Photo by Skaus Haus
Whether you’re a very experienced HMO landlord or an absolute beginner to HMOs, you must be fully aware of the factors impacting the industry. In recent years, there have been numerous changes to regulations and legislation, in addition to what’s happening in the economy and across the industry.
As we head into the New Year, let’s talk about eight important things all HMO landlords need to be aware of throughout 2024 and beyond!
1. Renters Reform Bill
Having been talked about for some time now, the Renters Reform Bill was included in the King’s Speech, showing the government’s commitment to passing the bill this year. There have been some recent changes to the proposals, but specific timescales and details are still uncertain.
The government has confirmed that it doesn’t intend to proceed with the abolition of Section 21 evictions until court reforms have taken place. And while they will push forward with ending fixed-term tenancies, a new ground of possession has been proposed to help facilitate the yearly cycle of student lets.
However, we still don’t know exactly how this will operate, so, this is something we need to continue to follow!
Tip: Make sure you’re ready for all of the proposed policies within the Renters Reform Bill and understand how these will impact you and what you need to do to prepare for the changes.
2. Energy Costs
Energy prices are going up again at the start of 2024. Ofgem has announced that the price cap will rise by £94 for an average household in January. The cap is being increased from £1,834 to £1,928, which is a 5% rise.
The regulator has also unveiled plans to introduce a one-off price cap adjustment of £16 to be paid between April 2024 and March 2025. This is to help suppliers recoup debt from customers struggling to pay their energy bills.
Tip: While making sure you’re on the best deals, continue looking at ways you can make energy efficient improvements to your HMO properties, as this will only become more important for you and your tenants!
3. Tax Obligations
It’s important to understand your tax obligations as a HMO landlord, and this depends on how you’re investing. There were some recent changes to tax announced in the 2023 Autumn Budget, including National Insurance cuts for employees and the self-employed.
The Capital Gains Tax annual exempt amount will also be reduced from £6,000 to £3,000 from April 2024. And there were changes to Corporation Tax that came into effect earlier this year as well.
Tip: Stay on top of any changes to your tax obligations, and factor this into your business decisions.
4. Interest Rates
The Bank of England has held the base interest rate at 5.25% for a third consecutive time. Some analysts are now predicting a series of rate falls throughout 2024 as inflation has dropped to the lowest level in more than two years.
But you should keep an eye on what happens with both interest rates and inflation moving forward and understand how this impacts you and your HMO business.
Tip: We recommend working with a specialist mortgage broker to help you navigate the changing mortgage market and ensure you always get the best product for your circumstances!
5. Landlord Licensing Schemes
In recent years, there has been an increase in landlord licensing schemes coming into effect across Britain, and there is more set to take effect in 2024. You need to be aware if these are coming forward in the areas you invest in.
Tip: If you have any questions about landlord licensing schemes and additional legislation in your investment location, reach out to your local housing authority. They are usually happy to help with this.
6. Tenant Preferences
Property preferences change over time and what HMO tenants are looking for can also evolve. So, it’s important to stay on top of any changes to tenant preferences among your target demographic, particularly as this can impact how quickly you can fill your rooms, how long your tenants want to stay, and how profitable you’ll be.
Tip: Be aware of what your competitors are offering and what tenants are on the hunt for, and wow tenants with your properties and management service!
7. Planning & Permitted Development
In the 2023 Autumn Budget, there were proposals announced for new rules to encourage local authorities to fast-track business planning applications and a consultation to change permitted development rights to allow a house to be converted into two flats as long as there’s no change to its external appearance.
It’s helpful to stay on top of any changes to planning laws, permitted development and building regulations so you can understand how this impacts your HMO projects and the renovations you undertake.
Tip: Consider working with an architect or planning consultant to help you navigate planning laws and building regulations.
8. Rental Demand
After a period of sky-high demand, the latest research from SpareRoom suggests that the recent rental frenzy is beginning to settle. The current ratio of tenants looking for room rentals versus the number of rooms available has fallen to its lowest point in more than two years.
This could mean that competition will be fiercer among landlords in the HMO market. Don’t be fearful of this as it can actually create opportunities for us!
Tip: Moving forward, providing great accommodation and a great management service to tenants will be more important than ever. So, focus on standing out and being ahead of the competition!
While this part of HMO property investment can be dry, there are serious consequences if you don’t keep up with changes within the industry and navigate the challenges that are impacting HMO businesses! So, make sure you’re ready for all of these across the next year and prepare for any changes ahead of time.
For more advice and resources on how to start, scale and systemise your portfolio, including up-to-date information about legislation, become a member of The HMO Roadmap today and get 2024 started off on the right foot!
And if you have any questions about the year ahead for HMO landlords, join us over in our free Facebook Group The HMO Community and ask away!
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind, writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!