How will HMO licensing changes impact London’s biggest property rental market?

Research by central London estate agency, Bective, has revealed how new HMO licensing rules will impact London’s biggest property rental market, Westminster.

The new HMO licensing rules came into force in Westminster at the end of August 2021. In short, they state that shared houses or flats where 3 or more people from 2 or more households share facilities now require licensing as HMOs. This replaces the old rule that stated an HMO license wasn’t mandatory until 5 or more people were sharing facilities. Westminster council hopes that this change will help improve living standards and create a safer, fairer tenant experience.

These new rules are of particular significance in Westminster, the largest private rental market in London. In the capital, private rental stock accounts for 27% of all dwellings. In Westminster, this number rises to 42% of dwellings, more than any other borough, followed by the City of London (41%) and Kensington & Chelsea (37%).

Furthermore, Westminster also has the 6th largest number of existing HMOs (9,539) of all London boroughs, trumped only by Ealing (20,429), Brent (16,984), Lambeth (12,000), Tower Hamlets (10,000), and Enfield (10,000).

Over the past three years, Westminster has also seen the 8th largest increase in the number of HMOs, up 19% between 2017 and 2020, behind Hillingdon (668%), the City of London (614%), Lambeth (532%), Tower Hamlets (67%), Newham (58%), Waltham Forest (53%), and Harrow (36%).

Finally, Westminster ranks 12th in terms of current HMO numbers as a percentage of all (18%), a list that rental stock is topped by Ealing (53%), Brent (46%), and Enfield (32%).

However, with these changes now in force, it's likely that the number of HMOs within the borough will now spike.

Because of Westminster’s large rental market and growing HMO market, the new licensing rules will have a more profound and long-lasting effect on the borough than it will on most others.

Bective Head of Lettings and Property Management, Tom Dainty, commented:

“The impact of these new rules will be two fold. Yes, it’s undeniable that additional HMO licensing and tighter scrutiny when dealing with rule-breakers will benefit tenants by raising the standard of living.

“But, at the same time, this increased scrutiny, along with the additional costs, might tempt landlords to up sticks from Westminster and find more profitable investments elsewhere.

“This exodus will be of detriment to tenants. Less landlords means less stock, and less stock means higher rent prices. With Westminster’s average rent already more than £2,600 a month, this could further price more tenants out of the borough.”

*Table shows top 10 boroughs ranked top to bottom for private rent as % of total stock*
Location	Private rental % of total stock
Westminster	42.1%
City of London	41.1%
Kensington and Chelsea	37.2%
Newham	36.0%
Tower Hamlets	34.5%
Hammersmith and Fulham	33.0%
Haringey	32.7%
Wandsworth	32.4%
Camden	31.8%
Brent	31.0%
London	26.80%
Sources - ons.gov.uk

*Table shows total number of HMO properties in London boroughs in 2017 and 2020, ranked from biggest 3-year increase to smallest*
Location	Estimate of total number of HMOs- 2016 to 2017	Estimate of total number of HMOs 2019 to 2020	3 year change
Hillingdon	651	5,000	668%
City of London	14	100	614%
Lambeth	1,900	12,000	532%
Tower Hamlets	6,000	10,000	67%
Newham	6,000	9,500	58%
Waltham Forest	3,900	5,951	53%
Harrow	880	1,200	36%
Westminster	8,000	9,539	19%
Greenwich	6,500	7,500	15%
Hackney	4,269	4,717	10%
Brent	16,000	16,984	6%
Hounslow	1,800	1,850	3%
Havering	265	267	1%
Sutton	1,200	1,200	0%
Ealing	20,429	20,429	0%
Kingston upon Thames	4,800	4,800	0%
Barnet	5,930	5,930	0%
Croydon	3,000	3,000	0%
Camden	8,000	8,000	0%
Kensington & Chelsea	4,434	4,000	-10%
Bromley	2,300	2,074	-10%
Bexley	1,400	1,200	-14%
Redbridge	5,000	4,000	-20%
Enfield	14,200	10,000	-30%
Barking & Dagenham	300	192	-36%
Haringey	12,000	6,000	-50%
Hammersmith & Fulham	6,633	3,000	-55%
Lewisham	14,810	6,000	-59%
Southwark	13,000	5,020	-61%
Merton	5,568	2,040	-63%
Richmond upon Thames	510	97	-81%
Wandsworth	15,000	820	-95%
Islington	N/A	400
London overall	194,693	172,810	-11%
Sources - Gov.uk LA Housing Data, Gov.uk LA Housing Statistics

*Table shows HMO as % of private rental stock in top 20 London boroughs, ranked from largest percentage to smallest*
Location	Est private rental (2019)	Estimate of total number of HMOs 2019 to 2020	HMOs as % of private rental stock
Ealing	38,904	20,429	52.5%
Brent	37,283	16,984	45.6%
Enfield	31,051	10,000	32.2%
Greenwich	25,191	7,500	29.8%
Kingston upon Thames	16,370	4,800	29.3%
Lambeth	42,245	12,000	28.4%
Tower Hamlets	41,885	10,000	23.9%
Camden	33,625	8,000	23.8%
Hillingdon	22,029	5,000	22.7%
Newham	42,124	9,500	22.6%
Waltham Forest	28,059	5,951	21.2%
Westminster	52,791	9,539	18.1%
Lewisham	33,277	6,000	18.0%
Haringey	35,781	6,000	16.8%
Redbridge	26,336	4,000	15.2%
Southwark	35,039	5,020	14.3%
Barnet	42,235	5,930	14.0%
Hackney	34,100	4,717	13.8%
Kensington and Chelsea	32,670	4,000	12.2%
Hammersmith and Fulham	29,399	3,000	10.2%
London overall	963,794	172,810	17.9%
Sources - Gov.uk LA Housing Data, ONS