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A REVIEW OF THE FIRST YEAR OF THE MANDATORY LICENSING OF HOUSES IN MULTIPLE OCCUPATION IN SCOTLAND

CHAPTER FOUR THE EFFECTIVENESS AND THE IMPACT OF MANDATORY LICENSING

4.1 This Chapter presents an initial assessment of how effective the first year of operation of the mandatory licensing scheme has been. Across the whole HMO field, 'hard' data is at a premium and reliance must be placed on perceptions and experience more than numbers. The data presented is largely qualitative and is drawn from interviews with key participants. While qualitative data has benefits in terms of its depth and richness, it can be coloured by personal, professional or political values.

4.2 The methodology expressed effectiveness in terms of three questions. To what extent, in its first year of the scheme had the scheme:

IMPROVING STANDARDS AND PREVENTING UNSAFE HMOS FROM OPERATING

4.3 Assessing the extent to which standards and fire safety were improved and bad landlords stopped from renting unsafe or substandard HMOs are considered together, as participants tended to address them as inter-related issues.

4.4 The private sector HMO owners who had an HMO licensed in the first year of the scheme offer a valuable 'user' perspective on how well the licensing scheme had operated. Mindful that their view on its effectiveness could be determined by their wider attitude towards licensing, owners were first asked if they agreed with the principle of HMO licensing as well as how effective the scheme has been in practice.

4.5 All bar one of the 10 HMO owners were unanimous in their acceptance of the principle of licensing. This was consistent with the findings from Shelter Scotland's report in to the licensing scheme (McLachlan, 2002). Owners saw licensing as a way of distinguishing the 'good' from the 'bad' and legitimising what they considered was the good quality of their own accommodation. An Edinburgh property owner with 15 HMOs stated that the government had a " legitimate right to control" while a Glasgow property owner (one who thought the licence fee was " extortionate") accepted licensing was fair in principle but owners should get more benefit. For example, councils should draw up and provide the public with a list of all licensed HMOs that reflected good standards of accommodation. One owner in the Highland Council's area believed that the principle of licensing was right because there were many properties " whose owners are doing nothing. Licensing should get them to improve the safety for their tenants". The word " fantastic" about the principle of licensing was actually uttered by another owner. The one owner hostile to the principle of licensing was a large property portfolio owner in Edinburgh who considered the whole scheme politically motivated and nothing more than a " big hammer to crack a small nut".

4.6 However, translating principled support into practical support proved a different matter. Overall, the owners felt the scheme had indeed raised standards for those that had licensed their HMOs but dissatisfaction and frustration was expressed on a number of issues. There was a general belief that local authorities had asked for more than was necessary in terms of standards and that licence evasion was going on and would likely get worse as smaller HMOs were incorporated by the scheme. Therefore, while effective in bringing HMOs that had applied for a licence, up to a high standard, the scheme, in its first year, had not succeeded in stopping unscrupulous owners and poor condition HMOs from operating.

4.7 To illustrate typical owners' views, a Glasgow owner commented that the scheme was " working well in practice for me but it is not getting the bad landlords". Another Glasgow property company believed it was only " getting the landlords who have been in the business for years". A Highland Council area owner said: " if the council could not get itself organised it would fail". For the other Highland area owner, the council needed more manpower " to chase landlords that ignore the scheme" and the scheme was not working properly " because it seemed that the only owners who have applied are those who believe the licence is a good idea". An Edinburgh owner was adamant that councils were " losing the plot" with the level of detail they were demanding. For fire safety, it would be sufficient to have " hard wired bedroom smoke detectors and a fire resistant front door. They should also look again at allowing internal rooms to be used as bedrooms". Another Edinburgh owner agreed that the licensing process had ' improved in practice since it began" but the council had " taken leave of its senses by demanding sprinkler systems in double upper flats".

4.8 From the representative key player organisations, the two representing landlord and agents were less convinced than the licensed HMO owners that mandatory licensing was necessary although they shared a common view that the scheme as it stood, was not working effectively. The Scottish Association of Landlords (SAL) gave only qualified support to the principle of HMO licensing and questioned its effectiveness in preventing evasion. In terms of its operation, SAL believed the scheme was not working properly because it was catching the " good landlords" but the " bad landlords" were not being tackled. Its conclusion was that the scheme should " go back to the Executive and look again at the legislation" but if it was to stay, local authorities and fire authorities should apply it less onerously. The Association of Residential Lettings Agents (ARLA) had " very few" members who operated large HMOs and did not think the principle of licensing was necessary for the smaller types of properties its members managed. It recognised that licensing for other properties could make them safer, make landlords use leases and could address " the calibre" of landlords because at present anyone could be a letting agent. However, for the smaller, good quality properties that ARLA members let using joint and several leases, it was considered unnecessary and would just lead to a withdrawal from the market. ARLA did not think the scheme had been very effective if only because so few properties seemed to have been licensed by 1 ^st April 2001 (the latest point at which official statistics were available at the time of interview). However, it accepted that more recently licensing was operating more efficiently as authorities were learning what they were meant to be doing.

4.9 Both the Scottish Council of Homeless (SCSH) and Shelter Scotland supported mandatory licensing in principle. SCSH had been involved in the development of the scheme but did not think that, to date, it had delivered its objectives. In its view, the scheme had been brought in as a bit of a " knee jerk reaction" to the fire fatalities in Glasgow. It was also sceptical that one of the key reasons for the scheme, the 'fit and proper person' condition was properly being met. From its own research, Shelter concluded that licensing had " succeeded in improving standards in HMOs" (McLachlan, 2002: 35) and from its property visits, licensed HMOs appeared to be well maintained with adequate cooking and washing facilities and " good and in some cases, excellent fire safety equipment" (McLachlan, 2002: 35). However, it also concluded that sub standard HMOs continued to operate because owners had not applied for a licence when they should have. In the research interview, Shelter emphasised that the scheme was still in its early stages of implementation to allow firm judgements to be drawn about its effectiveness.

4.10 The position of the Royal Environmental Health Institute in Scotland (REHIS) was that the scheme had worked well in its first year because of the size of the premises licensed. In its view, the success story had been with the better-funded places and those with management systems in place e.g. homes for the elderly, university owned student accommodation, nurses' homes where councils had been able to work in partnership with the owners of such accommodation. However, it accepted that this was not the position in Glasgow and Edinburgh who had " hit problems". It also believed that private landlords had " embraced the scheme positively". Not as many have avoided licensing as feared but there were the " rogue landlords" and it feared that this problem of non-licensing would get worse as the scheme moved to smaller landlords.

4.11 A majority of the local authorities considered the scheme had been reasonably effective in achieving minimum standards after one year of its operation - though not all agreed. Three quarters of authorities thought it had been very or quite effective in raising standards (Table 4.1). However over a quarter of authorities, nine, (28%) thought the scheme had not been very effective at all or offered no view as they had not approved any applications.

Table 4.1 Local authorities' views on the effectiveness of the first year of the licensing scheme in achieving minimum standards of accommodation and safety

Source: Local authority postal survey

4.12 While it might be concluded that, overall, more authorities had a positive view than a negative view about the scheme having raised standards in HMOs, this has to be qualified. Of the 7 authorities for whom the scheme had been 'very effective', 6 actually had very low rates of application approval in the first year. For example, one had no approvals with 11 applications received and another had 6 approvals from 28 applications.

4.13 A direct way of considering whether the scheme has succeeded in raising standards and improving fire safety is to compare the number of applications that were received in the first year for the 6 and above size HMOs, with the number that were anticipated i.e. to assess how many owners failed to apply. Information could only be gleaned from the postal survey returns and with the difficulties that authorities had in obtaining hard figures about the number of HMOs in their area (see para. 4.27 and Chapter 7), only estimated information could be obtained. Only twenty-four authorities (75%) provided an estimate of the proportion of HMOs eligible for licensing in the first year of operation, whose owners had applied for a licence. Percentages varied between 0% and 100%, the mean being 56%. In other words, as a rough estimate, just over half of HMOs that should have licensed in year one, had applied for a licence. Whether this is an estimate based on only the private rented sector or across all sectors could not be distinguished. Overall, it is a less optimistic picture from local authorities than implied by the general view of the same proportion of authorities who thought the scheme had been quite or very effective.

THE IMPACT OF THE SCHEME ON THE NUMBER OF HMOS

4.14 One of the issues most debated over the first year of the mandatory scheme has been the question of what impact licensing was having, and may have in the future, on the number of HMOs and the occupancy levels in HMOs (i.e. by owners reducing occupancy numbers by 1, each year, to avoid licensing). A related concern was whether rent levels had increased, or would increase, to allow owners to recoup the costs of licensing. The Executive's Guidance made clear to local authorities that a key objective of licensing was to raise standards in HMOs without causing a reduction in market supply:

"The purpose of mandatory licensing is not to drive HMO owners out of business, but is to ensure that they provide safe, quality housing" ( Scottish Executive (2000b: 12)

4.15 While this position may most obviously relate to the private rented sector, it also applies to licensable, shared accommodation owned by universities, housing associations, hospital trusts, charitable organisations and local authorities. They are not necessarily immune from a financial or other assessment that reducing numbers or even selling properties would be inevitable. The research addressed both the impact of licensing on HMOs encompassed by the first year's threshold of six and above persons and the potential impact on the smaller HMOs. It should be noted that the research did not include quantitative data analysis of sales, purchases or of changes in rent levels. The findings are based on qualitative data drawn from the knowledge, the experience and quite often the opinions, of different participants.

4.16 No private sector HMO owner indicated there was any widespread negative impact of licensing on the number of the larger HMOs but most knew of " one" or " some" other owners who had sold or had reduced their occupancy levels. A Highland Council area owner knew of some bedsitter HMOs that had been converted to single-family houses for sale. He also knew of owners of " bad" HMOs who would not licence, as they ' did not care about standards or licensing'. On the other hand, a Glasgow owner said she had no clear knowledge about whether the numbers of HMOs were declining in the city but at least for the bedsitter type there was a " very good demand". She had advertised a room recently, was " inundated" with inquiries, and let it immediately. She personally knew only one owner who had sold but she thought there were " quite a few" who were avoiding licensing. A Dumfries charitable HMO manager was aware of " some landlords who have left" due to licensing and this " was likely why it was seeing an increase in the numbers of young people" he was having to take in. An Edinburgh owner held that other landlords were reducing the numbers of tenants they took in to evade licensing but the council was not able to do anything about it as " they had their hands full" dealing with the applications that were being submitted.

4.17 The most serious concerns about the impact of the scheme were expressed about the smaller HMOs. A Glasgow property company believed there had been " a lot of selling of smaller 3s and 4s" by owners who " can't be bothered with the hassle" of licensing when it arrives. A Dumfries owner expressed the same view as the area had many colleges, and students would face a " big problems" if 3s were to be included. An Edinburgh portfolio owner thought that if the 3 person HMOs came in to the scheme, it " would severely hit the student market in October 2002". He could already see its impact as, in April 2002, he was getting the " smart students" booking next academic year's flats from 1 ^st July rather than leaving it to September. He had advertised one of his flats recently and could have let it for a July start, " many times over" with the demand from students who were looking ahead to the likelihood there will be fewer flats on the market by September.

4.18 Despite the gloomy predictions by the private sector HMO owners about future decline in the market supply of HMOs, their prediction of their own continued involvement in the HMO sector was very upbeat. Seven of the ten owners underlined their strong commitment to staying in the sector now and for the future, despite their criticisms of aspects of the licensing scheme such as co-ordination, costs, fees and the standards.

4.19 One Dumfries & Galloway owner "... would hope to continue to be in the renting business for as long as possible" while the other "... will stay in the renting business as our objectives are to help homeless young people". Two of the three Edinburgh owners were also very positive about the future. One had the " intention to stay in the rental business for up to 10 years" and the other was "... in for the long term and will not be taking any fewer tenants into my properties". A similar theme came from Glasgow owners. A property company emphasised " We have been in the rental business 30 years and have no intention of leaving the student rental business so the other flats will be licensed as well" and a large portfolio owner responded that licensing " has not made me consider quitting. I'll continue to rent HMOs". A Highland area owner was even considering acquisitions: " I will continue to rent out HMOs and may buy more, but only properties in good condition".

4.20 Across the other three owners, licensing was not the common denominator for quitting the market or reducing numbers. An owner of over 40 flats in Glasgow was selling up but was categorical that licensing scheme was not the reason. His motivation was his impending retirement and in his words, had " made my loot" from renting. An Inverness owner was considering selling in two years time despite having bought the property only 18 months earlier with little to do to achieve the licence. It was not purely because of the licence but because of the " hassle on the tenants' side, with phone calls during the night about problems with the house". He said he had bought the HMO without appreciating just what being a landlord could involve. Only one owner from Edinburgh said all his plans had been undermined by licensing. He would " not buy any more HMOs". The sale of two had already occurred and he would continue to reduce his dependency on them by focusing " on the non HMO market".

4.21 While, most discussion about the impact of licensing has focused on the decline in private sector HMOs, there is the issue of whether any growth is occurring. One potential source of growth is the student population. As student numbers continue to expand, cities and towns with universities should, in theory, see an increase in supply to meet the demand - but how will licensing affect that potential? Of the local authorities with universities or colleges, only Fife Council indicated there was growth occurring in student accommodation in the HMO sector around St. Andrews. Dundee City Council did not think licensing would have any effect on future supply. Maybe it was only thinking about the private rented sector as Dundee University painted a pessimistic scenario in which it would be selling its own flats where it only owned one in a block or stair. Its representative indicated that students would have to go into the less well-regulated private rented sector:

"It is difficult to believe that the Scottish Executive intended that universities be ruthlessly targeted by local councils. The result of this process in Dundee has meant less university controlled beds for students, which must certainly result in more students living in poorly, managed private HMOs". (Dundee University accommodations officer)

4.22 Edinburgh University was most concerned about the future impact of the scheme on the landladies who take in 2 student lodgers. It feared they would stop renting out rooms or only take 1 student, reducing the university's pool of accommodation to offer new students. Glasgow University had not witnessed any growth but neither had there been " any visible decline in HMOs in the West End" although it thought that some private owners had left the sector. As for its own student accommodation, it was in negotiation with Sanctuary Housing Association to sell all its modern student blocks built in the last 10-15 years. If it went ahead ³, licensing requirements would fall on Sanctuary. A company, Glasgow Estates, would do day-to-day running of the estate.

4.23 Neither of the 2 housing associations who participated in the research, indicated there was any chance any of their very sheltered housing schemes would be closed, despite the problems they had with the licensing standards. However, in its submission to the Social Justice Committee, Abbeyfield Scotland had expressed early fears about the impact of licensing costs on some of its societies' homes: " House closures may result even if full funding for unforeseen works is available" (Abbeyfield Scotland, 2001).

4.24 Turning to the views of some of the key player organisations, SAL accepted that " black and white evidence" of numbers dropping was difficult to obtain but according to valuers and surveyors, more HMOs were coming on to the market. It argued that the buoyant residential market for home ownership was motivating HMO owners to respond to the problems of licensing by selling for single-family ownership. ARLA reserved its views for the pending impact of licensing on the owners with small flats. It believed they would quit the sector or reduce their letting numbers. The Private Rented Housing Forum (which includes ARLA and SAL) expressed a similar concern. From a different perspective, SCSH was more upbeat about the future for HMOs. It had not formally been monitoring the scheme and had no indications that homelessness had increased due to the scheme but this was " not based on hard statistics". Profit was seen as the driving force for the private HMO owner and in SCSH's view, there was still a profit to be made despite licensing so " the market will survive - the fear that it was the end of the world" had not been correct.

4.25 A majority of local authorities, 20, (63%) indicated there had been no impact on supply in their area due to the licensing (Table 4.2). The grounds on which this conclusion was reached varied from factual to circumstantial. In most cases, it was not concrete, evidence-based knowledge. For some authorities it was " information files in the department", for others it was " local knowledge and officer experience" and for still others, it was " discussions with HMO owners" or " no evidence to the contrary".

Table 4.2 Local authority views about the impact of licensing on supply

Source: local authority postal survey *percentages rounded to 100

4.26 Not every local authority agreed with this positive analysis. Six authorities, (19%) thought the market for private sector HMOs had been reduced by the end of the first year of licensing One authority said that 3 bed and breakfast DSS premises had closed, another said there were " some closures" due to an owner's unwillingness to meet improvement costs. The decline was not always in sales. A few authorities said the decline was in respect of property owners reducing occupancy levels to avoid licensing rather than sales. The other 6 authorities offered no view about the impact of the scheme because they simply did not know.

4.27 Looking to the future, confidence about the neutral affect of the scheme declined. Nearly half, 15 authorities (47%) anticipated a drop in supply of HMO accommodation or bed-spaces in the longer term; the remainder of authorities were unwilling to speculate.

THE IMPACT OF LICENSING ON RENT LEVELS

4.28 The knowledge that local authorities held on the impact of the first year of licensing on rent levels was limited - more limited than about supply impact issues. Almost half, 15 authorities (47%) offered no view on the issue because they had no information or knowledge about private sector rents (Table 4.3). Only one authority, South Lanarkshire, said rents were increasing: " it was always anticipated that costs associated with the scheme would be reflected by an increase in the rents charged". Half of the authorities thought licensing had not caused rents in the private HMO sector to increase over the first year of the scheme. Explanations offered were similar to the reasons given for the scheme's lack of impact on supply although two additional factors were quoted: at the lower end of the market, the constraint exercised on any increases by maximum housing benefit payment levels and in the middle to upper end of the market, the more dominant effect of market forces constraining owners' freedom of action.

Table 4.3 Local authority views about the impact of licensing on rents

Source: local authority postal survey *percentages rounded to 100

4.29 Several said it was too early to see any impact. The downward influence of market forces on rent increases was emphasised by Dundee City Council. A " straw poll" that it took of two major landlords, a hospital trust, a housing benefit hostel and two letting agents:

"suggests that the market will affect the rent levels more than anything (over-supply of flats in Dundee) but a hospital trust is likely to pass on licence costs over 3 years to tenants (pence per week) but the rise to be kept at inflationary levels" (Dundee City Council, lead HMO officer)

4.30 In terms of the effect of licensing on future rent levels, authorities were much more pessimistic, with 14 (44%) predicting rents would rise due to licensing. Some thought it was only a matter of time until owners passed on the costs. Others linked increases to the market supply. Their argument was that if licensing reduced the number properties, the reduction in supply would force up rents. Growth in student numbers was another factor. Aberdeen and Glasgow city councils thought overall future supply would decline and with student numbers planned to increase, inevitably rents would rise. However, Edinburgh believed that the city's HMO sector would not decline and rents would not increase due to licensing. The " huge market demand from first time buyers and students and young professionals" would be matched by property investors buying HMOs as a financial investment. An officer commented that:

"One owner has 6 mortgages and 6 HMOs. These people know the costs, they have it all worked out and can make a profit. Property landlords are outbidding intending owner occupiers" (City of Edinburgh Council lead HMO officer)

4.31 Niche market renting opportunities in a buoyant housing market can lead to individuals and companies taking a calculated risk and purchasing HMO properties. This is more likely in the mid to upper end of the market and is epitomised by an example that arose as part of the tenant interviews in Edinburgh. With its buoyant housing market, a property-letting agency purchased a large flat in the centre of the city. It was subsequently modernised to a very high standard and licensed as a five person HMO. The owner of the agency said that it was subsequently let at 2000 per month to a corporate client (a bank) for three staff in the city on short-term contract work.

4.32 Of the 10 private sector HMO owners, 8 had indicated that their financial motivation for being in the residential letting sector was to achieve income generation or for a combination of income generation and capital appreciation. It is perhaps surprising that such motivation, and their licensing costs, did not appear to result in a major uplift in their rent charges. Seven said they had not raised their rents in response to licensing costs or had made only minor increases. The explanation most commonly given was the over-riding influence of market forces. An Edinburgh owner said: " you can't just go to your tenants and say you're increasing their rents because of licensing" and market conditions had a more significant effect on whether rents could be increased than licensing: " the market can't be bucked". Such views corresponded with those of the 16 local authorities who believed that licensing had not affected rents, at least in the first year of the scheme. One Edinburgh owner's rents had " hardly moved in five years" and a Glasgow owner said his rent charge had not changed " though it should have". Indeed, he added that his rents had not altered for the HMO for nearly five years. He had " good long term tenants" whom he wanted to keep and he " wasn't hungry for the money".

4.33 Of the three owners who had increase rents in response to licensing costs and fees, one had raised each room rent by 2.50 per month (with licensing costs of 3000 - 4000 plus licensing fee). Another had recently raised rents by 8% though he said this was " not so much to do with licensing as because they had not gone up for some considerable time" and the third had " squeezed" the rent up from 250 to around 260 - 265 per month for rooms in his HMO (3000 spent on upgrading costs). Housing benefit constraints did not affect him as he only let to students.

4.34 Turning to the 6 HMO private sector tenants who had been resident prior to the licensing approval of their HMOs, 4 indicated their rents had risen around the time of licensing. These ranged from a 20 per month increase on a pre licence rent of 175 per person, to a 15 per month increase on a pre licence rent of 265. However, of the 7 tenants who had taken up tenancies at the time of, or after licence approval, only one tenant indicated a rent increase had occurred, from 200 to 235 per month.

4.35 While it appears that private owners were not greatly exercised, at least in the short term, by the need to recoup the costs of licensing, this was not the case in the non-profit sector. Abbeyfield Scotland argued that residents should not have to foot the cost of operating local authority licensing schemes but the cost of the licensing fee and upgrade costs would have to be passed on to residents. In its main written report to the Social Justice Committee, the Society stated:

"We believe that if a local authority applies an order for work based on fire safety/escape requirements that grants are available for only 20% of the work to be carried out. Increased charges to residents are inevitable under the circumstances" (Abbeyfield Scotland, 2001a: 5)

4.36 The three universities were similarly exercised by the financial implications of licensing fees (see Chapter 8) and upgrade costs in relation to their halls of residence and student blocks. However, it should be noted that they had upgrading plans prior to licensing. Licensing either brought forward work programmes, reorganised the order in which works were to be carried out or added additional fire safety requirements. The fees they would have to meet were considerable (see Chapter 8) but it is not possible to identify how much of any future rent increases would have arisen regardless of licensing. Dundee University commented that:

' It is inevitable that rents will increase and the services provided will decrease to pay for the necessary accommodation upgrades. There is no other way to finance the work required. The level of increase cannot be quantified at present but it would seem likely a double figure percentage increase will be required' (Dundee University, accommodations officer)

4.37 Glasgow University expressed a similar position:

"The university cannot subsidise its accommodation and services. They must be self-financing so the fee and upgrade costs will eventually be passed on to the students" (Glasgow University, student accommodation manager)

4.38 Edinburgh University, like Glasgow, had yet to pay the licence fees for its residence blocks and its 4 year programme of upgrade work still had to commence but at the time of the study it said that:

"The fees have not caused the rents to increase. The university sets its rents taking a whole range of factors into account. In Pollock Halls, the rents went up because upgrade work was going on and the installation of a fire alarm system was just added in. The rents would have increased regardless of the licensing cost" (Edinburgh University, student accommodation manager)

4.39 In its submission to the Social Justice Committee, the National Union of Students Scotland recognised that the scheme was still in an early stage of implementation and that evidence of high rent increases was not available. Its concerns were for the future, namely that universities and private owners would pass on their licensing costs to students through unaffordable rent increases. It commented that:

"While a moderate increase in rents to guarantee health and safety of some accommodation is possible, students are worried about the level of rent increase that any transfer of landlord's costs might result in" (National Union of Students Scotland, 2001)

Given the views by the universities themselves, there are genuine grounds for this concern.

SUMMARY OF KEY FINDINGS

4.40 With the wide range of contributors that provided their views on the effectiveness of the first year of licensing, unanimity of viewpoint was absent but on a number of issues, a majority view or consensus existed. In some issues, the divergence of views defeated any clear consensus.

4.41 In the first year of the mandatory licensing scheme:

• The scheme was effective for those HMOs that were licensed. They achieved very good standards although private owners considered the standards had been over-onerous
• There was consensus that in the first year of licensing, overall, the scheme had only limited effectiveness in raising standards because just over half of the 6 person HMOs that should have been licensed by the end of the first year, appear to have been licensed
• One of the main problem local authorities faced in achieving full licensing coverage of the 6 and above HMOs, arose from the failure of many HMO owners to apply for a licence. There was general agreement that the owners who came forward early with applications were better managers and more conscientious owners than those who evaded licensing
• The types of properties that had been licensed in the first year tended to be the owned by the more conscientious private sector HMO owners committed to the business of renting and by non profit owners
• There was a broad consensus that over the first year of the licensing scheme, there had been no major decline in the number of privately rented HMOs or in occupancy levels. There had been sales and reductions in occupancy numbers but these did not appear to have been significant
• Most private sector HMO owners supported the principle of licensing. It was seen as legitimate for the government to seek to ensure good standards and safety in shared accommodation but they were critical of its implementation, partly for the standards it imposed and partly for their sense that with too many owners having failed to apply for a licence, it had not delivered any tangible benefits to them for having come forward to have their properties licensed
• The majority of owners of larger HMOs who had voluntarily licensed their properties in the first year of the scheme, indicated that they would stay in the HMO rental business for some years, despite the additional costs incurred due to licensing. However, some owners of larger HMOs were likely to sell but licensing regulation may only be part of their reasons
• There was no consensus that the future number of HMOs in the private rented sector would decline. Half of authorities believed there would be no negative impact on future supply but a greater weight of opinion from the other authorities together with HMO owners, universities and some key player organisations feared that the owners of the smaller 3 person HMOs and to a lesser extent, owners of 4 person HMOs will leave the market or reduce occupancy levels rather than face licensing
• Overall, there was no confidence from contributors that the private rented HMO sector will expand. There was seen to be only very limited potential for new entrants to the sector, but this would depend on a buoyant local housing market in specific locations and was likely to be very selectively targeted such as at the top end of the rental market
• Although information was limited, there was a consensus that the first year of the scheme had not resulted in significant rent rises for HMO tenants in the private rented sector. Where rents had risen, it seemed to be as much a response to inflationary factors or the length of time since previous rent increases as to moves to recoup the capital expenditure required to meet licensing costs
• There was a degree of consensus but with dissent by a number of local authorities, that licensing will lead to rent increases in the future

Owners of HMOs in the non-profit sector such as universities and Abbeyfield Societies, were more explicit about the inevitability of licensing costs being passed on to tenants than private sector HMO owners

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