
This post comes from Jon Knowles, who lives in Hounslow, West London. Some time ago Jon noticed some disturbing changes in his area. Homes built to accommodate a family of three or four were being bought up and converted to houses in multiple occupation.
The practice was starting to have an impact on the neighbourhood as these HMOs were housing many more people than the buildings were originally designed for, placing a strain on rubbish collection and the sewage system. Jon started to investigate and has uncovered something which is nothing short of a scandal.
The new type of housing development was the result of rogue landlords taking advantage of the planning and housing benefit systems to warehouse the poor in sub standard accommodation whilst sticking you, the taxpayer, with exorbitant bills.
What is more, this highly profitable scheme is being rolled out across London and could soon be appearing in an neighbourhood near you. In this post Jon describes how the scam works and the impacts it is having locally. You can read more on his local blog www.hanworth.org
The Great Hanworth Houses in Multiple Occupation Scam
by Jon Knowles, photographs by George TurnerIn 2010 the previous Coalition Government made changes to planning regulations which had a profound effect on the housing market. The law was amended to allow for substantial alterations to a property without the requirement for planning permission from Local Authorities. In particular, changes in use were allowed between C3 dwelling-houses (ordinary family homes to me and you) and C4 houses in multiple occupation (HMOs).
The goal of the policy was to ease planning restrictions, encourage building and spur the economy in the middle of an economic downturn. The effect has been to allow the widespread exploitation of the vulnerable, the destruction of communities and for the public purse to be ripped off to an extraordinary extent. All of this has can be achieved through the exploitation of multiple loopholes which I will lay out here.
The Scheme
First identify housing stock in London Boroughs for sale between the £280,000 to £380,000 and purchase through an off-the-shelf holding company. Family sized properties are still available for these prices in the fringes of London, in places like Hounslow and Brent. You can probably get a quick loan from any one of a number of specialty mortgage outfits such as Commercial Acceptances and offer the company and future profits by way of collateral.
You won’t need to haggle with the vendor over the price, just gazump whoever else is bidding – your future profits will easily cover any the shortfall.
Now, the changes to planning rules allow you to entirely gut the property to maximise any and all available space for habitation under permitted development rights.
Divide the property into six bedsits, each with its own toilet, shower and sink. You won’t have to concern yourself with onerous building regulations either as you’re going to pay a private contractor to provide various certificates which will be offered to the local authority.
No-one will check. As far as the neighbours are concerned the home is being re-modelled and you can tell them any old rubbish you like to keep them off your back. Once the work is substantially finished you can let the Valuations Office Agency (VOA) know that the property is now ‘flats’ and they will dutifully re-band for Council tax purposes. This is important because you will want to pass off the cost of the tax onto your tenants and not have to worry about dipping into your profits. Now you need to find tenants.
At this point you can involve a lettings agency or else advertise privately. Gumtree is a good free source of free advertising. You might also approach certain homelessness charities. The idea here is to attract those on universal credit, particularly those to whom local authorities have a slender duty of care. If they are offered a roof over their head they simply have to accept – it’s either that or the gulag of rough sleeping.
In outer London, housing benefit rules allow you to charge as much as £980 pcm for each bedsit in your property and the local council will guarantee you payment up front. With six flats that is £5,700 pcm! With a few cunning twists you can ensure that the Council pays you directly and bypass the tenant – just get them to sign a simple form denouncing themselves as hopelessly unreliable at managing their affairs.
So now you have six tenants on Universal Credit and Assured Shorthold Tenancies (ASTs) all paying their own Council Tax with the generous assistance of the tax-payer. In four or five short years your company will have paid off the mortgage. But why wait? You can repeat this business model as many times as you like.
Hanworth, West London
What I have outlined above is not theory but lived experience. In Hanworth, at least nine properties that we know of, small family homes, were purchased at the asking price and turned into bedsit HMOs without let or hindrance from Hounslow Council in 2016. This is all but invisible to anybody other than a determined investigator. All the properties are within half a square mile. Local residents fought tooth and nail to have these properties opposed in the planning stages only to be told that it ‘was not a planning matter’. Appeals to local councillors were fruitless.
The only current defense against this naked profiteering is an obscure piece of planning legislation known as an Article 4 Direction. This allows for the removal of certain Permitted Development rights within a defined geographic area. However, it can only be done with the support of local authority officers and it comes with the threat of compensation for those whose ‘rights’ have been removed. For this reason local authorities are extremely reluctant to take such a course of action. After six months and more of campaigning residents were able only to obtain a deferred Article 4 Direction coming into force in November 2017. The profiteers can do their worst to the neighbourhood until then.
Let me make abundantly clear the damage that this business model is doing. Relatively affordable housing stock is being removed from an over-heated market. There is a desperate shortage of such housing stock and after substantial ‘remodelling’ these properties are unlikely ever to be family homes again. The properties are wholly unsuitable for change of use into HMOs and so obviously violate many of the standards which are supposed to apply to such conversions.
Building standards in these properties are very poor. Outsourcing of building regulations is allowed such that the HMO owners are permitted to appoint their own contractors to supply the necessaries to council. If you want to keep getting business from these companies you may not wish to hold them to any kind of standards. We have seen sewage flooding back up from the toilets and the showers on the ground floor of one of these properties. Communal kitchens are way below the required minimum in terms of space and have no external ventilation, not even a window in several instances.
The model represents little more than warehousing of the homeless in cramped bedsits with no communal areas and no sense of community. All of this is done at disgracefully high cost to the tax-payer. The £980 pcm charged to the Local Authority is by my estimate at least twice what would be a reasonable rent. The damage done to the amenity of local residents should not be forgotten. Sewage and water systems designed for a small family in the 1930s are now over-burdened with six flushing toilets and six showers; six times the amount of rubbish and possibly even pressure on already strained parking arrangements are frequently seen. The high turnover of tenants who often have chaotic lives can lead to other problems for both themselves and other residents.The abuse of Houses in Multiple Occupation – A city wide problem
Worryingly, I have discovered that this practice is being repeated all over London. In Hanworth we have seen eight properties converted in a very small area by the same network of companies owned by gentlemen from the Charedi community of Stamford Hill. We know that these companies own properties all across London and the UK where this model is being replicated. Large sums of money flow between well-established Charedi charities and these property companies in the form of donations and loans. The purposes of these transactions are obscured as far as possible, facilitated by abbreviated accounts filed at Companies House.
They are certainly not the only people in this business. The profits available to these companies from the public purse are tremendous and the practise will not stop until the laws are changed to prevent it.
For reasons of concision I am unable to go into the many details which are necessary to understand the complete systemic failure which allows this disgraceful profiteering to thrive. The dubious ethics and questionable practices of the companies involved and the impotence of current legislation are discussed at length over at my blog hanworth.org.
This happened next door to me in Bedford where the owner converted a family home, despite the covenant clearly prohibiting this. He even converted the garage to a one bedroom flat. He didn’t inform the local council for four years and then they allowed the HMO status. The garage surely is not a suitable place to live yet Bedford Council state that it is…..
Your post saddens but doesn’t surprise me. We have faced this type of problem for several years in Tottenham. As a former Labour councillor I was part of a small community group which looked into a number of cases where landlords abused the (then) permitted development rights. In a couple of cases we identified fake documents supplied to Haringey Council to obtain a Certificate of Lawfulness.
As you say the loosening of the rules has made it easier to turn homes into hutches.
Even where a local Council wants to use its powers to detect and prevent abuses, the cuts to local budgets in effect “hollow out” staffing. Experienced and knowledgeable staff may leave,
Councils may themselves take decisions which add to the lack of available resources. For example, our council has wasted money on foolish and unnecessary projects. (e.g. a new borough logo; buying a lease and fitting out a shop for the international starchitect John McAslan & Partners. They have set aside £45k to go off again to the developers’ junket at MIPIM in Cannes.)
Individually the amounts involved are not huge. But they add up. And more than that, this vanity spending signals their decayed priorities.
Alan Stanton
Alan, I am not at all surprised that you have had this experience in Tottenham. In part your neighbourhoods have provided the testing ground for the business model and modus operandi. I have been looking into certain planning applications made by the self same cast of characters.
Under planning law you can not change a house into flats without planning permission and building regs approval. You will need to meet fire regs also plus a sound test. The conversion would cost many tens of thousands of pounds. I do not believe this story unless the council does not know. All the author needs to do is contact the planning depth who will close illegal hmos down.
David, I assure you I have been ’round the houses’ – if you’ll forgive the pun – on planning issues with Hounslow Council. Over the course of an entire year residents were consistently told this was ‘not a planning matter’ as there were no grounds upon which Council could object. The best gloss one can place up;on this inexplicable attitude is an epic error on the part of Hounslow’s Planning Department. However, so repeated and insistent have these errors been, despite persistent warnings as their nature by residents, that it has begun to look like wilful ineptitude. Hounslow Council’s willingness to accept that these are HMO’s managed by Registered Social Landlords is shamefully negligent. The properties are marketed as flats, each have an EPCs, are banded at the VOA as flats, have leases referring to them as flats, are being billed to Council at the higher ‘self-contained’ rate as if for flats for the purposes of Housing Benefit. Only the Council see these as HMOs valid under Permitted Development! Exactly the same associated group of Stamford Hill Businessmen who have tried to perpetrate the same scam over at Brent have been successfully opposed at Appeal level on at least three separate occasions. Why interest does Hounslow have in maintaining the fiction of these spurious HMOS? Very sadly, last Friday we had a death in one of the properties. It is too early to provide reliable details but we understand that the body lay undiscovered for several weeks. This gives the lie to the claim that these properties are genuine HMOs – they are flats which isolate and warehouse vulnerable individuals behind their own locked doors paid for by the tax-payer.
The sad truth is Councils don’t want to know because without these sub standard unhealthy conversions they would have a problem housing people in the borough. The last thing they want is a longer housing list, especially as they wholeheartedly adopt the MIPIM developers and demolish their housing stock for fewer affordable homes which pay more council tax. Bad press for regeneration… And these hovels are cheap on the benefits purse compared to what they’d have to shell out if they forced them to upgrade to the decent homes standard.
Claire, what’s shocking is that Hounslow is phasing out it’s old system Locata, whereby affordable lets could be ‘bid’ for. Last time I checked I found quite a few lets of genuine flats at HALF the rate that these jokers are charging the taxpayer. Not so cheap on the public purse after all!
I thought HMOs with 5 or more tenants required to be registered with the LHFA environmental health service to ensue they complied with legal requirements such as Fire Regs?
Sorry to disillusion you but it would seem not. This is certainly not necessary IF you can involve a Registered Social Landlord in the management of the property. Such involvement confers magical protection on the HMO (if, indeed, that is what it is) and exempts it from mandatory licensing regimes. It’s a terrific fig leaf which can be waved in the face of any Local Authority. RSLs are subject to the paper tiger known as the Homes and Communities Agency. They talk a good talk about standards but all they really care about is financial regulation and even that, not so much….
Jon, I’m interested in learning how one could find out whether this is taking place in other neighbourhoods. I’m from Bristol and we have an increasing crisis with homelessness and affordability, and I wonder whether this is happening here too. Barring keeping a beady eye on my neighbourhood, is there any other way that I can investigate? I’m keen to know how you found out in Hanworth, if you’re happy to share that information. Thanks, Sab