Agenda item

The Deputy Mayor submitted a report, on the Mayor’s behalf, for Executive’s consideration. The purpose of the report was to seek Executive approval for the Houses in Multiple Occupation (HMO) fee structure and reviewed licensing process. 

Since 2006, Middlesbrough Council had delivered a statutory (mandatory) licensing scheme for HMOs occupied by five or more unrelated people who shared amenities such as a bathroom, kitchen or living space. This was a duty under Part 2 of the Housing Act 2004. Owners of HMOs were required to submit a licence application and pay a fee. Environmental Health Officers then carried out an inspection of the property to check conditions met safety standards and good management arrangements were in place. Once granted a licence was usually issued for a five-year period. Currently, HMOs were only re-inspected during the five-year period if complaints were made by tenants or others regarding standards or management issues and regulatory action may be necessary.  On an annual basis gas safety and electrical safety certificates were required to be submitted to the local authority by the property owners.

HMOs provided more affordable single or double person accommodation and, due to Middlesbrough’s demographic, there was a considerable demand for this type of accommodation, particularly from the most vulnerable tenants. HMO accommodation was often used for emergency accommodation for the homeless. The number of HMOs had increased in recent years, providing more accommodation for a growing student market as well as meeting the need for low-cost single-person accommodation.

There were currently around 1,730 people living in around 245 licensed HMOs in Middlesbrough, the majority of these offered a compliant standard of accommodation. There were HMO properties that operated illegally without a licence. These only become known to officers when tenants made complaints or intelligence was shared between regulatory bodies, including review of Council tax records and information sharing with other agencies, such as the Fire Brigade. It was difficult to quantify the extent of unlicensed HMOs.

Local Authorities set their own fees to recover the costs of administrating and enforcing mandatory HMO licensing. The current fee structure (2024/2025) was £755.42 for HMOs with 5 bedrooms plus a further £24.98 for each additional bedroom.  This fee was for a five-year licence.

ORDERED That Executive approve:  

1.    The fee structure set out in paragraph 4.10 of the report and in Appendix 1, and

2.    The review of the HMO licensing process.

OPTIONS

The implementation of a new fee and fee structure would enable the Council to deliver its regulatory requirements and deliver a neutral budget cost-effective licensing scheme. It would also help to deliver the Council’s aspiration of providing high quality, affordable housing for all.

The option to ‘Do Nothing’: this would have resulted in the Council continuing to charge the current fees and applying a single fee scheme which would be contrary to recent legal determination.  The HMO licensing scheme would have to operate within the current income received from application fees, with the current staffing resource which would restrict the delivery of the statutory function. To ensure that the licensing function was adequately administered it was likely that public funds would be required. There may also be legal challenge of the current one payment fee structure. The Council may be subject to appeals and associated costs. 

REASONS

The current fee and fee structure for HMO licensing in Middlesbrough comprised of a single payment and, subject to any annual council-wide inflationary increase, the fee had not been reviewed for approximately 12 years.  Fees and charges should be reviewed periodically and adjusted to reflect changes in operating costs. The Housing Act 2004 (section 63) enabled Local Authorities to require the payment of a fee to accompany the application for a licence. Fees charged were to cover all costs incurred in the carrying out the licensing function under the Act.  The licensing scheme should operate on a full- cost recovery basis with all the costs borne by the licence-holders and no burden placed on the public purse. A review was required to ensure that the staffing resource was adequate for the delivery of the licensing functions and ensure the operating costs of scheme are being met by the income from the licence fee. The following changes in the licensing process had been identified which impacted on the required staffing resource:

      i.        A need for interim additional housing inspections during the five-year licence period to ensure the properties were being well maintained and managed.

    ii.        The additional work required to ensure that gas safety certificates and electrical safety reports were submitted by property owners to the Council annually or when requested. 

   iii.        The time taken for the administration of licensing larger HMOs. Historically, larger HMOs had benefitted from comparatively low licence fees, the inspection of larger HMOs took considerably more time than smaller properties.

   iv.        Management and enforcement costs.

In relation to the charging structure, the current licence fees were charged as a single payment.  In accordance with court judgements, licence fees must be charged in two-parts. A Part 1 payment covered the costs of processing and administering the licence application and the Part 2 payment covers the costs of the ongoing administration, management, investigation of unlicensed properties, compliance checks with licence conditions, officer training and development, enforcement of the licensing scheme and associated overhead costs.  The Part 1 application fee was non-refundable should the application be unsuccessful. The income from each HMO licence issued was spread over the five-year duration of the licence.