Financial viability

A financial viability exercise took place to include a variety of properties using two different models.

Model 1: Converting the property to a house of multiple occupancy (HMO) and utilising the lounge as an additional bedroom

Model 2: Converting the property to a HMO and utilising the lounge as a bedroom and using the smallest bedroom as a communal dining area/sitting area

Using the rent charged on a typical 1, 2, 3 and 4 bed for new builds, which is generally higher than older stock and the current rent charge for a room, most options would create an annual surplus. Whether council tax would be rechargeable  does however need to be taken into account.

2 bedroom properties stacked up well by utilising the lounge as a bedroom and in our experience, the communal dining/living area wasn’t taken advantage of and so removing this communal living aspect of shared housing should not have a negative impact on tenants sense of security and health.

Although 4 bedroom properties stack up best financially, they are in short supply or are adapted, and priority for these properties are generally given to larger families when looking at re-letting.

There were several issues using assured short-hold tenancies:

  • The tenancies were fixed term for 6 months meaning there were limited powers during that period to take action for anti-social behavior or rent arrears
  • Where one tenant was working and the other was in receipt of Housing Benefit, there were difficulties in managing rent arrears as both tenants held joint liability for the rent
  •  Where a joint tenant left the property, the remaining tenant became wholly liable for rent and bills which saw an increase in rent arrears as the shortfall in Housing Benefit was higher due to the one bed LHA rate being applied

We took the decision to convert all properties to HMO’s and use licenses across all the shared stock to be able to provide a consistent service that met the needs of tenants but also offered us the ability to take appropriate action where required in terms of managing risks and anti-social behavior. To date, we haven’t had to use the flexibility within a license.