crisis from Heriot-Watt University previously estimated the need to build 340,000 homes a year until 2031 to overcome the housing crisis in the UK. However, according to the Telegraph, England needs 616,000 new homes to accommodate overseas students and their dependents.
• According to Platinum Property Partners, with the current rate of building homes, it is expected that there will be a shortfall of nearly 104,000 homes each year for the next 30 years (given that construction stakeholders fail to revise their building plans).

The New Hotspot: House of Multiple Occupancy in the UK

The student population seeking higher education in the UK has several types of rental properties to choose from. These include purpose-built student accommodation, university accommodation, and other housing properties in the private rented sector. In the UK, houses of multiple occupancies (HMOs) have emerged as one of the most preferred options for student accommodation with the increasing demand for student housing in 2023.

So, what is an HMO? An HMO property is defined as a property rented out by three to five individuals who are from more than one household under Section 254 and Section 257 of the Housing Act 2004. The tenants of the property share common facilities, including the bathroom, and the kitchen, hence the name “house share”. In recent times, HMOs have emerged as a suitable accommodation option for students, owing to their offerings and affordability.

According to the Amber Student Accommodation Report Q1 2023, the market valuation of HMOs in the UK was estimated at £26 billion, with the current number of these properties reaching 870,000 in the year 2022. On the other hand, the United States HMO Providers Industry is valued at $225.1 billion, recording a compound annual growth rate of 1.5% annually (you can download the full report here).

Understanding HMO Licencing in the UK: Addressing the 4Ws

To get a better understanding of HMO licensing requirements in the UK, here is the 4W analysis of the legal requirements for renting out these properties in the UK covering the where, why, what, and who of the properties.

The “Where”: Breakdown of Area-Wise Imposition of Licenses in the UK

In the UK, HMOs are primarily regulated by the Housing Act 2006 and the Licencing of Houses in Multiple Occupation (England) Order 2018, although it is also region-specific.

1. England & Wales: HMO Licencing was imposed through the Housing Act 2004 to ensure that it falls under a licensable HMO property in England & Wales as per the Licencing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (England) Regulations 2006.
2. Scotland: In accordance with the Housing (Scotland) Act 2006 Part 5, all HMO properties require a licence for premises that have three or more people living together. This licence in Scotland usually lasts for three years.
3. Northern Ireland: The legislation of Northern Ireland has mandated licences for HMOs under Section 7 of the HMO Act (NI) 2016. This Act requires every house in multiple occupancies to be licenced for all these properties.

The “Why”: Emergence of HMO Licencing Requirements in the UK

The most simple and uncomplicated answer for why there was an emergence of mandating licencing for HMOs in the UK was mainly to ensure the safety of the tenants. For instance, a tragic incident in April 2000 involving a fire in a Glasgow HMO flat led to the death of two 20-year-olds due to a disconnected fire alarm as well as a blocked fire exit window. (Source: BBC News)

Many such incidents compelled strict adherence to precautionary procedures and protocols for the safety of the tenants. With the mandate of HMO licenses as per area, there are several inclusions of essential amenities, including fire safety, adequate garbage disposal, and other important factors. This assists in monitoring and controlling the general standards of maintaining a shared house.

The “What”: Different Types of HMO Licenses in the UK

Since October 1 2018, it has been mandatory for the private-rented property of HMOs to have a license. There are primarily three types of licensing that exist in the UK:

1. Mandatory Licencing (Large HMOs): All HMOs nationwide require a mandatory HMO license if there are five or more occupants residing in a property who belong to two or more households. In this type of licensing, the private-rented property has three or more stories.
2. Additional Licencing: In accordance with location, size, or housing conditions, some properties may not meet the requirements for a mandatory license. For such properties, landowners must hold an additional HMO license acquired from local authorities. These could be for three or fewer people staying in a small HMO.
3. Selective Licencing: Selective HMO licenses are required for properties that have a low demand for housing in some areas. For the approval of this license from the city council, the landlord needs to meet the required physical standards of the property.

The “Who”: Do All HMOs Require Licencing?

If the question “Does my HMO require a license?” has traveled across your mind, fear not. This would help to answer your question:

• An HMO property requires an HMO license when it is rented by five or more people (in a large property with three or more stories) who are from more than one household, and where the tenants share basic facilities including the bathroom, living room, and kitchen.
• On the other hand, even though acquiring a license is mandatory, there are still some HMOs that do not require a license. In cases where a property is rented out to three or fewer tenants, the HMO does not require a license. However, the property is still required to comply with the standards of the Housing Health and Safety Rating System (HHSRS), and the Management of Houses in Multiple Occupation (England) Regulations 2006. However, the property may further require an additional or selective HMO license. To confirm, please visit the website of your local city council.

💡Important to note! What are the penal implications of HMOs operating without a licence in the UK?

Operating an HMO in the absence of a licence on or after October 1 2018 is a criminal offence under the Housing Act 2004. Landowners operating without a licence can face a fine of up to £30,000, whereas any breach of licencing provisions can be fined up to £20,000. Recently in April 2023, a High Wycombe landlord without an HMO licence was fined more than £12,000 (Source: Bucks Free Press).

How to Get an HMO Licence in the UK?

If you want clarity on how to get a license set up for your property in the UK, you’ve come to the right place! Here are the three steps to follow to apply for an HMO licence:

Step 1: Prerequisites to Assess Prior to Applying for an HMO Licence

Here is a detailed view of whether your HMO is ready to rent. Take a look!

Step 2: Verification & Authorization by the Local City Council

When your property successfully meets all the HMO license requirements in Sections 63-68 of the Housing Act 2004, the Licencing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (England) Regulations 2006, and the Housing Health and Safety Rating System (HHSRS), you can apply for acquiring a licence on the local city council authority’s website. You can check your licence cost according to your Local Planning Authority.

Step 3: Obtaining the HMO Licence and the Road Ahead

After the application is sent to the local authority, property owners receive a receipt for the newly renewed HMO license, whose validity is typically 5 years. Nonetheless, it’s necessary to maintain adequate housing standards regarding fire safety and other essential parameters to avoid fines or penalties.

💡Important to Note! In case your licence is revoked, you should recheck the laws and regulations as per your city council for the maintenance of an HMO in your specific area. The local authority would help to clarify on what grounds the application was rejected and how to obtain the licence.

Wrapping it Up

Grasping all the aspects of obtaining an HMO license may seem complicated for first-time HMO owners renting their properties to students. Nonetheless, it’s important to understand every nook and cranny of HMO licensing requirements in the UK to avoid running into legal troubles and facing penalties. If you have any questions, you can always contact your local city council to seek assistance. Do you have a ready-to-rent HMO setup but don’t know how to make your property more visible? List with us!

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