Home Information Pack (HIPs) controversy: What does it mean for you?

With the extension of the requirement for home information packs (HIPs) to three bedroom houses this week, they are now needed for the majority of houses being sold in the UK.

Since the introduction of HIPs for four bedroom houses in on August 1, the number of larger homes coming on the market has plummeted, and there are fears that this week's move will have a similar effect on smaller homes.

To date, most of the complaints surrounding HIPs are related to intrusive and lengthy home inspections, and their cost, which generally ranges from £500 to £1,000.

While teething pains are inevitable with the introduction of any new scheme of this kind, the effect of HIPs on the housing markets in England and Wales has been dramatic.

A recent survey by the Royal Institute of Chartered Surveyors (RICS) showed that 53% of chartered surveyors have seen a fall in the number of four-bedroom houses put on the market since August 1, compared to the same time last year.

While the drop was modest in the North and Wales, 20% and 26% respectively, London saw the number of four bedroom houses put on the market plummet by 67% in August.

As concerns over HIPs mounted with this week's widening of the legislation, the government received a sharp 'told you so' from industry experts.

Louise Cuming, head of mortgages at moneysupermarket.com, described HIPs as a “shambles”.

“Amid all the chaos surrounding HIPs, the government has introduced yet another amendment that will only confuse matters further. Anyone searching for a three bedroom home might have to look much harder… The Government should bite the bullet and admit, in their current format, HIPs are a disaster.”

Trevor Kent, former president of the National Association of Estate Agents, said: “It doesn't do what the government said on the box it would do. It does not speed up house sales, it does not help first time buyers, it does not lessen gazumping, it does not improve the green credentials of the housing stock.”

Despite government claims that HIPs will speed up the selling process and cut costs for sellers, there seems to have been little or no benefit for consumers. It is an extra bill for those who sell their homes and it is wasted money for people who put their home on the market, but fail to sell it.

If this week's move results in a sharp decrease in the number of three bedroom homes coming on the market, as many expect it will, it is likely to have a dramatic effect on the housing market. Applying the simple supply and demand model, the price of homes of this size is likely to increase dramatically. Good news for sellers, bad news for buyers, and possibly disastrous news for the housing market in general.

It remains to be seen if the current problems with HIPs are simply teething pains or if the government will be forced to amend, or even scrap, the new legislation. With the vehement opposition of the industry to HIPs and even some dissention within government ranks, the latter seems the more likely.

From a consumer point of view, loopholes are already being exposed on ways for sellers to avoid forking out on HIPs. One idea is to market a home as having two bedrooms and a study, while it has been suggested that many will put their house on the market without a HIP and risk the £200-a-day fine, as enforcement is likely to be lax.

While the government's heart may have been in the right place when introducing HIPs, its failure to do a test run on its effects is now coming back to haunt it.