Brent council introduced a new rule for HMOs last year via the Article 4 Direction - requiring planning consent before an HMO is established.
The measure was introduced to improve standards and avoid overcrowding by rogue landlords, but the change has now created a bottleneck at planning level, according to Shilpa Bathija, director of Winkworth in Kingsbury in North London.
On the latest episode of Winkworth’s The Property Exchange podcast, Bathija says: “We understand the logic of making everything transparent and with the right protocol. However, the council isn’t able to handle the planning applications. It’s all become a bottleneck for any landlord who wants to rent out a house or flat to sharers.
“People are having to compromise on the size and quality of the property they need to live in to fit their budgets because you can’t have more than two households in one property. That great experience of sharing a house and living in London does not exist in Brent anymore unless the stringent legislation is adhered to.”
A lack of social housing is also putting more pressure on the rental sector in Brent.
Bathija continues: “Vulnerable people on benefits are being forced to rely on the private rented sector. Social housing stock has not been replenished.
“We now have people calling us to say that the council has directed them to us to try to find rental accommodation, which doesn’t make sense with their inability to afford current costs of renting.
“On the sales end, there has been a 22 per cent drop in first-time buyers able to enter the property market because rents are so high and they cannot save as much as they used to. It’s just becoming a big pressure cooker that’s waiting to explode. The whole point of the government penalising landlords with additional stamp duty and abolishing mortgage interest relief was to boost the first-time buyer market. We are going round in circles.”
Tom Street, lettings director of Winkworth, says three other London boroughs of Tower Hamlets, Islington and Hackney - all Labour controlled - operate licensing schemes for HMOs which can also affect sharers.
He tells the podcast: “Some landlords with two or three bedroom properties don’t want to have to pay the licensing fee with the additional costs they already have as a landlord so they just decide to focus on letting to families with children, where the licensing scheme doesn’t apply.”
Dominic Agace, chief executive of Winkworth, adds: “We are living in fairly extreme times in the private rental sector.
“We are seeing 15 per cent rental price growth in London for the past two years, with 10 per cent predicted for next year. While we wait for reform and the Election, prices have gone up. That means people are choosing smaller properties and not what they need in life. And that’s a bit sad.”
Despite the current gloom for renters, the future for property investment remains compelling, compared to stocks and shares.
Agace explains: “A buy to let property is still a great investment, compared to the stock market fluctuations. Property and bricks will stay here forever. The level of entry has gone up and in areas driven by debt, like London, where the prices are higher, that’s where the big problem is but we are seeing it grow in some parts,
“The East of England, however, is seeing more buy to let landlords now than last year where property prices are lower and there’s significant capital growth going on and less of a debt concern.”