How many times have you thought about buying a house in a popular area and renting it to many tenants?
HMOs (or House of Multiple Occupation) is a popular type of house in areas with high demand for shared housing, good transport links and lots of jobs.
But there’s a caveat. Something called Article 4. But, what is Article 4?
We’ll talk about it shortly down below.
It’s important to understand what is Article 4 as it could make the difference between a good investment and a bad one.
If you’re a newbie buying your first rental house or a seasoned investor looking to grow your portfolio, this article is for you.
I’ll tell you about Article 4, how it came into being, how to find Article 4 areas and overcome objections, your options and much more.
So stick around, grab a cup of tea or coffee and read on.
- Proof Of Attempted Sale
- Look For Comparables
- Do A Pre-Planning Application
- Speak To A Local Planning Consultant
- Buy An Existing HMO
- Check HMO Density
- Sandwiched HMO
What Is Article 4?
The Town and Country Planning Department of the UK Government defines Article 4 as
“An article 4 direction is a direction under article 4 of the General Permitted Development Order which enables the Secretary of State or the local planning authority to withdraw specified permitted development rights across a defined area.”
It means the Local Authority has the right to accept or deny the change of one property use class to another.
The free grant of rights to change a property class is called Permitted Development rights. Article 4 restricts these rights.
For example, if you want to convert a single home into an HMO, or a hotel. Or convert an old care home into a block of built flats.
The Local Authority may need you to get permission to allow major changes to the class of the property.
The Planning Portal covers Use Classes in great detail.
You can see that single homes (dwellings) fall under the C3 Class while HMOs come under the C4 class.
With Article 4 restrictions, it means you cannot change the property use class without asking the council.
This makes it risky for a lot of investors to buy these houses upfront.
Because there’s no guarantee the planning application will be successful.
We’ll talk more about planning and how to get it accepted shortly.
Now that we’ve answered the question what is Article 4, let’s look at how Article 4 came to be.
History Of The Article 4 Directive
The 1995 Town and Country Planning (General Permitted Development) Order improved the Article 4 process and promised to follow it.
The Govt introduced it to control the amount of housing in urban areas and maintain quality.
In dense areas (London, Manchester) there may be quality compromises by landlords to maximise profits.
The Secretary Of State and Local Authorities introduced Article 4 as a barrier to entry.
And to control precious resources like parking, sewage and garbage disposal.
You can now understand why they introduced Article 4 in the first place.
Let’s see how to find an Article 4 area because chances are, if you’re looking to buy an HMO, it’s one of the first things you need to check.
Checking For Article 4 Areas In Popular Cities
Let’s say you’re looking for a nice area to invest in and buy your first HMO.
Or you’ve already got a few and looking to expand your HMO empire.
When assessing any new location for an HMO, it’s important you do a thorough Article 4 assessment of the area.
The last thing you want is to go through the hard work of finding a good deal.
Only to find that you need hmo planning permission and didn’t factor this into your initial assessments.
How Do I Find An Article 4 Area?
The easiest way to find an Article 4 Area within a city is to look at the Local Authority’s website.
Almost all Councils include an “Article 4 Map” in red where you can see which streets or boroughs are within Article 4 restrictions.
A simple Google search “Article 4 Areas in Sheffield” will give you the answer immediately.
Do Article 4 Directions Expire?
No, Article 4 direction do not expire by themselves.
Only the Local Authority has the right to change or cancel these restrictions as and when they see a need for it.
They can also replace it with a new direction. The Secretary Of State can intervene but only when there’s a clear reason why this is necessary.
Article 4 In Large Cities
Let’s say you’ve decided to invest in big cities like London, Birmingham or Manchester.
According to several sources, these are among the top 5 cities in the UK to live and work in.
An update from the Birmingham City Council on 8th June 2020 shows the entire city is now included in the Article 4 Directive.
This means you can’t convert a property into an HMO without consulting with the council.
Similar restrictions have been set up in Manchester and London city centres.
Big cities are attractive to investors due to their large (and often profitable) foreign student population.
Foreign students will generally pay more for good housing (as they are often privately funded).
Also, the high cost of house ownership makes it hard for young graduates to buy their own property.
They’re also more likely to live in a house share.
These are ideal tenants and due to the surge in busy cities, the Government has imposed Article 4.
“These councils, including Wolverhampton, have used Article 4 directions to remove permitted development rights in certain areas so that anyone wanting to convert a family house to a small HMO would need planning permission for the change of use.
For residential landlords, this means that they will need to get planning permission if they are proposing to rent their private houses out to a group of up to six unrelated people.
It’s a controversial move because some consider students and young professionals to be valuable to the local economy because they use the shops, pubs, takeaways, cafes and restaurants etc. However, others dislike the anti-social behaviour, which can be associated with these groups, particularly students.”
A Wolverhampton Council spokesperson further adds
“Article 4 has been brought in to control the proliferation of smaller properties being converted into HMOs.
It is aimed at maintaining good living standards for tenants and is part of our quality, standards and choice message in the private rented sector.
There is a high demand for affordable housing but it needs to meet the appropriate health and safety standards and be well managed.
Article 4 enables us to be on the front foot with these standards through planning.”
Say you still wanted to buy a property in an Article 4 area, what all should you check?
How To Buy A HMO In An Article 4 Area
Let’s say you’ve found a great area with sweet deals, lots of distressed houses which need TLC (tender, loving care). But it’s in an Article 4 area. We’ve discussed what is Article 4 at great length above.
Now it’s time to find out what you need to check before buying the property.
And how to maximise chances of a successful planning application?
1. Proof Of Attempted Sale
One big objection councils raise is
“Is there proof that the property has been marketed as a family house for the last 6months without success?”
The council is looking for proof that you or the landlord has tried selling the home as a family home/single let.
They’re trying to stimulate the growth of family homes in the area.
If you can prove that the landlord or you have tried to market and sell the house as a family home without success, it may add a lot of weight to your planning application.
2. Look For Comparables
Like with anything, always look for comparables.
Say you’re planning to do a conversion — single let to HMO or old police station to an HMO or a block of flats.
Look for someone who has done something similar within the local area.
What was the result?
You can assess planning records and the final decision on the Local Authority’s website.
You can see in the above images that the Council granted conditional planning to this HMO conversion.
But, if the authority rejected previous applications, chances are yours might be too.
It’s important to find as much information as you can on previous applications.
Think of ways to remove any potential objections.
3. Do A Pre-Planning Application
A pre-planning application may give you a sneak peek into the likelihood of your application being accepted.
It’s a good idea to do a pre-planning application to find out what your chances are.
Although if you’ve already bought the property and started construction work you’re better off going for a full planning application.
4. Speak To A Local Planning Consultant
Another thing you could do is speak to a local planning consultant.
In high demand cities, there are consultants who have great relationships with the local authorities.
They often have knowledge beyond what’s already on the Council’s website.
These consultants can share tips on how to increase the odds of a successful application.
It’s best to get a recommendation of a good consultant from someone unbiased that you trust.
5. Buy An Existing HMO
Another good strategy in an Article 4 area could be to buy an existing HMO.
An existing HMO that doesn’t need a change of class is fine to continue operating as it is.
Although the yield may be lower than if you bought something distressed and converted it.
This is because existing HMOs in an Article 4 areas are worth their weight in gold and landlords know it.
But who knows, you may get lucky and find a landlord who’s willing to sell off a part of his portfolio and strike a good deal.
You’ll still need to change the HMO license to your name so it’s something to check before you go ahead with a deal.
Get as much paperwork from the landlord showing the use of the property as an HMO.
This could include previous tenancy agreements, utility bills and previous planning applications.
This will help a lot in your HMO license application.
6. Check HMO Density
Most Councils publish an HMO density list for different streets in the local area.
It’s also called HMO Density Threshold which means they aim to keep the percentage of HMOs in an area below a certain number.
For example, here’s the HMO Density List for Sheffield City Council.
In Sheffield, this number is 20%.
So the council will likely reject applications within 50m from the property where the density is above 20%.
Different councils have different thresholds so best to check this on each website.
7. Sandwiched HMO
Like HMO density, councils also assess if any of the neighbouring attached properties are an HMO.
In that case, there’s a chance they may reject planning to maintain the HMO density.
So the recommendation is to avoid buying a property that has a neighbouring HMO.
I hope this article helped you learn what is Article 4 and how to find an Article 4 area.
We also shared ways to address concerns when buying property in an Article 4 area.
Conduct thorough research on your target area to assess Article 4 directives.
Speak to local estate agents, planning consultants and letting agents, before buying a property.
The worst thing is to buy a property with the intention of converting it to an HMO,
But unable to get planning and stuck with it. You don’t want to be that investor.
Lastly, always have a backup strategy like a flip or single let.
If you’d like to talk to an architect that’s helped hundreds of people get HMO planning in various councils across the country, please get in touch.
We’d love to help you.