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What Does The ‘Levelling Up’ White Paper Mean For HMO Investors?

08 March 2022 - Posted in Landlords

What Does The ‘Levelling Up’ White Paper Mean For HMO Investors?

 

Tips For How Landlords Can Navigate These Potential Changes

 

Chances are you’ve probably heard about the government’s Levelling Up White Paper, which was released in February. Within the document, the government announced a number of reforms set to impact the private rented sector.

 

Here I’ll cover some of the biggest rental reforms announced in the white paper, what it means for the HMO sector, and tips for how investors can navigate these potential changes.

Rental Reforms Announced within the Levelling Up White Paper

 

Some of the biggest rental reforms announced within the Levelling Up White Paper include:

 

The abolition of Section 21 evictionsThe creation of a ‘Decent Homes Standard’Setting up a new landlords’ register

 

The government has previously said they were planning to ban Section 21 evictions. This would end landlords’ ability to evict tenants without a good reason. Earlier, it was mentioned that the government would also expand the rights landlords have to remove tenants if they have a valid reason, but further information on this hasn’t been announced.

 

Additionally, the government announced a plan that will require all homes in the private rented sector to meet a minimum national standard. It will include requirements involving properties to be “safe, warm, and in a good state of repair”.

 

Lastly, a new landlords register is being considered where rogue landlords will be fined and banned to stop repeat offenders. Some professionals in the property industry are welcoming this, while others feel this won’t have the desired effect.

 

What Does This Mean for the HMO Sector?

 

First and foremost, you always need to ensure you are keeping your tenants safe. With the Decent Homes Standard, some landlords will be required to improve their properties. The aim of this reform is to improve the quality of homes in the private rented sector and to clampdown on rogue landlords.

Recently, The Times reported that this national standard would require private landlords to upgrade approximately 800,000 properties that currently wouldn’t meet the new requirements. This could cost landlords with older, lower quality properties a hefty price tag. 

Creating and maintaining high-quality properties should already be a priority for any HMO investor, but this announcement should further push you to ensure you are doing this effectively for every single property in your portfolio. 

 

This could even provide you an opportunity to get ahead of the competition and bring forward much-needed high-quality properties, which are currently in ever-increasing demand.

Scrapping 21 evictions could also make it more difficult to evict tenants, and this is something that should be factored into decisions you make on your HMO property portfolio. And a landlords’ register shouldn’t dramatically impact you if you are following all the legislation that applies to you, which you should be doing anyway. 

 

3 Tips for How HMO Investors Can Navigate These Changes

Changing legislation may be worrying for some HMO investors, but there are a number of things you can do to navigate these changes. Start by considering how these potential changes could impact your portfolio and follow these three tips.

 

1. Re-evaluate Your Portfolio Performance 

You may need to update your deal analysis. Will you need to spend more money for higher quality refurbishments moving forward? This may be the case, especially if the government’s proposals to increase the minimum energy efficiency ratings of privately rented properties gets written into law.

 

2. Future Proof Your Properties

Running a successful HMO portfolio is all about making sure it works not just today but tomorrow, next year, in five years, and 10 years down the line. Have a long-term view with everything you’re trying to achieve and try to get ahead of any potential changes that could impact your HMO properties.

 

If you don’t get this right, it could cost you a lot of money, time, and heartache. In a worst-case scenario, you could find your investment simply doesn’t work in the future. However, by getting ahead and planning for potential changes now, you can make sure your properties are future proofed and generate recurring income for years to come.

 

3. Stay on Top of Any Legislation Changes

We know legislation can be boring, but these are your legal obligations. You must be fully aware of them and any changes that could come forward as there are serious consequences. There’s so many different legislative policies to keep up with, but you need to know and keep up with these, one way or another.

 

Sign up to newsletters like this one, read the latest trade news,  be involved in online and in-person industry groups and networks and make sure you have a good property manager. If you don’t keep up with the latest updates, you’ll be liable, so do your research and keep up to date with any changes. 

While further details on these reforms are expected sometime in the spring, start thinking about what these changes would mean for you and how you can start preparing now!

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