A trend has started throughout the country to further restrict the licensing of HMO properties. Existing HMO Mortgage holders are not going to be impacted but in many parts of the country all new proposals for a multi let property will need to be approved before landlords can proceed. This is under the guise of protecting certain neighbourhoods but is likely to have a big impact on property values and landlords looking to expand their portfolios.
Definition of An Article 4 Direction
The government made it easier in general to convert properties from a single use dwelling into a small HMO (3-6 residents). In doing so in October 2010 they clarified that councils would continue to have the power to use Article 4 Directions to control the spread of HMO’s in certain areas for various reasons. Newcastle council explains the situation as follows:
An Article 4 Direction is made by a Local Planning Authority. It serves to restrict “Permitted Development “ rights, which means that a lot of the things people do to their land or houses without planning permission and often take for granted, are brought into the realms of planning consent. It does not prevent development but it does require that a planning application is submitted so any impacts can be assessed.
Newcastle City Council
Concerns Many Landlords Have Over Increased Use of Article 4 To Restrict Their Plans
An initial public backlash against ‘student areas’ and ‘immigrant properties’ spreading rapidly through suitable areas has led many councils to consider using their right to restrict planning for HMO’s to reduce or at least constrain saturation in certain areas. To use Newcastle Council as an example again they state they have chosen to apply their rights in one part o the city because:
it contains the highest proportion of existing HMO’s in the City. If accepted, the Direction will come into force on 25 November 2011.
Newcastle City Council
The thing to be clear about here is that if you currently own and operate an HMO property that is correctly licensed under the current legislation you will usually not be impacted by these changes. If you are looking to expand your portfolio, however, in one of the areas affected by an Article 4 Direction you will need to apply (and can face being turned down) if you wish to convert a single family dwelling into an HMO.
The National Landlords Association believes these Article 4 Directions are going to have a massive impact on the supply of good quality, affordable private rented accommodation in the parts of the country where they are created.
It will reduce the availability of housing for students, recent graduates, people on low-incomes and migrant workers. This will have knock-on effects on local businesses, universities and the wider community.
The administration costs for local authorities will be disproportionate to the benefit and reduce the available resources in this time of austerity that are needed for tackling more pressing issues facing local communities.
The National Landlords Association encourages members to join their campaign against this legislation.