Labour politician criticises HMOs as state-funded investor profits

Labour politician criticises HMOs as state-funded investor profits

A Labour councillor has condemned Houses in Multiple Occupation (HMOs) as a “state-financed cash machine” for investors amid growing political and local authority scrutiny of the sector in England.

Andy Bates, a Labour councillor in south London, publicly criticised the role of HMOs in generating profits for landlords at the expense of public funds allocated for temporary accommodation. His comments come as several councils introduce measures to regulate or restrict HMOs to address housing and welfare concerns.

Labour councillor’s strong stance on HMOs and welfare spending

In a post on the Labour List website, Andy Bates argued that HMOs represent a significant source of profit for investors who benefit from state-funded welfare payments. He highlighted the competition among the Home Office, local councils, and other bodies for temporary accommodation, suggesting that landlords operating HMOs are capitalising on this demand.

Bates pointed to an example in his own south London area to illustrate how investors profit from welfare-funded housing. He called for a refocus of welfare expenditure, emphasising the need to curb “excessive and dysfunctional profit taking” by landlords. According to Bates, this would allow welfare and employment support to be better targeted at those genuinely in need.

Local authorities increase controls on HMOs amid political pressure

Alongside Labour’s criticism, Reform UK-controlled Newcastle-under-Lyme council is considering an Article 4 Direction to require planning permission for new HMOs across the entire borough. This would effectively limit the conversion of residential properties into HMOs without explicit local authority approval.

Other councils have taken similar steps. Tameside Council introduced an immediate Article 4 Direction in late 2025 to prevent HMO proliferation. Warrington Council approved borough-wide controls and a new Supplementary Planning Document aimed at preventing unfair clustering of HMOs. Luton Council launched a selective licensing scheme in 2026 to improve regulation and tenant protection in HMOs. Wigan Council is pushing for mandatory planning permission for all HMOs, and Stoke-on-Trent City Council is conducting a major review and property inspection initiative to address resident complaints related to HMOs.

These measures reflect growing concern over the impact of HMOs on local communities, housing standards, and the welfare system. Councils emphasise the importance of responsible providers and stronger oversight of housing conditions and safeguarding.

Political and regulatory context of HMO scrutiny

The criticism of HMOs as vehicles for state-funded profit aligns with wider debates about the private rented sector’s role in housing vulnerable tenants, particularly those reliant on welfare support. The temporary accommodation market has expanded due to rising homelessness and housing shortages, increasing demand for HMOs as affordable options.

However, this growth has raised questions about the quality of accommodation, landlord behaviour, and the balance between investor interests and tenant welfare. Labour and Reform UK politicians have increasingly voiced concerns about the social and economic consequences of HMO expansion.

Local authorities’ use of planning controls such as Article 4 Directions and selective licensing schemes reflects a shift towards tighter regulation of HMOs. These tools enable councils to manage the concentration of HMOs, enforce housing standards, and protect neighbourhoods from negative impacts like overcrowding and anti-social behaviour.

Practical implications for landlords and letting agents

Landlords operating HMOs or considering entering the market should be aware of the growing regulatory scrutiny and political opposition. Article 4 Directions and selective licensing schemes can significantly affect the ability to convert properties into HMOs or continue operating them without additional permissions or compliance requirements.

Letting agents must advise clients on the evolving local regulations and help ensure that properties meet licensing and planning conditions. Failure to comply with new controls could result in enforcement action, fines, or restrictions on letting activity.

Landlords should also consider the reputational risks associated with negative political narratives around HMOs. Engaging proactively with local authorities, maintaining high property standards, and demonstrating responsible management can help mitigate these risks.

Uncertainties and areas to monitor

The extent to which national government policy will support or resist further local restrictions on HMOs remains unclear. While councils have powers to impose Article 4 Directions and licensing schemes, the government’s stance on balancing housing supply with regulation will influence future developments.

There is also uncertainty about how welfare reforms or funding changes might affect demand for HMOs used as temporary accommodation. Landlords and agents should watch for announcements from the Department for Levelling Up, Housing and Communities and the Home Office regarding housing and welfare policy.

Additionally, the impact of these political criticisms on broader rental market regulation, including safety standards and tenant protections, could evolve. Stakeholders should monitor consultation outcomes and legislative proposals that may emerge.

What landlords should consider now

• Review local planning policies and licensing schemes affecting HMOs in your area to ensure compliance.
• Maintain detailed records of property standards, tenant communications, and compliance activities to demonstrate responsible management.
• Engage with local authorities proactively, especially if operating or planning HMOs, to understand forthcoming regulatory changes.
• Stay informed about welfare policy developments that may affect demand for temporary accommodation and HMO tenancies.
• Consider the reputational impact of political criticism and adopt best practices in property management and tenant support.

Supporting landlords with compliance and regulation

The Landlord Association (TLA) offers membership resources designed to help landlords and letting agents manage regulatory challenges associated with HMOs. TLA’s compliance materials and guidance support members in understanding local licensing schemes, planning controls, and welfare-related housing issues.

Additionally, TLA is developing ORBIT, a new property management and compliance platform currently in BETA testing. ORBIT aims to assist landlords and agents in organising property portfolios, maintaining documentation, and recording key compliance actions relevant to HMOs and other rental properties.

Members can explore TLA’s compliance resources and learn more about ORBIT BETA access to stay ahead of regulatory changes and maintain effective property management practices.

Landlords and agents should continue to monitor local authority announcements and political developments affecting HMOs. Being prepared for evolving controls and maintaining high standards will be essential in navigating the sector’s changing regulatory environment.

Sources: Landlord Today