This is a topic that’s on the mind of a large proportion of HMO landlords. Ok, so it may be summer at the moment, however as we draw towards the cooler months and the next energy price cap increasing in October.
So, what can landlords expect? Well, in a nutshell, landlords can expect their fuel bills to increase by a further 70%. On top of things like increased costs to council tax, broadband, materials, labour, and more it’s yet another thing that will eat into profits.
We’ve seen the £400 fuel bill discount having recently been announced and whilst any help is extremely welcome, it’s disappointing to hear some bodies such as Citizens Advice raising concern that tenants on all-inclusive rates (such as HMO tenants) will not ‘see any benefit’ through the scheme.
Citizens Advice claims that landlords will simply ‘pocket the savings’. This does irritate me quite a bit as sure, landlords could pass on the money, but rents would need to increase to balance out the additional costs. An extremely short-sighted and daft campaign if you ask me.
Also, the £400 discount will not go far when it comes to energy bills for a five or six-bedroom HMO!
It’s also worth considering how the HMO market has adopted an all-inclusive rent model. Certainly, this makes life easier for tenants and there are some HMOs where bills are in addition to rents. Perhaps if there continue to be significant rises, we will see a move towards rent and bills charged separately.
So, what can landlords do to balance out the costs of potential rises in fuel bills? Here are three actions that you may wish to consider. These are actions we’re taking for the properties we manage and working with landlords to monitor the evolving situation.
Warn tenants about being more careful with energy usage
In what we recommend as being a preventative measure that could be taken immediately, it’s certainly worth getting a message out to all tenants with a general warning about the cost of utilities and inevitability of further rent increases.
The goal of this is to also help discourage inconsiderate usage and head off any rent increases being higher than they absolutely need to be. We recommend sending this message out by email to tenants.
Install a heating control system
This is a measure that landlords may wish to consider implementing before the weather starts cooling down.
I recently wrote a detailed article with some specific guidance for landlords around this area and the main take-home point was how tenants should still have some degree of control.
Landlords should also adhere to the advice given by Sean Hooker, Head of Redress at the PRS about this action:
“Whilst there is no law specifically prohibiting a landlord from locking away or boxing a thermostat, this goes against the guidance of Chartered Institute of Environmental Health and the operating guidance of the Housing Health and Safety Rating System (HHSRS) in which it states a tenant should have control of the heating.”
“In HMO properties where there is a centrally controlled system, the landlord is obliged to ensure the tenants are not exposed to excessive cold and can regulate the temperature in their own rooms e.g. there are controls on their radiators.”
“The issue of whether therefore a landlord is breaking the law is down to whether the property is cold or not and constitutes a “Category 1 hazard” under the HHSRS.
Increase rents accordingly
Ok, so I’ve put this as the third and final point because, whilst probably inevitable, it should be seen as the last action to take.
Unless there is a drastic downward trend in costs, I think it’s inevitable that we will see HMO rents increase by at least 20-30%. It’s going to be a crucial exercise for landlords to review their costs every few months to ensure that any rental increases are made in line.
Whilst rent increases are inevitable, it’s also important to remain competitive so there is a fine balance to strike here.
If you are an HMO landlord and have any questions or concerns about your properties over the coming months, then I would be happy to help. Just get in touch via LinkedIn and I’ll arrange a suitable time to discuss further.