Fiddling while Rome burns
Mark Davies (pictured) is managing director of Link Mortgage Services
Housing is one of the key drivers of the UK economy and yet remains one of the most neglected in terms of political commitment to address the lack of it.
At the root of this is the fact that current homeowners are voters and no government wants to make voters feel poorer.
There is not enough stock and there were no declarations of changing this.
As a result, the Queen’s speech addressed issues of local affordability, tenant well-being and safety that included a better deal for renters with a new lifetime deposit that will make the process of moving home easier and cheaper; plans to abolish ‘no-fault’ evictions; plans to slash the cost of new homes for local people and key workers in their area by up to a third; and a New English devolution white paper to unleash the potential of all the regions across the country – levelling up every city, town and county; and finally the largest change to building safety laws for 40 years intended to deliver a new safety framework for high-rise buildings – though how this affects current stock is less clear.
There is no mention of any wholesale strategic change of direction in housing.
Nothing here will change the lack of housing stock or our inability to build enough of the right kind of property quickly enough.
Equally with a need to fund the infrastructure promises to regions that voted Conservative, there is little likelihood of any reform to stamp duty to increase market liquidity.
Nevertheless, a lack of action politically does not mean our housing market does not continue to evolve and, unchecked, this is why it presents issues that then require retrospective action to put them right.
Where we are seeing growth is in the HMO market.
The UK’s population continues to grow and, in keeping with another global trend, more and more people demand city living.
Market investors are drawn to the better yields of HMOs.
The appeal to tenants is manifold.
Young professionals can save for deposits by reducing rental outgoings, parents who work away from home do not need to uproot their settled families from elsewhere.
But to assume all is rosy in the HMO market would be wrong.
HMOs in poorer areas, or in areas of high immigration are often dilapidated and not fit for purpose.
(The BBC website carries some of these horror stories).
Too often the nature of the poorer clientele leaves them vulnerable to exploitation by less scrupulous landlords.
HMOs serve a purpose but are not a homogenous entity.
Their licensing is sporadic across the UK but the growth in the market is prompting a response. Birmingham City Council announced this month a city-wide Article 4 Directive which means planning proposals must be submitted for any conversion of a family house to HMO. Current small HMOs will need to be declared by landlords before the directive becomes enforceable in June. Does this go far enough – we shall see from the response in due course, but if it does not then HMOs will require far more specific and consistent licensing and management.
HMOs are not a long-term solution to our critical lack of housing but they are helpful to many tenants. Lenders need to understand this asset class carefully and understand that as tenants become more desperate for accommodation there is a propensity for the condition of these solutions to deteriorate.
Investors and landlords need to be responsible as well.
If HMO is to become an increasingly important part of our housing solution we all have a duty to ensure it is the best it can be.